From a casual search of properties on the Internet to figuring out financing to actually making an offer on your dream residence, the experience of buying a home can be both exciting and daunting. Whether you are buying your first house or your fifth, there is tried-and-true advice for getting the most out of your investment.
“Home buying is one of the most stressful and emotional processes that we go through,” says David Gerhart, president of the Columbia Board of Realtors. “Rely on the advice of your agent to work out the drama with you and for you. Treat the transaction like a business decision, which usually comes down to money.”
First Things First
Qualifying for a mortgage is the first step toward home ownership. Gerhart says getting preapproved for a loan will make your offer on a home more competitive. Preapproval also gives you an idea of your price range. Mortgage lenders ask buyers detailed questions about their finances, including employment history, personal assets, debt, income, monthly expenses and credit score. According to the financial-planning site LearnVest.com, the general rule of thumb is that your mortgage should not exceed 2½ times your annual income. In most cases, experts say it is ideal to pay 20 percent of the home’s sale price upfront. The more you put down, the lower your interest rate and monthly payment. You’ll also avoid the cost of private mortgage insurance.
On To The Hunt
Once you know how much house you can afford, it is time to start shopping. The education and experience of a real estate agent can be invaluable during this time. An agent can help you negotiate with the seller, handle contracts, evaluate properties and research the marketplace. To find a real estate agent, start with referrals from family, friends, neighbors and co-workers. Websites such as Zillow, Trulia, Angie’s List and Yelp offer agent reviews from previous clients. The Columbia Board of Realtors is another resource. Members of this organization are also members of Missouri Realtors and the National Association of Realtors. They are required to follow the NAR Code of Ethics and Standards of Practice. Buyers should meet with potential agents in-person to find out more about their background, credentials, continuing education, communication style and any awards they have won.
“Buyers should interview Realtors and sign an agency agreement with a buyer agent they are comfortable with,” Gerhart says. “A good agent will walk you through the entire process and ensure that all paperwork is complete.”
After touring a home that seems to fit every item on your checklist, it might be tempting to make an offer as soon as possible. But Gerhart urges buyers to take their time and look at the property more than once. He also suggests talking to residents and driving through the neighborhood during the day, evening and weekend.
“Ask people who live in the neighborhood about how active their homeowner association is, and if there are any deed restrictions and covenants,” Gerhart says. “Look at the amenities, such as a pool, tennis courts, walking trails and parks.”
Before you make an offer, request a comparative market analysis from your Realtor to find out how much the home is worth based on the recent sale prices of similar homes in the area.
“Never make a lowball offer,” Gerhart says. “It will probably make the seller mad. In many cases, the property will sell to someone else. Put your offer in writing. A verbal offer is only as good as the paper it is written on.”
With closing day on the horizon, there are still some critical tasks to complete. Gerhart recommends buyers schedule a home appraisal through their lender. He tells his clients to also hire a professional home inspector to check for any serious issues. If the inspection uncovers problems, the buyer can ask the seller to lower the purchase price or to take care of the necessary repairs. A buyer can also cancel the deal without penalty if the contract allows.
“Don’t get too attached to one house,” Gerhart says. “Some deals go south because of various steps along the way. Walking away from a property is not always a bad thing.”