The pandemic-fueled seller’s market America has endured over the past few years is finally beginning to wane, if ever so slightly. Home buyers may now feel more comfortable wading into the purchasing waters without fear of cash buyers who offer thousands over the asking price or massive bidding wars.
Though many home buyers are wary of rising interest rates, this is still a good time to buy a house. However, you still need to know what to look for and how to proceed in the most financially advantageous way possible. Jonathan Rundlett of EXIT Mid-Atlantic specializes in helping buyers snag their dream home and has some words of wisdom to share for people hoping to venture into home ownership.
Down payment & fees
“Most conventional loan programs require buyers to have between 3% and 5% of the home purchase price for a down payment. I suggest buyers strive to save at least 10%, if not more,” says Rundlett.
When buying a home, there will be additional fees that come along — such as lender fees, title fees, appraisals, and home inspection fees — that can catch some home buyers off guard. Rundlett suggests that buyers remain aware of all of the additional costs that come along with a home purchase.
“There is also the consideration of money you will want to have on hand once you close on your new home and move in because there may be some repairs or upgrades necessary, and you will likely want to invest in some new furniture,” Rundlett offers. “Making sure you have enough money in the bank to cover a down payment, fees, and everything you’d like to do to the house once you buy it will help you sleep better at night as you take on a mortgage.”
It may go without saying, but buyers should try to avoid being talked into taking on the cost of a home they can barely afford. “They should run all the numbers and be realistic about affordability,” says Rundlett.
It helps to plan for an eventual home purchase by sticking to a budget and putting a set amount of money aside every month toward the homeownership goal. There are also down payment assistance programs available. Buyers may wish to speak with a HUD-approved home-buying counselor, as many provide great training and resources for people looking to buy their first home. By researching various options and utilizing the help available to home buyers, buyers could possibly walk away with more money in their pocket once the deal is done.
Review your credit
In addition to making sure one’s finances are in order before buying a new home, a credit review is often recommended. Lenders will look at the FICO score, debt-to-income ratio, and past issues, such as bankruptcies, before they decide that a buyer is a sound investment.
“Most lenders will provide you with a complimentary review of your credit report,” says Rundlett. “This will give you a guideline on what you may be able to afford and how you can possibly improve your credit rating in anticipation of a home purchase.”
Stick to a budget
The costs of home ownership don’t disappear once all the papers are signed, and buyers receive the keys to their new place. There are moving costs to consider, plus the costs of decorating a new home, and utility costs can often be higher than they may be in a rental.
In addition, buyers must factor in the cost of homeowner’s insurance and property taxes.
“Maintenance and repair costs are now all on you and can quickly add up if you’re not careful,” says Rundlett. If it is their first time purchasing a home, buyers may consider taking a HUD-approved First Time Homebuyer Counseling Program class.
In these classes, professionals instruct new home buyers about all the costs associated with buying a home and the ongoing expenses to budget for. Completing the class will also earn buyers a certificate that is good for one year to qualify for loan programs that offer down payment and closing cost assistance, so the classes can save people money in the long run in more ways than one.
Research the local market
Researching the local market is especially important if you are unfamiliar with the area. There are many tools online that can help home buyers research schools, crime rates, walkability, and many other factors that could play heavily into their decision to go with one neighborhood over another.
EXIT Mid-Atlantic is well-versed in area research and helps its buyers find the perfect neighborhood for their needs. They also suggest buyers spend some time on their own research.
“Drive around your target neighborhoods and keep an eye out for anything that you would consider a red flag, though these can vary from person to person,” Rundlett explains. “One person may not want a neighborhood where the houses are very close together, while another may not mind a more “close-knit” community.”
Buyers should take advantage of all the resources at their disposal to research where they may spend the majority of their time in the future. “You wouldn’t want to rush into a purchase only to find there is constant construction near your home or that your house is the nicest and most expensive in a neighborhood that is not transitioning,” Rundlett notes. The team of real estate experts with EXIT Mid-Atlantic know the area and can help direct buyers toward a good area or away from one that may be problematic.
Work with professionals
Enlisting the help of a professional real estate agent when searching for a new home can be a great benefit, as these agents have their fingers on the pulse of the home market and can offer suggestions that a buyer may not have ever considered. Agents can connect buyers with spec home builders to get those buyers access to desired neighborhoods or find “fixer uppers” in desirable neighborhoods that could be equity-building goldmines for the right buyers.
“Working with professional agents will give you an insider’s advantage in the often volatile real estate market,” Rundlett says. “They can negotiate prices for you, find diamonds in the rough, and get you the best deals possible.”
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Buying a new home can be stressful, especially for a first-time buyer. But by having one’s finances in order, doing diligent research, and having a great real estate agent on your team, one can smoothly navigate the choppy waters of home buying and end up with a home they love.
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