- Everything You Need To Know About Buying A Home
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In 2015, entrepreneur and lifestyle blogger Geri Hirsch made two big life decisions: she got married and, shortly before the wedding, she and her now-husband Darin bought a house.
Everything You Need To Know About Buying A Home
Right from the start, Geri learned a big lesson about the home buying process: patience. She, Darin and, on occasion, her realtor, toured more than 90 homes across Los Angeles before landing on the right one — a 1927 Spanish-style upper unit with sweeping ocean and city views. “It was a very long process, because we really didn’t want to settle,” says Geri. The couple lived in the house while they embarked on a major renovation, including kitchen and bathroom renovations.
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On the other end of the spectrum, Heather Mitchell, a single New York attorney, made a quick but calculated decision to buy a home: She stumbled upon a gem of an apartment after seeing just a few of them on a weekend walk in the neighborhood with her mother and brother. “I immediately fell in love with it,” she says of the two-room apartment she bought in 2020, in the middle of the pandemic. “It was a unique opportunity inside a co-op building and has a great view of the Brooklyn Bridge and the Freedom Tower.”
As Geri and Heather can attest, the home buying experience can vary greatly depending on your location, financial situation and other factors. But the basic steps, as detailed below, remain the same. One of the best first moves is to find a good real estate agent — they can walk you through the process, give you an inside look at the neighborhood, and provide tons of other information that will give you the foundation you need to make smart decisions. To that end, we consulted with San Francisco-based real estate broker Tracy McLaughlin, New Jersey realtor Jaime Richter of Allison Ziefert Real Estate Group, and Kyla DeMarzio, senior vice president of guaranteed-rate mortgage lending. Their insights will help you transform from home-
The first step to becoming a homeowner is to have a clear picture of your financial situation, which will help you determine a realistic down payment, which ranges between 10% to 20% for most people, and how high a mortgage you can afford. As a general rule of thumb, according to Experian, your mortgage payment should be no more than 28% of your monthly income. Additionally, consider your credit score (740 or higher is excellent), monthly income – including commissions and bonuses – savings and debt, whether it’s student loans, outstanding credit card bills or car payments, to figure out what’s good for you works for your budget. Your realtor can also review possible mortgage payment scenarios, including homeowner’s insurance and property taxes, so you know exactly what to expect before making a final decision on a home.
Once you know more about what you can afford, you’re ready to start the process of getting pre-approved for a mortgage. It’s imperative to research mortgage lenders – well-regarded mortgage brokers or banks – to find the right one for you. You can go by word of mouth or even ask your real estate agent for a referral. “The mortgage lender is thinking about the client’s comfort level,” says DeMarzio. “Maybe I could give someone a million dollar mortgage, but that doesn’t mean they want a $7,000 a month payment. It’s about that conversation and supporting the client — and not just in the pre-approval process. It’s not just about what they’ll qualify for, but where their comfort lies. Then the realtor and lender work hand-in-hand to create an alliance of resources throughout the process until they close the deal.”
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As you search for a mortgage lender, prepare to become an open book about your finances. You’ll need to provide pay stubs, statements for your savings, checking, retirement and investment accounts and recent tax returns.
In Heather’s case, she had to share financial information on her mortgage application as well as the co-op board in order for her co-op application to be approved. “I was surprised by the amount of financial information I had to provide and how many checkpoints there were,” she says.
Geri, who bought a house with her husband in L.A., points out that this part of the process is crucial to buying a property without major delays. “Get all your ducks in a row on the financial side so you’re fully prepared to go when you walk into your dream home,” she says.
You’ll also need to act quickly once you’ve received pre-approval. If you provide all the required financial information on time, you can get pre-approved fairly quickly; it can happen already after a week. However, your pre-approval letter will only be valid for about 30-90 days, depending on your area of interest. You’ll have to reapply if you don’t find a home during that time, which DeMarzio says doesn’t actually hurt your credit score like it’s often believed to be the case. “You’re allowed to run your credit two to three times a year for various purposes, and it should have absolutely no impact on your credit,” she says.
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In states that require a real estate attorney at closing, this is also a good time to start a relationship with one.
Prospective buyers are excited about this next step in the home buying process, but it pays to proceed with caution. Don’t ignore the fact that the COVID-19 pandemic continues to affect the real estate market. “With limited inventory in most markets across the U.S., homes are selling quickly with many offers and some with higher asking prices,” said David Mele, president of Homes.com. Real estate brokerage Redfin just released new data, revealing that nearly 40% of homes in the U.S. are selling above asking price.
With that in mind, imagine your life in your new neighborhood. Be diligent in researching and getting a real feel for what it might be like to live in your desired neighborhood. Do you want an area that offers lots of activities for children? Is a pedestrian district important to you? “Find an agent who is familiar with the exact area you want to live in, as they will know the market, prices and levels of competition,” says Richter. “Beyond that, a local agent will be able to give you additional resources that you may not have known about. For example, if you’re moving to New Jersey from Manhattan and still have to commute, you’ll want to know the best cities to live in for commuting. If you’re moving from Brooklyn and restaurants are really important to you, work with someone who can refer you.”
Once you’ve connected with a realtor to view listings, Geri recommends making a non-negotiable list as well. “We knew we needed to have three bedrooms because we wanted to grow into a home and have kids, so we narrowed our search from there,” she says. In addition to the number of bedrooms, consider other features you might want such as a large yard that’s perfect for entertaining, a multi-car garage, a finished basement, or a move-in ready property that doesn’t require much renovation.
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Homes.com even found that a growing number of buyers who have switched to telecommuting are shopping with this in mind. “According to our recent research, home feature preferences have changed significantly, with 78% of real estate professionals citing client requests for home offices as the number one change, followed by larger square footage (57%), outdoor recreation spaces such as swimming pools , hot tubs and decks (45%) and upgraded kitchens (44%),” says Mele. In other words, setting certain parameters can simplify your search and make it less strenuous.
Be strategic when finding the perfect home. “We’re in an environment right now where sellers want to know that someone loves their house,” says McLaughlin. That’s why she recommends including a personal letter to the seller with family photos to give them insight into your life and why you’re the best fit for their property.
Hirsch also urges potential buyers to take their research to the next level. “It would really help if you could understand the motivation as a seller,” she says. “Every time we went to see a house, we would try to do some research to get some information.” An example Hirsch shared is thinking about a seller’s motive for listing their property for sale. If they have already found a second home, which depends on the sale of their current property, this means they probably need the money to close on their new home. “If you know that, you can make an offer that may be more desirable to them just by getting closer to them faster,” says Hirsch.
Your real estate agent, family and friends can recommend a credible inspector who is skilled at examining everything from a property’s roof and foundation to plumbing and electrical installations.
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