It's 2017 and that means it's a GREAT time to start preparing yourself for buying a house in 2018!
A lot of the people who are currently reaching out to us about buying a home, in our local market of Raleigh, are preparing themselves for a purchase in 2018. These folks are the inspiration for this article and my hope is you will be well prepared by the end of it.
In Real Estate it's not uncommon for people to keep their eye on the market long before they become serious buyers and thus we are writing a how to guide for buying a home in 2018.
Buying a house requires preparation and the more prepared you are the more confident you will be heading in. Real Estate is one of the safest investments you can make, especially if you're buying in a great location.
The biggest mistake people make is they buy nothing at all. They renew their leases and push home buying off for another year. If you ask the clients we work with 'what is one thing you wish you did differently' their answer would be 'buy sooner.'
This guide has been prepared after consulting real estate experts and mortgage professionals. Their thoughts on what prospective home buyers need to do are discussed below in detail. Without wasting any more time, let’s get right into it!
How to Prepare to Buy a House in 2018
Step 1: Check your Credit Score
This step is important if you are planning to take a mortgage or home loan. To qualify for a mortgage and get the best terms possible, you need to have a good credit score.
There are a lot of great websites online that can help you understand where your credit score is at, I personally use CreditKarma.com. The scores aren't always 100% accurate so take them with a grain of salt. Using the mobile app on my phone I'm able to understand the strengths and weaknesses of why my score is the way it is. Try not to close your older credit accounts because these give you a good average length of credit history.
A credit score is simply a representation of your credit worthiness. FICO credit scores range from 300 – 850. A higher credit score is always better when taking out a mortgage. You are bound to get the best interest rate (lowest interest rate possible) and best loan terms if your credit score is 740 or more. The interest you pay for your loan is important because it dictates the entire cost of the loan. Furthermore, getting a rate that is .25% lower can translate to thousands of dollars in savings every year for the entire term of your mortgage.
I've seen people with a credit score in the high 500s turn it into a high 600s in just a few months. So if you need help improving your credit score, check out some resources online.
Step 2: No New Credit Cards
When preparing to buy a house, you should also stay away from new credit cards even if they come with irresistible benefits. This is highly recommended since opening new credit lines can hurt your chances of qualifying for a mortgage, and if by any chance you are eligible for a mortgage, you won’t get the best rate. New credit lines usually change mortgage loan application numbers. To make sure your mortgage loan application numbers stay the same, avoid new credit lines by all means. You should also avoid overusing existing credit going forward to avoid getting bad terms in the future.
What are the benefits of the credit card? Can you call your bank and see if there is any way to get around using a credit card until you have purchased the new home? This will allow you to have the highest credit score possible when it comes time to get a mortgage.
Step 3: Find a Mortgage Lender
Before you start looking for a home to buy, you need to get a mortgage lender first. This step is critical because it lets you know the kind of home you can afford to buy. It saves you the time, money and headaches during the home buying process. It also makes sense to start a conversation with a mortgage lender well in advance of you buying a home because they can help prepare you for the actual application process.
Finding a good mortgage lender is easy, though it requires a lot of effort and that's the hard part. You can start by asking your bank if you have established a good relationship with them what are the best steps you can take for a mortgage approval? Next, you will want to compare products. Each lender and bank will have different products they can offer certain types of people so don't settle for the first one. Look at all of your options and choose the one that makes the most sense for you!
Step 4: Get Preapproved
Serious buyers make a pre approval their first step when buying a home. This is because they are serious and know that if they are going to buy a house they will need it. As with most markets, if you try to buy a house in our market you're going to compete with a lot of other buyers. Even in smaller towns like Clayton, which was once considered farm land people are having to raise their offers to a few thousand over asking!
Before you can approach potential home sellers, you have to get pre approved which simply tells the seller you are capable of buying the home in question. Getting preapproved is easy. You just need several documents. Typically, you will require your tax returns and W-2 forms for the past year or two. You’ll also need your current paycheck stubs for three or more months as well as a list of your debts and assets. You also require other documents such as proof of mortgage/rent payments. Once you get pre approved, it’s important to avoid making big purchases, missing debt payments and changing jobs as you wait to get a mortgage to avoid altering information in your mortgage application.
Step 5: Find A Great Real Estate Agent
Before you find the house you need to find a great real estate agent and this is more important now than in previous years. With so much information online it's hard to believe what's real and what isn't. A great Realtor will help you navigate the world of real estate. Often people will be willing to see a house with anyone who will show it to them. Strong Agents are going to have tougher barriers that you need to break through because they are in high demand.
Often people will be willing to see a house with anyone who will show it to them. Strong Agents are going to have tougher barriers that you need to break through because they are in high demand. It's worth working with someone who is good, that has good reviews, then it is working with someone random. Do your research.
When someone asks to see a home for sale in a competitive market like Cary, we typically require a phone call or in-person meeting beforehand to help learn if we are the right fit for that client. This is a benefit to the client as it is to us. We make a commitment to our clients not to work with too many clients at once because that would jeopardize our ability to work for them.
There are certain questions you should ask when interviewing Real Estate Agents and these will help you determine if you're working with the right person. A home is a large investment after all.
Once you are pre-approved, you can get yourself a good real estate agent to help you find the perfect home for you. Real estate agents are easy to find today regardless of your location. You can use referrals, relatives or the internet to get the best real estate agent in your area. This step is important since real estate agents are knowledgeable about real estate. They offer useful support on all matters relating to real estate from finding the right house to negotiating and closing.
Step 6: Find a Great House
Start with the location you want.
A lot of folks in our area are basing their home purchase in 2018 on school districts. Towns like Apex and Holly Springs are growing so fast that they are either capped or are constantly being rezoned for their school districts. Finding a great house doesn't necessarily make you dependent on a school district, though it does make sense for families who make it a priority.
Determining your priorities is going to help you find a great house. Have a list of 'must haves' and stick to it while being reasonable. Understand that most homes are not going to have everything you want and if it does then you should act quickly. When you find a great house, don't wait, make an offer on it because if you don't, someone else will.
Step 7: Don’t Forget about the Closing Costs
Even if you are a first time home buyer with a 0% down payment loan you need to remember that bringing money to closing is often required. Most people don't realize that closing costs can be around $5,000 when you include the attorney, lender, inspection, and other fees. Remember, as the buyer you don't pay any Realtor fees.
If you're buying a home in 2018 you should start the conversation now. Begin saving up for your down payment, your closing costs, and have a cash reserve for a rainy day!
It’s also important to discuss with your agent on ways of reducing closing costs. However, if you hire a reputable real estate agent, you have nothing to worry about.
Buying a house is challenging if you don’t understand the process. There are many things you need to consider when buying a home and you'll find some generally great information online to help you along the way. Whether it's your first time or your fifth time, it's always good to brush up on what to expect, especially if it's a new state with new laws.
The above steps give a great overview to how best prepare when buying a house in 2018. The information may vary slightly depending on location as well as the mortgage lender you choose.
If you're buying a home with a significant other you will want to start preparing for that as well. There are a lot of additional steps to take and the laws will vary by state on how it works. Consult with a Real Estate attorney if you have any questions on how to take title.
If you have any questions for us, drop us a note in the comments section below!
Hi there! I'm Ryan Fitzgerald, a REALTOR in Raleigh-Durham, NC and the owner of Raleigh Realty. Chances are you and I share a similar passion, Real Estate! I also have a passion for technology, sports, and people. Would love to hear from you. Drop me a note in the comments section below and feel free to share this article socially!