Buying a home is a big commitment, possibly the biggest you’ll ever make. Approaching the task of buying a home can be overwhelming. It is a complex event during which there is so much to learn and to consider.
With low interest rates and affordable homes, Orlando is still a buyer’s market, which means you may be ready to buy your very first home. Fortunately, for home sellers in the Orlando area, especially in areas like Kissimmee and Saint Cloud, the homes are selling quicker than they have in quite some time. With that said, buyers need to know what they are doing when they are ready to buy.
Below are some pieces of advice to consider before you buy, what you can expect from the buying process itself, and some handy tips to make life easier after you purchase your first home.
Determine the type of home that will best suit your needs
Are you looking for a single-family home, a town-home/townhouse, a condominium, or a multi-family house with two or more units? Does the house need to be move-in ready, or would you like to pay a little less and do some of the renovations yourself? Do you want to start small and eventually buy something bigger, or do you want this to be your one and only home. What features are you looking for in a home? Do you need all of them? You may want to make a list of “need to haves” and a list of “want to haves”. These decisions are important and should be based on your home-ownership goals. Think carefully about what and why before you decide to buy.
Get your finances in order
If you do not have the cash to buy your first home, you will want to make sure your credit is in line. You can request a free copy of your credit report from the three major credit bureaus at sites such as www.annualcreditreport.com or www.freecreditreport.com. Review your report closely! Make sure that all of the accounts listed do, in fact, belong to you. If there is something that needs addressing, begin working on it immediately. It is somewhat difficult to deal with the major credit bureaus, so the quicker you get started the better off you’ll be.
Lenders prefer a low debt to credit limit ratio, so it is best to have more credit available than you use. They also prefer to see long-term relationships; therefore, having your oldest accounts in good standing on your report will benefit your purchasing power.
If you have too many active accounts, you may want to consider closing some (but be sure to close the newer ones over the older ones – considering they are all in good standing).
Set a budget
Determine the amount you are willing to spend on a home and stick to it. Also, be sure you can afford that amount. When setting your budget, don’t forget to include the expenses that you’ll incur as a homeowner aside from the mortgage (i.e., mortgage insurance, property taxes, homeowner association fees, condo association fees, water, sewage, etc.). Also, it’s a good idea to set aside some money for an emergency fund. This can be used for a variety of situations large to small (think job loss to appliance repair or replacement).
Find a good agent
Not only can your real estate agent advise you on neighborhoods and listings, your agent should be your advocate and help keep you on track. Ask friends, family, and colleagues for recommendations for an agent with expertise in your target market. Also, check out our recent blog post: How to Find a Great Real Estate Agent (Realtor)
A Pre-Approval is the most powerful tool a buyer can use to prove their ability to purchase a home. A buyer with a Pre-Approval means less surprises or problems. Anyone who wants to buy a home in today’s market should first review their financial situation with a lender. The understanding of how much can be borrowed reduces the possibility of problems later.
There is a big difference between a letter of pre-qualification and a letter of pre-approval, and it is important that you understand this difference before we start looking at homes.
When a lender grants a buyer a “Pre-Qualification”, it means the lender has reviewed the buyer’s finances and has done a basic calculation to determine how much that buyer may be able to borrow. While pre-qualification can reduce the processing time for home loans, it does not guarantee that a loan will be made by a lender.
When a lender grants a buyer a “Pre-Approval”, it means the lender has actually approved the loan with only two additional requirements. First, that the buyer chooses a home to purchase, and second, the home the buyer chooses appraises at or above the sales price. The “Pre-Approval” letter represents an actual commitment on the part of the lender. In order to secure such a letter it is necessary to complete a formal loan application and pay the associated fees. Credit, salary and bank funds will be checked, and if the loan is a good investment, the lender will issue a pre-approved letter that provides a commitment for a period of time, subject to a satisfactory property appraisal and title search.
In order to purchase a home, you must either have the funds available or a pre-approval from a lender. If you do not have a lender to work with, feel free to contact us and we will get you in touch with one of our qualified lending partners.
Don’t do anything drastic
Other than purchasing your new home, don’t do anything else drastic, like buy a car or get a new credit card (even if it can save you 20% on your next purchase). Even if you are pre-qualified, changes in your finances such as these can squelch the deal.
Evaluate the neighborhood
You may have found the home of your dreams, but make sure the neighborhood doesn’t belong in a nightmare. Before you make an offer, you may want to talk to the neighbors to get the scoop on what it’s like to live there. You may also want to “stake out” the neighborhood and see what it’s like in the morning, after dark and even in the middle of the night. This way you will see who is coming and going, what the traffic is like, etc.
Get a quality home inspection!
Once you’ve found your home and your offer has been accepted. It is critical that you get a home inspection! Although many banks require a basic home inspection, you may want to pay for a more in-depth inspection. It is in your best interest to ensure the home you’re buying has a solid foundation and will provide you safe shelter for many years to come.
Perform regular maintenance – As we stated above, your home may be one of your biggest purchases you’ll ever make, so don’t take it for granted. Perform regular maintenance (change AC filters, change batteries in your smoke detectors, etc.)
There’s a lot to consider, but try to keep these tips in mind as you begin the search for your perfect home and hopefully, you will find the home of your dreams!
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