Deciding whether you're ready to purchase your first home is one of the biggest decisions you'll make in life. Buying is a huge (not to mention expensive) commitment and isn't a decision you should take lightly. Before you make the leap to homeownership, it's imperative you know where you stand, what you want, and what's realistic for you and your financial situation.
Here are 5 questions to ask yourself before buying a home:
1. "How much can I really afford?"
One of the biggest mistakes first time homebuyers make is stretching their budget and buying a house they can't afford. Before you start looking for your dream home, you should sit down, write out a budget, and figure out exactly how much you're comfortable paying per month.
Keep in mind that owning a home is more than just a mortgage payment. In addition to your mortgage, you'll need to cover additional home-related expenses, like homeowners insurance, mortgage insurance property taxes, and maintenance. Ideally, your total home costs shouldn't exceed 35% of your pretax income. So, if your household makes $10,000 per month, your total home costs shouldn't exceed $3500.
2. "What kind of shape are my finances in?"
Before you purchase your home, it's imperative you take stock of your financial situation. The state of your finances plays a huge role in how much lenders will approve for your mortgage, and before they approve your loan, the banks will dig deep to make sure you're a qualified applicant. Your financial situation will also affect the interest rate on your loan, which can save or cost you hundreds of dollars per month.
When deciding whether to approve your mortgage, the banks will look at:
- Your credit history, including your credit score, delinquent payments, and overall balances
- Your debt, including credit cards, student loans, personal loans, and auto loans
- Your income
- Your employment history, including your salary history and your length of employment
- Your savings and the amount available for a down payment
Essentially, your lender is going to review your financial history to determine whether they believe you will pay back your loan. If they feel you're a risky candidate, they'll either approve a loan with a high interest rate - or approve no loan at all.
Before you apply for a mortgage, it's important to get your finances in the best shape possible. Review your credit report and ask for any inaccuracies to be removed. Work on paying down your debt and padding your savings. The better your financial situation, the better deal you'll get on your mortgage.
3. "What are my must-haves, my nice-to-haves, and my can't-haves?"
Before you buy a property, it's important to iron out the details of exactly what you're looking for. You should break down the qualities of your future home into three lists:
Your must-haves are the qualities you absolutely need in a home in order to move forward with a purchase. A must-have might be a home in a safe neighborhood, enough bedrooms to accommodate your family, or a backyard where your kids can play.
Your nice-to-haves are things you'd ideally like to have in a home but aren't deal-breakers if they're missing. Nice-to-haves might include an updated kitchen, an en suite, or a finished basement.
Your can't-haves are the qualities you absolutely don't want in a property. These are the deal breakers that will keep you from purchasing a home. Can't-haves might include a property that borders a busy street, a fixer-upper property that needs a lot of work, or a property that's too far away from the center of town.
Once you have these three lists, it will be easier for you and your real estate agents to judge potential properties and narrow down the list of homes to view.
4. "Do I know where I want to live?"
When it comes to real estate, one of the more important things is location. And before you purchase property, it's important you iron out exactly what you're looking for in a location.
Do you want to live in the center of a city or out in the country? Do you want to live in a residential neighborhood or in a more developed area? Is it more important to be close to your job or close to shops, restaurants, and entertainment?
Once you know everything you're looking for in a location, your real estate agent can suggest neighborhoods that match your criteria.
5. "When do I want to move?"
When you move is also an important factor to take into consideration. There's no "best time" of the year to move, but different times of the year have different advantages.
If cost is your top concern, you might want to consider moving in the winter, when prices are traditionally at their lowest. If being able to see a wide variety of home choices is more important to you, then plan to look at properties in the spring and summer, when available inventory peaks.
Buying a home is a big decision. Asking yourself these questions will help provide the clarity you need to make sure your new home is the best fit for you, your family, and your long-term goals.
There's usually at least one home in every neighborhood that looks so attractive you can't help but slow down and swoon each time to walk or drive by. On the flip side, there may be a few that force you to look away in horror. (Sorry, neighbors.)
It's a fact: Curb appeal can make or break your home. So, it's no surprise that a house that makes you want to move right in before you're even past the mailbox not only commands a higher selling price but also sells faster.
Whether it's the perfect paint job, meticulous landscaping, or a combination of these and other factors, some homeowners will go to extraordinary lengths to create the "wow" factor necessary to woo would-be buyers.
Let's look at the ways you can boost your home's curb appeal.
1. Freshen up the facade
Nothing improves the look of your home faster than a power washing, fresh paint job, or new siding. Depending on your budget and how desperately your place needs a facelift, consider one of these options and see if your home doesn't look as good as new. Need more incentive? An exterior paint job can potentially increase the value of your home from 2 to 5 percent, according to Consumer Reports.
