It’s a great time to buy a house. That is, if you don’t have to sell one first. Sellers desperate to move are pricing their houses competitively, and mortgage rates remain near historic lows.
Still, just because it’s a buyer’s market doesn’t mean that the time is right for you to leave renting behind.
Two real estate agents, a lender and a couple who recently closed on their first home talk about what to consider before making what’s normally the biggest purchase of one’s life.
Save your documents. Keep your most recent pay stub, W-2, bank and retirement-account statements for the loan-approval process. The mortgage originator will pull your credit report to provide a snapshot of your outstanding debts. Be wary if a lender offers you a loan without checking these out.
It wouldn’t hurt to check your credit report for free at annualcreditreport.com before you start the loan process to make sure there aren’t mistakes that could hurt your chances of qualifying.
It’s standard to be pre-approved for a loan before starting the home- search process. Just because you are pre-approved by one lender doesn’t mean you must get a mortgage through that company.
Play house. As soon as Dustin May, 23, and Heidi Myogeto, 22, decided to look for a house, they began banking $2,000 a month into a savings account. That gave them a taste of how their spending would change once they were homeowners. “I haven’t seen the inside of a bar since New Year’s,” said Heidi, who said they’ve curbed going out to eat.
Don’t forget the snow shovel. Coldwell Banker Burnet agent Mary Thorpe-Mease talks to first-time homebuyers about repairs, assessments and other costs of homeownership. “I just want them to have their eyes open,” she said.
Don’t buy too much house. Borrowers can qualify for home loans that would take up more than half their pay. That usually translates to much bigger payments than what they’re typically comfortable with.
Some first-time homebuyers may be tempted to take on too large a mortgage; with the run-up of housing prices in the past few years, they’re weighing the risk of being stretched by a big mortgage against the financial return of ownership.
Decide what you’re looking for. Dustin and Heidi carpool to work. When asked what they absolutely needed in their home, they replied, “Two showers.” Unsure of what else they wanted, they hit the Web, looking at homes of all types within their price range. Dustin made a list of what they liked about the roughly 50 homes they toured to help them narrow down the choices.
Consider how long you’ll stay. No matter what you see on TV, don’t expect to flip your house. Masami Suga of Edina Realty cautioned: “It’s awfully hard to get into any property today … and be able to get out in a year or two and still make money.”
