8 Tips To Home Search The Smart Way
Home searching can be fun and successful when you follow these 8 tips.
1. Start saving early
Here are the main costs to consider when saving for a home:
- Down Payment: Your down payment is heavily dependent on the specific type of mortgage you choose and the lender. Conventional loans typically aimed at first-time homebuyers can allow for just 3% down. However, this requires impeccable credit ratings.
- Closing Costs: To finalize your mortgage there are a few fees and expenses that must be paid. These extra payments at the end are what we in the industry commonly refer to as "closing costs". They amount to roughly 2%-5% of the total loan amount.
- Move-in Expenses: Most people forget about this part when buying a home. Keep in mind that you should put money aside for necessary home repairs/upgrades as well as furnishings.
2. Decide how much home you can afford
Use the mortgage calculator on my "Finance" page to figure out what you can afford based on your income, debt, and potential downpayment cost. Once you have a total figure in mind, it is time to start shopping in your price range!
3. Check and strengthen your credit
Your credit score will be a defining factor for the interest rate your lender offers as well as your ability to even qualify for a home loan or not.
- Obtain three copies of your credit report from the top credit bureaus — Experian, Equifax, and TransUnion — then dispute any errors that could damage your total score.
- Pay all your bills on time, and keep your credit card balances as low as possible.
- Keep current credit cards open. Closing a card will increase the portion of available credit you use, which can lower your score.
- Track your credit score.
4. Explore mortgage options
A variety of mortgages are available with varying down payments and eligibility requirements.
- Conventional Home Loans: These loan types are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.
- FHA Loans: This loan type is insured by the Federal Housing Administration and allows down payments as low as 3.5%.
- USDA Loans: This loan type is guaranteed by the U.S. Department of Agriculture. It is for rural homebuyers and usually require no down payment.
- VA Loans: This loan type is guaranteed by the Department of Veterans Affairs. It is for current and veteran military service members and usually require no down payment.
5. Compare mortgage rates and fees
It is recommended that you apply for the same loan across multiple lenders to compare the total costs, including interest rates and possible origination fees to guarantee you get the best possible deal you qualify for.
6. Get a pre-approval letter
Pre-Approval from a lender is an offer to loan you X amount of money under specific terms. Obtaining this letter shows sellers and other Real Estate Agents that you are a serious buyer and you genuinely have the ability to purchase the home.
7. Pick the right type of house and neighborhood
You will want to weigh the pros and cons of different types of homes, given your lifestyle and budget. A condo or townhome may be more affordable than a single-family home, but shared walls with neighbors will mean less privacy. You will also want to budget for homeowners association fees when shopping for condos and townhomes, or houses in planned or gated communities.
Another option to consider is buying a fixer-upper, which is a single-family home in need of updates or repairs. Fixer-uppers usually sell for less per square foot than move-in-ready homes. However, you may need to budget extra for repairs and remodeling. Renovation mortgages finance both the home price and the cost of improvements in one loan.
Think about your long-term needs and whether a starter home or forever home will meet them best. If you plan to start or expand your family, it may make sense to buy a home with extra room to grow. Check out potential neighborhoods thoroughly. Choose one with amenities that are important to you, and test out the commute to work during rush hour. You can shop for homes using the button at the top of this page.
8. Pay for a home inspection
A home inspection is a thorough assessment of the structure and mechanical systems. Professional inspectors look for potential problems, so you can make an informed decision about buying the property.
Here are some things to keep in mind:
- Standard inspections don’t test for things like radon, mold, or pests. Understand what's included in the inspection and what other inspections you might need.
- Make sure the inspector can get to every part of the house, such as the roof and any crawl spaces.
- Traditionally the buyer attends the inspection. By following the inspector around you can get a better understanding of the home and ask questions on the spot. If you can't attend the inspection, review the inspector's report carefully and ask about anything that's unclear.