2. Roll out the green carpet
Think of a sweeping green lawn like a lush welcome mat. It's just that inviting. If you've noticed some weeds or bare spots, it's time to put your green thumb to work. Especially in good weather, your lawn is an extension of your home, providing a wonderful space to enjoy both recreation and relaxation. If your grass has gone to seed, consider rolling out some sod, which serves as a fast solution to your lawn dilemmas. Not sure about the effort or expenditure? Consider this: According to The Lawn Institute, a well-maintained lawn increases a home's property value by 15 to 20 percent.
3. Trim those hedges
Your grounds needn't rival the Gardens of Versailles, but ensuring that they're well-kept goes a long way toward creating an overall appealing look. Scraggly shrubs and bushes that have seen better days detract from your home's appearance. Be sure to prune overgrown hedges and remove and replace anything that's dead, as it can also be a fire hazard in some areas.
4. Spruce up the fence
They say fences make good neighbors, but they're also great for adding privacy while keeping kids contained and pets on your property. Depending on the material you select, such as wood, cast-iron, or concrete versus chain-link, a fence will add value during an appraisal. If you already have one, be sure it's in the best shape possible.
5. Raise the roof
You want your home to dazzle from top to bottom. If your roof is in bad shape, it's not only going to drag down the look of your home, it's also going to bring down its value while possibly making it less energy-efficient. According to Remodeling Magazine's 2013 Cost vs. Value Report, a new roof boosts a home's resale value by a national average of nearly $12,000. Not too shabby!
6. Add a pop of color
Now that you've taken care of the major items, it's time to get creative. Ornamental plants provide a welcome burst of color and add interest and intrigue. This is a homeowner's chance to show a little personality. Pick plants and flowers that fit your lifestyle, terrain, and budget. (Then, don't forget to water them!)
7. Light it up
Strategically-placed outdoor lighting allows you to show off your home's best features. It also offers safety to family members as well as guests who come and go after the sun sets. If you're interested in keeping electricity costs to a minimum, look into solar lighting.
8. Pave the way
Though most of the time it's simply a place to park your car, your driveway can up your curb appeal if it's in tip-top shape. Asphalt makes it easy to plow if you live in a climate that gets plenty of snow. Homebuyers with young children love it as a spot to let kids play basketball, scooter and skateboard, or create a masterpiece with sidewalk chalk. If you have the means, upgrading to pavers adds an elegant touch that will truly make your home stand out.
9. Don't forget maintenance!
Whether you're hoping to put your home on the market or plan to stay put permanently, increasing your curb appeal is always a good idea. So, if you've made improvements, stay on top of them. Small things like a missing shutter or a loose gutter rob your home of its chance to live up to its true potential. Plus, when you stand back and admire your property, you'll remember why you feel in love with your home in the first place.
When you go to sell your house, there’s a good chance you’re not going to agree with what a real estate agent suggests for a list price. It’s one of the most common issues real estate agents deal with, and help homeowners understand. Problem is... many homeowners don’t necessarily see it as agents trying to help them, so much as convince them to do something they don’t want to do.
Naturally, you want as much as you can get for your home. And, you’ll certainly have your own opinion on the value of your home. You’re totally entitled to your opinion. And it’s totally your call to ignore the agent’s advice, and list your house for as much as you like... if the agent is still willing to work with you. But if the agent is not willing to, it doesn’t matter, you can always find any number of agents who will put it on the market for as high of a price as you want. But, it might be the biggest mistake you can make...
In the least, you’ll just waste your time. (And the agent’s time.) But, it could also lose you money, instead of make you money...There’s lots of ways this happens, but one of the biggest reasons is that the longer you are on the market, the more it impacts how buyers perceive your home, and what it is worth. And that is hard to hide...
It has become more and more of an issue as so much data and information has become available online. Like, how long a house has been on the market, and how many times it has been listed without selling. So, the best thing to do, is list your home based upon the current market data... not what you want, wish, or think.
When it comes to pricing your home for sale, Jack Welch, former CEO of General Electric, has such an appropriate quote...
“Face reality as it is, not as it was or as you wish it to be.”
Let’s break that down and apply it to pricing your home... starting in reverse.
As You Wish It To Be
This is so human, isn’t it? Everybody has things in life they wish were different and better.
C’mon, we all wish we were millionaires. Or even just hundred-thousandaires. But why wish for just hundreds of thousands. Almost everyone wishes beyond that. Why not? It’s a wish. No harm in that. It might even motivate you to do something that gets you there...
