Wouldn’t it be great to have a home buying checklist? Something you could stick in your pocket that would remind you to ask all the right questions and make a smart home buying move?
As we count down the final few weeks to take advantage of the $8,000 first-time home buyer tax credit and $6,500 long-term homeowner tax credit, it’s helpful to have a checklist all home buyers can turn to.
Ilyce’s Home Buyer Checklist:
1. Understand the difference between what you want in a house, and what you need. Just because you want a house with five bedrooms, five bathrooms and a pizza oven in the outdoor kitchen, doesn’t mean you need all that. The concept is to get everything you absolutely need in a property and a few of the things you want – without breaking your bank account.
2. Identify your neighborhood(s) of choice. Write down what characteristics your neighborhood of choice should have and compare that list with actual neighborhoods in which you might want to live and can afford to buy. Then, spend time in that neighborhood, driving around during the day and night. Visit the local schools, see who hangs out in the grocery store and coffee shop, and drive the commute to your office during rush hour.
3. Figure out how much you can comfortably afford to spend. While lenders are more conservative in handing out loans, they may offer you a bigger loan than you’re prepared to take. Start by calculating how much you can afford to spend – and want to spend – on your mortgage, property taxes and insurance each month. Then, add in all of the other expenses you pay for each month (and don’t forget to save a few bucks for the upkeep and maintenance expenses you’ll have to pay for as well). Once you’re done, figure out how much money you have left in your paycheck and whether you want to spend a little more of it on your housing expenses each month. (Remember, part of the housing crisis came about because home buyers purchased homes they could not realistically afford and worked with lenders that gave them loans that they couldn’t afford over the long haul.)
4. Pull a copy of your credit history and credit score. Do this at www.annualcreditreport.com. You’ll get a free copy of your credit history from each of the three credit reporting bureaus (Equifax, Experian, and Trans-Union) plus, you’ll have the opportunity to pay around $9 for a copy of your credit score.
5. Gather your paperwork together before you shop for a loan. You’ll need copies of your W2, bank account and retirement account statements, as well as tax information. I have a full list at ThinkGlink.com (http://www.thinkglink.com/article/2008/09/11/mortgage-loan-applicants-need-more-documents). You’ll need even more documentation if you’re getting a jumbo loan or if you own your own business.
6.* Shop around for a mortgage. Talk to at least five different types of lenders. Most lenders will offer you a 15-year or 30-year fixed rate mortgage through Fannie Mae, Freddie Mac or FHA.
7. Find an amazing real estate agent. While the information available on the Internet makes buyers feel as though they’ve got everything they need to negotiate a great deal, they’re actually missing the key ingredient: experience. A great agent with years of experience negotiating for buyers and sellers in your neighborhood of choice is invaluable.
8. Understand what “true value” means in your neighborhood(s) of choice. Start collecting information about the local housing stock. Ask your agent to walk you through each home that has recently sold, so you begin to understand the relationship between price, condition and value.
9. Apply for your loan. Try not to chew your nails off while waiting to be approved.
10. Work with your agent to identify the homes for sale in your neighborhood(s) of choice that meet your wants and needs. As you walk through these homes, try to decide if the homes you’re seeing meet all of the needs on your list. Is the agent listening to you? Do you need to have another conversation to help you refine what you’re looking for? Or, is the agent showing you property that meets your needs and wants better than what you thought you wanted originally?
11. Put together the other pieces of your home buying team. Now that you have the agent, you’ll need a few other people to help you buy the right property. Choose your home inspector and your lender (and decide what kind of loan you want). Think about hiring a good real estate attorney (especially if you’re buying a foreclosure or short sale, and even if real estate attorneys aren’t normally used to close house deals in your state).
12. Understand the true costs of homeownership. You don’t want to be stressed out over the monthly expenses of owning a home as well as the other unexpected surprises that come so often with buying a home.
13. Don’t let anyone push you around. You should work hard to set your own home buying agenda. If someone demands that you make a decision immediately, politely step back from the situation. Remember, there will always be another house for you to buy – especially as we continue to work through the glut of homes on the market after the Great Recession.
14. Make a smart offer. Look at how much other homes in the area have sold for, and then build an offer that gives the seller something he or she wants (mostly, that’s money, but it might be time) in exchange for whatever you really want.
15. Stay focused until the closing. Schedule the movers. Pack your boxes. Set up utility accounts at the new property and shut off your utilities as of the morning of the move. Put in a change of address notice with the post office, your financial services companies, your employer, etc. And don’t forget to buy your homeowner’s insurance policy, with enough coverage for the home and its contents. You may also need other insurance that are not generally covered in a policy, such as flood coverage, back-up sewer coverage, coverage for collectibles if you have any or jewelry.
Clip this home buying checklist and keep it in your pocket, so that you’re always making a smart move.