As you move through life, you will face many financial choices. The car you buy, where to travel for vacation, which college to attend or where to retire, to name a few. No other single financial decision involves so much detail and has so many moving parts as buying a home. I provide financial advice and help clients through the process of buying a home by implementing 3 important steps to assist with the home buying experience. Whether it’s your first home purchase or one of many others, these steps will help you be better prepared to buy your home and be more confident.
I recently met with a couple looking for help to purchase a new home. “So, why are you motivated to buy a home?” I asked.
“Well, our apartment complex is raising our rent again! We might as well be paying for a house.”, the couple explained.
They definitely should be concerned. There are an estimated 43.1 million renters in the United States and research shows that the median rental price for an unfurnished apartment is $1,500 (statisa.com Aug 2019).
So, while apartment rental prices increasing are a motivating factor, it is best to establish a goal around your home purchase. In my client's case, they are faced with an urgency because generally the notice of the rental increase only comes a few months before the renewal terminates. They have to make a choice to stay and pay more, find another rental or buy a home! By rushing into buying a home, you could overlook something important which could end up costing you thousands of dollars. Having goals in mind when you are making your home purchase is extremely important! This process will benefit the emotional aspect of your home purchase.
Your goals when making a home purchase can be very personal. They should be realistic and practical versus outside of what you can truly afford. In my client's case, they had a timing issue. They have the option to go month to month, which could make sense if they aren't able to find the home that fits their goals. Some of the suggestions I made to them where the obvious things to consider, such as location, nearby amenities and ease of commuting to work. Other things I mentioned to consider as goals are, the length of time they plan on living there, the amount of space needed both inside and outside, the school districts and the best opportunity to buy.
After having a clear set of goals, then comes the financing aspect. Not many people can write a check or pay cash for the total purchase price when making a home purchase. Exploring your home financing options is the second step. It is very common for people to seek financing where they bank or by doing an online search. While this may be efficient in some cases, it may not be the most effective option. The Consumer Financial Protection Bureau finds that nearly half of consumers don’t shop around. Not shopping around for a home loan could end up costing you thousands of dollars. Comparing 3-5 mortgage companies could help you narrow down which company is going to benefit you the most.
Here are a few key points when evaluating the mortgage lenders. First, it would be best to plan a full week to sort through the mortgage companies that you would like to evaluate. Mainly, because most lenders may want to run a hard credit check. This prevents having your credit ran sporadically over the course of several weeks. The second step is asking specific questions about the loan programs. Below, I listed a few questions to ask loan officers to help you get better informed.
-What is the current interest rate? (Keep in mind that this could change. Also, the interest rate could vary depending on your credit score.)
-What is the annual interest rate? (This is important to know as it will include embedded fees from the lender.)
-What lending programs do you offer? (They may have FHA, VA, conforming or non-conforming fixed rates and ARM (adjustable rate mortgage).)
-Do you have any down payment assistance programs?
-Can I get a Loan Estimate? (You shouldn’t have to give up too much information to get this report. This report can help you then compare the loan options and determine which is best for you.)
The third step has to do with going through the process. Decide if you will be doing it on your own or working closely with a professional. If you decide to do it on your own, being diligent and organized is vital to avoid costly mistakes. If you work with a professional, go through an interview process when hiring them. I have shared some questions to ask the loan officer, but don't forget about the real estate agent. When working with a professional, you have to strongly consider what is most important to you as well as your expectations. Be sure to understand their experience, knowledge of the market, how will they communicate with you along the process and, most importantly, how they plan on helping you meet your home purchase goals!
I can assist a home buyer by helping them understand their financial situation including credit, income, expenses, debt and investments. Also, by helping you compare loan terms from competitors, fees, taxes and insurance and/or a better understanding of the long-term financing. In addition, by setting very detailed specific and strategic goals to quickly and efficiently reduce the biggest expense you might possibly ever have!