Because you can certainly do things to make it your reality. But you’re probably not going to just wish yourself into becoming a millionaire. And you’re probably not going to become a millionaire by simply doing whatever it is you have been doing, which has not gotten you there yet.
But there’s hope. Always hope.
And so it is when many homeowners want to sell their home.
Not to say that everyone thinks that their home is worth a million dollars. But almost every owner feels like their home is worth a good amount more than the actual market value. Usually by tens of thousands of dollars. Regardless of price range.
But the market value is based upon what buyers have paid for similar homes recently. So you need to base your price against the prices similar homes have sold for.
You can’t expect your 3 bed, 1 bath Ranch style home, to sell for as much as a 4 bed, 3 bath Colonial in a similar (or better) location and condition than yours.
You can wish it would. But it probably won’t.
With that said, you can make your home worth as much as a 4 bed, 3 bath Colonial... if you make it into one. But the point being... you would need to do something to make it so, not just wish it were.
Not As It Was
A lot of times, when they hear how much their home is worth in the current market, say something along the lines of...
“There’s no way my house is only worth $525,000. Back in 2005 my house would have gone for $700,000! And, sure, I know that the market was crazy high back then, and the market took a dive. But the market is bouncing back now. So, I can’t see asking anything less than $650,000.”
OK. Deep breath. Phew. Here we go...
Half the time, you can’t even prove that a house would have sold for, say, $700,000 back in 2005. That is often just what an owner personally thought it was worth in their mind. But that was never tested. The chances are... it wasn’t worth that back then. Or ever.
But, let’s just say it was worth $700,000 back in 2005. And now it truly is only worth $525,000. That is the reality. Now. And that is all you can deal with. You can decide not to sell. Wait out the market until prices go up to a point you are happy with.
You cannot, however, turn back time. You can’t price your home based upon such distant history... as it was. It won’t do you any good.
Face Reality As It Is
It is that “simple”. But yet, so hard.
So many homeowners overprice their homes, and lose money in many ways by not facing reality as it is. And a lot of real estate agents reluctantly allow homeowners to do it.
It takes a pretty special agent to be firm about pricing with a homeowner. Because many agents will do as you wish. And they’ll put your house on the market and wish right along with you. First, they’ll wish for a miracle...Then, they’ll wish they were firmer with you on the price to begin with...And the whole entire time, they’ll wish that you would just lower your price already...And they will bring up lowering your price. Constantly. And you will be annoyed. And feel like that’s all they are doing. And you’ll start thinking about who the next agent you hire will be, once your listing contract expires with the agent who did as you wished.
So, save yourself some time, aggravation, and make as much money as you can and should on your home, by facing reality as it is, not as it was or as you wish it to be.
You’re better off listening to and hiring an agent, who is firm about your market value, and helping you face reality, than you are working with an agent who is, well... wishy-washy.
This is such a common question. And it can be a touchy, awkward subject when you know a real estate agent and are planning to buy or sell a house.
Part of you probably wants to ignore the topic. Maybe hire another real estate agent, sell your house, or buy a house, and hope your friend or family member just doesn’t notice or find out.They will. And it will be more awkward if you do that. So, you should address this head on.
It probably feels like a no-win situation as far as you’re concerned. If you don’t work with your friend or family member, feelings will be hurt, and the relationship will be affected forever. On the other hand, if you do work with them and something goes wrong...feelings will be hurt, and the relationship will be affected forever.
No, the agent shouldn’t let it affect your relationship...not because they’re supposed to be superhuman saints...but they are human and it does hurt. And not working with the agent you’re friends with, or are related to will most likely affect your relationship on some level.
Sounds miserable. And, beyond your gut feelings and concerns, there seems to be so much information on the Internet, and in conversation, that points to it making sense not to work with someone you know...
OK, fine. All valid concerns and reasons. People use these excuses. And it can make sense for you to avoid dealing with a friend or family member...if you have solid reason not to.
But those types of reasons are easy to find elsewhere. You can feel validated and “right” by all the stuff you see online, or hear out of the mouth of some random real estate agent who’s trying to convince you to work with him, instead of your friend or family member.
Now that we have your concerns out in the open, let’s focus on why you should hire your friend or family member. Because there’s a lack of articles pointing out why it should make total sense for you to work with a real estate agent you are friends with, or are related to.
- What if the agent doesn’t do a good job? Will you feel fine firing him or her? Or just have to grin and bear it?
