Tips for a Smooth Homebuying Experience

Establishing your priorities and understanding the process are the foundation of homebuying success.

Couple reviews paperwork with a mortgage loan officer.

Buying a home doesn’t have to be an overwhelming process. Below you’ll find a few quick tips that will help make each step go smoothly, so you can start making memories in your new home.

Starting the Process

One of the best things you can do before you begin your search is to talk to a mortgage loan officer and get preapproved for a mortgage. Going through the preapproval process is relatively easy and will help you understand exactly how much house you can afford.

It helps to do some advance prep, which can help expedite your preapproval. You should gather two years of W2s, your most recent paystubs and two months of statements for your assets, including retirement funds. This will help your loan officer recommend the best financing options for your individual situation. You will have a clear picture of what your total monthly payments will be, the terms of your loan, and how much money you will need for the closing.

Your mortgage loan officer also can work with you to create a budget and help come up with a plan to purchase in a price range that both meets your needs and matches the lifestyle you want to live.

Once you have a preapproval letter in hand, you’ll be prepared to compete—and succeed—in a highly competitive housing climate.

Working with a Realtor

It’s so important, especially in today’s market, to work with a qualified real estate professional that you trust and connect with. These experts have the experience and knowledge necessary to analyze the local trends and help avoid costly mistakes along the way. To ensure the process goes as smoothly as possible, interview a few different Realtors or agents, and choose the one that understands your wants, needs and concerns the best.

Working with a Lender

When it comes to working with a lender, make sure you have a thorough understanding of the process, the costs and the longer-term financial pros and cons. Lenders are there to be a resource for you, so never hesitate to ask questions—even if you don’t think it will matter. A good loan officer will be happy to explain the basics, listen to your concerns and do their best to make sure you walk away feeling good with your decision. Likewise, keep them informed about anything that changes with your life (new job, new credit, etc.) or your real estate transaction. It might make a difference, and the sooner they know, the sooner they can find a solution for you.

Adjustable Rate Mortgages (ARMs)

With housing inventory being very tight, home prices have edged up in the last few years. For some home buyers, that may mean that a house they could have purchased with a fixed-rate home loan may now be out of reach. In these situations, it may make sense to look at adjustable-rate mortgages. They can offer a lower rate and slightly more flexibility in the amount you qualify to borrow. ARMs also make more sense in those circumstances where you may not intend to live in the same house for the rest of your life.

The Low-Down on Down Payments

You may have heard that the “conventional” down payment is 20%, but in reality, most homebuyers make lower down payments. In fact, you can buy a home with as little as 3% down. It all depends on your individual situation. On the one hand, a 20% down payment can help you make lower monthly payments and gain more equity in your home. And, by putting 20% down, you also won’t have to pay private mortgage insurance. However, a 20% down payment can be a challenge, especially when you add in closing costs, homeowner’s insurance, and property taxes. With a smaller down payment, you can avoid draining your savings account, so you’ll have money left to comfortably pay for closing costs, insurance, taxes and extra repairs or upgrades after you move in.

Beyond the Down Payment

Many people focus solely on the down payment when estimating what they will need to purchase a home, but there are other costs that you should take in to account. Besides the down payment, buyers need funds for closing costs that can range from 2% to 5% of the loan amount, as well as money for homeowner’s insurance, and property taxes. Also, it’s important to keep in mind that you may need additional funds for furnishing or refurbishing the house.

Must-Have and Nice-to-Haves

Demand for homes is at an all-time high, making it more of a seller’s market than a buyer’s market. One thing that can help buyers is knowing what features they must have in a house, and what features they can compromise on or live without. Write up your own list of “must-haves” and “nice-to-haves” before you begin your search so you can make the best use of your time. Plus, this will help ensure the homes you see will be the ones you’ll be happiest with, long-term.

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