Thinking of buying a house in the near future but don’t know exactly where to start? It’s always best to be prepared for such a big step, and we’ve got the house hunting tips to set you up for success with your hunt.
Save your money
Buying a house is a big financial commitment. If you’re a first time home-buyer, it may surprise you how much things can cost. Between the down payment, closing costs and other fees, these things can really ring the bell.
For example, if you save anything less than at least 10–20% of the total house price for a down payment, the extra amount you’ll pay in interest and fees with your loan could put a serious hurt on your finances for the future. If you buy a house that’s $300,000, that will be $30,000-$60,000.
And a down payment of 20% will be necessary to avoid private mortgage insurance (PMI) for the life of your loan too. PMI will cost you 0.5%-1% of your total mortgage loan amount per year.
Closing costs can also be considerable too and can be as much as 5% of the purchase price of the house. On a $300,000 house, that could be $15,000.
Check your credit score
Most conventional loan lenders for fixed-rate mortgages have a baseline credit score they use to approve mortgage applicants. A score at or above 700 is considered excellent and will most likely get you a loan with the lowest interest rate.
If your score is in the 600s, lenders will start to see you as a potential risk. A score of 680, for example, is still considered good. But when you get below 660, some lenders might start saying no. For some lenders, 640 or 620 is the line at which consideration for a better mortgage loan program may no longer be on the table. It can all depend on that particular lender.
That said, there are other types of mortgages, such as FHA or VA, if you qualify. These are easier to get and actually even designed for borrowers with credit scores as low as 500.
Get pre-approved for a loan
Once you have your credit rating figured out, it’s important to get pre-approval for a mortgage loan next. Mortgage pre-approval is when a lender reviews your financial background to measure your qualifications as a borrower. And this will tell you two things: if they can approve you for a home loan, and how much you’re qualified to borrow.
This will also help you identify any problems you have from the lender’s perspective (credit score too low, debt too high and so on). And it helps you set a budget you might not have known you had. Once you have a pre-approval amount, you can “reverse engineer” some home prices you’ll be able to afford. The lender’s number will be a maximum loan amount. But you need to break it down into monthly payments to see if it falls within your ability to pay.
Additionally pre-approval will help show real estate agents that you mean business when you’re looking to choose an agent to help you with your housing search.
Build a checklist
What kind of house are you thinking about – do you need a single family home or a condo, do you want something with a shared wall or no, how many floors, rooms, bathroom, garage spaces do you need, what neighborhoods do you like? These are all things you should consider.
Unfortunately, you will probably never find a house that has every single thing you want, unless you build it yourself. But you should be able to find a house that has most of the things you want, so it’s important to be flexible about wants and not on needs. Lack of a “want” is not a deal breaker, but lack of a “need” very well could be. If you can find a house that meets all of your needs and hopefully some of your wants too, it’s possible that you’ve found the home for you.
With your checklist, split your wants apart from your needs. The needs are things you absolutely can’t be without, and you and your real estate agent should always keep those in mind. Your list of needs should only include things that would be hard or impossible to change (the location, the school district, the lot, the size of the home). Wants are things you can change. If your house has carpeting, but you want hardwood floors, or if your house has an unfinished basement, but you want a finished one, you can always change those things later, if the house fulfills your needs list.
Find a great real estate agent
Once you’ve set up your pre-approval and your checklist, now you need an agent that knows the neighborhoods you’re searching, has the experience that will ensure you get what you’re seeking and understands your budget, and understands the market and how to submit the best offers with the right leverage to get you the house you want.
When choosing your agent, make sure you check out the agent’s online reviews, ask them how much they will get paid, look at their experience, and agree on important details such as communication methods and your motivation to buy a house. Above all things, consider experience first, everything else is secondary.
Check out online homes
Once you have your agent lined up, preview properties online on your own, so you can see how your checklist works with wants and needs for the houses that might interest you. Technology has come a long way. A lot of listings have great online details, virtual tours, video content, and other features to help you screen properties.
With online research, it’s easy to reduce the number of homes you have to visit, and you can weed out the ones that don’t meet your needs. You’ll probably start with a wide search area of hundreds of houses for sale. Then when you use the Internet to screen them based on size, price, appearance and location, this will reduce the houses you want to see in person to a much smaller number of houses. Now you’re ready to do some actual house hunting..
If you’re looking for agents with more experience than 99% of other real estate agents in the country and with intimate knowledge of the neighborhoods you’re searching, consider Trelora. Additionally, Trelora gives you a screaming deal – we split our buyer’s agent commission with you when you buy a house with us. Finally, Trelora’s proprietary technology makes online home searching a snap and allows you to coordinate communication with your Trelora agent quickly and efficiently.
Mike is the Market Director for Colorado at TRELORA. He is personally responsible for closing over 600 successful real estate transactions and has played a role in closing hundreds more. He started at TRELORA in August of 2016 and began his real estate career in Jacksonville, FL in February of 2011. In his tenure at TRELORA he has been a Buy Manager, Buy Agent, Listing Agent, and Field Agent before accepting his current position as Market Director in January of 2021. Mike has a Bachelor of Science in Finance and a Master of Science in Entrepreneurship both from the University of Florida. Go Gators!