- What if you decide not to buy or sell, and waste their time? You would feel bad…
- What if you simply don’t want your friend or family member to “know your business” or finances…
Here are some valid reasons for listing with your friend or family member:
The entire basis of the relationship between a real estate agent and their clients is that it’s a “fiduciary relationship”. Simply put...it’s a “trusting relationship”. You really ought to be able to trust a friend or family member, above and beyond someone you don’t even know. If you can’t, well, then you shouldn’t hire the person even if they’re your friend or are related to you.
If your friend or family member is a great agent, and is as good of a choice, if not a better choice than someone else who simply fits the bill because they aren’t your friend or family member...hire your friend or family member. Hiring some random, lesser skilled agent doesn’t do you any good, other than to avoid awkwardness.
This is such a loaded subject. Real estate agents hate this issue more than you do...more than you could ever imagine. They’re constantly bracing themselves to have to deal with it at some point. If you simply talk openly about this subject with the agent you know, and show that you understand their dilemma, and feel for them, you will get some crazy appreciation from the agent. And that crazy appreciation can translate into some awesome care and service.
This is something most agents don’t want to openly say much about…so, let me say it for them. The agent you know probably really needs your support and for you (and everyone else they know) to hire them. This is a tough business. It’s highly competitive, and it’s hard to make money...not even lots of money. We’re talking just-surviving-in-the-business type of money. So when someone an agent knows uses someone else just to avoid any weirdness, it hurts. It hurts their heart, and their bank account. (And just because an agent isn’t getting filthy rich in this business, and needs as much business as possible, does not mean they aren’t a great agent who will do an awesome job for you!) So, have some compassion and help the agent you know, instead of some random agent you don’t really care about.
Go ahead and ask any real estate agent you don’t know if you should work with a friend or family member. But if they even sniff that you’re thinking of buying or selling, and they have a shot at business, they’ll probably give you so many reasons not to. Of course they will.
But that’s a double edged sword. Be leery of a real estate agent who pushes that angle too much, because that agent is someone’s friend or family member, and rest assured, they don’t have that same perspective when it comes to their own friends and family.
Use your own head, and your own heart to make the decision. Make it as much of a business decision as possible, but do take into consideration that there’s some amount of being a kind human that needs to be considered.
Before you hire someone else, at least sit and chat with your friend and family member who’s a real estate agent.
Better yet...sit with them now, before you’re actually buying or selling, and chat about real estate. More specifically, chat about their career. Get to know how they work, and are as an agent. So you can not only hire them when the time comes, but also so you can refer them as much business as possible starting now. They’ll surely appreciate it!
And, if you can’t possibly see yourself working with the agent you’re friends with, or are related to, at least ask them to refer you to another agent, before you just go finding a random one on your own.
Have you ever had an agent deny to show you a home because you weren't pre-approved for a mortgage? It's not because they're mean, or they don't value your business...it's actually because they're looking out for your best interests.
Let's face it, shopping for a home before getting pre-approved for a mortgage is like walking into a grocery store without a wallet. You may have the desire to buy, but you lack the ability. Let’s cover some basics...
What is a mortgage pre-approval?
In a nutshell, a mortgage pre-approval is written assurance from a lender or broker that you’re able to borrow money to purchase a home up to a certain amount. It’s based on the income, employment and asset documentation you supply at the time of application, in conjunction with your credit history. So let's look at the 6 reasons you should get pre-approved.
It carries more weight than a “pre-qualification”
A pre-approval differs from a pre-qualification. With the former, the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 30, 60 or 90 days). A pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but it’s a less accurate indicator of your ability to purchase. A pre-approval always carries more weight.
You’ll know how much house you can afford
Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford. Knowing this narrows down the options and makes the selection process more efficient. Not to mention, it protects you from the unpleasant surprise of realizing the home you fell in love with doesn’t fit your budget.
It adds clout to your offer
In many markets, homes attract more than one offer. If the sellers are weighing one offer against another, they may lean towards the one accompanied by a pre-approval letter. That’s because pre-approvals instill confidence that the buyer is financially capable of purchasing their home.
It could increase your negotiating power
In addition to strengthening your offer when compared to buyers who haven’t taken this step, getting pre-approved may give you the upper-hand when negotiating the price. If the homeowner is eager to sell, they may be more willing to accept a lower offer from someone they’ve been assured is financially capable of purchasing their home.
It saves time.
Obtaining a mortgage is a lengthy process. Getting pre-approved ahead of time shortens the time between contract to close -- this way you’re ready to proceed with finalizing the mortgage once you’ve found the home you want to purchase.
Without it, most agents won’t work with you
Makes sense, too. Right? Think about it: when you hire an agent, he/she will invest countless hours showing you homes over the course of your house hunt. If you were in their shoes, wouldn’t you want assurance that your hard work would lead to a favorable outcome for both you and your client?