While most of us will go through the process of buying a home in our lives, it's not something we do often. That's why, especially in this seller's market with a potential shortage of homes to choose from, prospective home buyers will want to be extra vigilant and prepared as they begin the process to ensure they get the best value possible.
A real estate agent will be a useful resource and should be familiar with the area of your search. However, you should also get to know the housing market you'll be searching and negotiating in to ensure you end up with a home and price you're happy with.
First Things First
It's tempting to jump right into your search, but working with your lender to make preparations and get pre-qualified for a mortgage will allow you to act quickly when you do find a house you love. Things you should consider and discuss with your mortgage lender include:
- How much you want to allocate for a down payment
- Your credit score, which will affect the interest rate you qualify for
- The price range for your new home
Once you've thought about each of those items, you're ready to discuss your mortgage options and get pre-qualified. Together with your lender you can:
- Decide which type of mortgage will work best for you (adjustable-rate, fixed-rate, etc.)
- Choose the duration of your loan
- Calculate your estimated monthly mortgage payment
- Discuss the interest rate of your mortgage
Going through the pre-qualification process can help you prepare before seriously looking for a home, and can also help to expedite the process down the road. Remember that pre-qualification letters are generally valid for 60 to 90 days and will need to be updated after that point.
On the Hunt
Once you decide where to focus your search, look at the prices of nearby homes - particularly those that are similar to what you're looking for. You may find that certain home features are easier or harder to come by, which will in turn influence the value and price.
Browsing the market on a website like zillow.com can help you get a better idea of both values in your ideal neighborhood as well as the kinds of homes and features you're likely to find. This preliminary research will help you prioritize and know what to expect, which will also help streamline the search process with your realtor.
When you're ready to make an offer, your market knowledge can help alleviate what can be a stressful phase of the buying process. There's often a lot of urgency during the negotiation. Your real estate agent might encourage you to act fast so another buyer doesn't beat you to it, or to make an offer that's close to the asking price. However, before making an offer, seriously consider the value of the house itself. Take into account:
- How other similar homes in the area are priced
- How much repair or renovation you will need or want to put into the home
Keep these factors in mind throughout the negotiation process. Even if it's recommended that you "meet them in the middle" - if the seller's starting number is way off, the "middle" potentially won't be a fair price for you. You might also hear something like, "is losing this house really worth saving $2,000?" But that same logic can be made on the seller's side, too. Is losing the sale worth $2,000 to them?
Whether you feel pressure from your realtor, the seller or other buyers, resist the urge to act hastily. Instead, lean on what you learned from your initial research so you can confidently negotiate for a fair price.
Securing "The One"
Once your offer has been accepted, it's time to get both an inspection and an appraisal. Both will help ensure you're getting the home and the value you're looking for. The appraisal will be ordered by the lender on behalf of the borrower. While people have mixed feelings about appraisals, these have become standard procedure as a way to confirm a home's value, protecting both your mortgage lender and you, the buyer.
While at this point you might be feeling pressured to move quickly - don't. Appraisals can help you negotiate for a fair price, and an inspection can help you avoid costly surprises down the road.
You've finally reached the last stretch of this lengthy process. Here, you'll work with your bank to finalize all of the necessary paperwork to close on your house.
Worth the Preparation
Home buying can be a long and emotional process, but by being prepared, you can more easily and confidently find and negotiate for your ideal home.
This article originally appeared on RaymondJames.com.