If you’ve begun the process of buying your first home, you’ve probably heard it all. “Get preapproved.” “Shop around.” “Try a First-Time Homebuyer Loan.”
What about the tips you don’t hear from every friend and family member? They’re just as important but not talked about as often.
Here are nine examples of advice that could benefit your homebuying process that you may not have heard yet.
Play the Waiting Game
You know what you’re looking for – from square footage to bedroom count to the size of the yard to proximity to your workplace, but nothing meets those parameters. Try taking a peek at ones that aren’t on the market. Not only can keeping tabs on not-for-sale properties give you a little more knowledge on your ideal neighborhood or style of home, but it can also give you an edge if any of those homes come onto the market.
This goes for houses that are out of your price range or were just recently listed but aren’t quite to the price level you’d like. As long as you can remove yourself from getting emotionally attached to a house that may or may not ever drop into your price range, it can be lucrative to track the progress of a higher-priced home to see if its trajectory goes downward the longer it’s on the market. Surveys have shown that 43 percent of sellers reduce their asking price at least once. Check again a month later – houses traditionally drop in price after one to two months of being listed and unsold. (And anxious sellers that may not reduce the listed price will likely be more open to low-ball offers in negotiations.)
Let’s face it – credit scores can be tricky and unruly beasts when you don’t know how to affect them positively. But since they play such a pivotal role in lending decisions, namely mortgages, the accuracy of said credit report needs to be to your liking. But what can you do, really, when a score seems a bit off?
It’s estimated that 25 percent of Americans have errors on their credit reports. (And five percent have errors that could affect loan terms negatively.) You’re entitled to a copy of your report, so first things first – get it. Once you obtain your report, look it over carefully. If there are any disputable errors included, there are steps you can take to remedy the situation. Gather up the proof of the error (i.e., statements, receipts, etc.), and submit a written request for a correction to all three credit bureaus. It can take time and a little leg work on your part, but an improved score and more spending power is worth the trouble.
Know your market
Knowledge is power – that’s why having a firm grasp on your most desired neighborhood is key. If you have a certain region or city in mind, there are ample opportunities to get a sense for what types of houses you can expect, what they’re valued at and what they’re selling for – it’s all at your fingertips on sites like your local MLS.
Don’t be fooled
Oh, the wonders an interior decorator can work on a sub-par home. The miracle of staging, from a seller’s perspective, is that it can pretty up a lackluster space to better excite buyers. On the flipside, though, buyers may be prone to getting drawn in by quality staging versus looking past it to the property itself. A recent study found that 49 percent of Realtors® said their buyers’ decisions were affected by staging.
Keep in mind – if you notice a TV perfectly placed on one side of the living room and can’t possibly imagine a better setup, check to make sure there’s actually a wall plugin and cable jack behind it. Staging can be deceptive – sometimes it’s too good to be true. Conversely, don’t let poor staging of a home get in the way of your vision – pinpoint which items, such as paint and wallpaper, dingy carpeting and overall dustiness, can be easily remedied after move-in. These shouldn’t be deal-breakers.
Be realistic about your income
You made the right decision and got pre-approved for a home loan. It’s a smart way to go, because it gives you a better idea of how much home you can afford once you begin the search. Or does it?
Just because you’ve been pre-approved for a certain amount doesn’t necessarily mean you can afford that amount. You still have to go through the process of planning a budget to determine how much you can spend on a monthly mortgage payment - a homebuyer education course can help with planning budgets. Your pre-approval amount might be a little steep for your current income. Another rule of thumb – don’t let assumed or anticipated income factor into your decision. That can get you in a bind down the road if that income falls through and never arrives – except now you have a mortgage to pay that you can’t afford. It’s a good idea to stick with what you’re currently paying in rent, for example, since it’s an amount you know your budget can handle.
Know the boundaries
You’ve got big plans for that future home of yours – from a wood fence to a flowerbed to an extended deck. But if you simply go by what the seller tells you off-handedly about the property lines, you might be in for a rude awakening. The best way to know exactly where the borders of your future property are is by having a land survey conducted.
If you have immediate plans in mind, you can take a look at the results of the survey and plot out what’s possible in terms of local zoning ordinances. Make sure there are no surprises once the ownership is handed over to you and backing out becomes very difficult.
Insist on your Rights
As a homebuyer, you have certain rights – it’s important to know what they are so that you come to the financing table with a firm grasp on what to expect out of the experience. The U.S. Department of Housing and Urban Development (HUD) ensures that all buyers have the right to a Loan Estimate form once you've applied for a mortgage - it provides you an estimated interest rate, monthly payment amount and total closing costs for your loan. In addition, this estimate can give you insight on estimated tax costs, insurance costs and how the interest rate or monthly payment might change in the future. The estimate helps you anticipate, so make sure your lender gives you one within three business days of receiving your loan application.
When you know what you’re entitled to during the loan pre-approval process, you’re more apt to ask the right questions and get the right answers about the budget you’re working with and your odds of being approved for purchase come buying time.
Negotiate like a champ
If you’ve never done it before, you’re more than likely not predisposed to being good at the bargaining table when it comes to buying a home. Luckily, there are ways you can prep your negotiation skills to better ensure you get what you want out of the conversations (or at least closer to what you want). The best defense is knowledge – you should know how much loan you’ve been preapproved for. It will speed up the negotiations, which is always a plus when you’re competing against other buyers.
Another key element of furthering your effort to purchase a given home is realizing when it’s time to quit negotiating. The desire to win at all costs may come naturally to you, but if you do the math and realize the scope of your argument over price, it’s easier to tell when it’s time to be finished. U.S. News & World Report cited a great example of a dispute worth giving up. While the disparity between a $199,000 price tag and a $195,000 price tag might seem substantial, with an average interest rate, it amounts to about $20 per month in added cost to you. (Not exactly worth missing a chance at the perfect home.)
Living in the now is all well and good, but what about your future? Whether you plan to stay in your purchased home for the long haul or you see it as a “starter home,” there’s something to be said for planning ahead. Considering a home’s potential for resale value with a few minors renovations should factor into your first-time buying decision. According to SDHDA program stats, the average first-time homebuyer stays in a given home for about seven years before repeat homebuying.
The same goes for your own future-planning – do you anticipate children, pets or other events that may call for additional space? Is there adequate yard space for a dog, is there room on the property for future expansion and is the home in a safe, quiet neighborhood with quality schools? Save yourself the trouble now by accounting for some of these inevitables in the near-term.
Sources: Discover®, U.S. News & World Report, Federal Trade Commission, National Association of REALTORS®, ING DIRECT, National Association of Home Builders®