As spring gives way to summer and children get a break from school, families across America enter the real estate market in search of a new home. For many, it’s a first-time transaction and they are searching for their very first home. Others are trading up (or down) and looking for their next home. There are certain steps that anyone looking to buy a home should take in order to have the best possible home buying experience.
Step 1: Know your budget
Never let anyone tell you what you can afford. You need to determine that on your own. Fortunately, there are plenty of tools around the Internet that can help you. Just be careful about using free calculators you’ll find online. They’re great, but remember that they tend to show you the very highest end of your range. Proceed carefully!
When possible, be sure to check your findings with a calculator hosted by a neutral party. Nerd Wallet offers a calculator, and Credit Karma offers a tool as well. If you work with a CPA or a financial planner, discuss this with them before you begin shopping for a new home.
Step 2: Know all the costs
Fortunately, the new rules handed down to the mortgage industry by the Consumer Financial Protection Bureau require all lenders to inform the borrower of all costs associated with the new loan within three days of the receiving a completed loan application. This cost estimate has to remain accurate unless changes are made to the deal. Even then, they have to provide a new estimate (called a Loan Estimate or LE) three days later.
It’s a little more difficult to track all of the possible costs on the real estate sales side. Count on a good agent to help you negotiate a good deal with the seller. Anything that the seller doesn’t agree to fix or replace in writing will not be their responsibility afterward. Rules vary by state, which is another reason to work with a real estate agent you trust.
Step 3: Don’t get rushed
Everyone involved in the real estate transaction wants to get the deal done quickly. They know you want to move into your new home and coordination is important to make sure that you’re not forced to live in a hotel or a relative’s basement until the closing takes place. Still, you are entitled to all the time you need to fully understand the transaction. Do not be afraid to slow things down if you need to.
It is true that in many markets today, given the low inventory of homes for sale, that time is of the essence, but it may be better to walk away from a deal you don’t understand than enter into a transaction that won’t serve you or your family well in the long run.
Buying a new home is a grand adventure and for many it’s the culmination of a dream they’ve had all their lives. Follow these steps and you’ll have a much better experience when you buy your next home.