These questions are questions that buyers frequently ask us.
Buying a home is new to me. Where do I begin?
A credit check is the first step a homebuyer should take on the path to buying a home. While its always good practice to check your credit once every 6 months, if you have not done that or aren't sure what your credit score is don't worry, it's a simple process and you can find out the information fairly quickly through online resources.
As a quick primer, your credit rating for real estate lending is based on a combined score from the three credit bureaus:
The credit bureaus look at your payment history (35%), amount owed/available credit (30%), length of credit history (15%), new credit/recent inquiries (10%) and types of credit used (10%) to determine your FICO score. The Fair Credit Reporting Act (FCRA) requires, at your request, all three credit bureaus to provide you a free copy of your report every 12 months. The Federal Trade Commission has an online report regarding this here. You can go to the AnnualCreditReport site to request and view your report online. You will want to check your credit reports to be sure there aren't any mistakes and, if there are, dispute them.
The next step to be taken is to obtain a pre-approval from your lender. Many people feel better knowing what their credit scores are before they go speak with a lender. Some people start directly with the mortgage lender/broker, as the lender will pull your credit scores to help determine not only how much they can lend, but at what terms. The mortgage lenders we have in our Resource Referral Directory will also work with you on cleaning up your credit report to help raise your scores, if possible. The pre-approval process will take into account your income, assets and present debt to determine how much house you can afford. A pre-approval indicates that the lender is committed to loaning you up to a set amount of money subject to the home you choose. In this day and age, most sellers require that the buyer be pre-approved for their mortgage before considering any offer. Being pre-approved will also help to make your life less stressful as you will have the peace of mind in advance of knowing that you qualify for the home and it is just a matter of the home meeting the lender's standards.
Once you know how much you can spend, you are really in control. Spending time looking through listings on the MLS IDX on our site (this is the Austin home search) will allow you to become familiar with neighborhoods and the features of the homes in that neighborhood as well as what the asking prices are for those homes. Although the listing and selling price will not be the same, it is a good general guide to become familiar with a neighborhood.
What should I consider when looking for a home?
In the end this is a very personal matter of taste, but the first place you can start is to put together a list of features you would like in your new home and neighborhood.
I stress the neighborhood because I believe it is a good idea to actually be sold on the neighborhood first and then find the home within that neighborhood. Finding a home that you fall in love with can be fairly easy. Finding the right home at the right price in the right neighborhood is not nearly as simple, and having the right Realtor, such as West Elm Properties, can save you down the road. The nieghborhood has a profound impact on your daily life which then has an impact on property values.
When putting together your list of features for the neighborhood consider commute time, proximity to schools and shopping, the quality of the schools, the tax rate of the neighborhood and crime as well as any future construction or potential nuisances. With a growing city like Austin, knowing and understanding how the city is developing can have a great influence on your neighborhood decision.
When considering what features you would like in your new home, start with the "need" basics. First determine your minimum size (square footage), beds, baths, living, dining, garage and the expand from there to your wants. What type of kitchen would you prefer? What type of flooring? What upgrades in the home? What size lot? How much landscaping? Don't forget to include your future needs for however long you intend to live in your home. These ideas will give you thoughts to key on as we look for homes to view in the MLS. All the features you want might not be available in the price and/or neighborhood you desire so you would need to make compromises and determine which of the 'wants' are more important. It's a give-and-take process.
In the end, there is usually a home that feels right in your heart - a gut decision. There is that 'Yep, this is the one' feeling and, typically, it is correct.
How many homes should I view and how should I make a final decision?
It really depends on your level of comfort how many homes you should view. In general, you should probably view the number of homes it take you to feel familiar and comfortable with what you can expect for your money. This is also where your background research can come into play. The more familiar you are with a neighborhood and pricing before you start to look at homes, the more likely you will be able to move quickly on a home you like. Many times I have seen a client actually find the home they love in the first few homes we view but because they are just starting out they feel afraid that maybe there is something better for the price available. Many times they end up missing out on the home due to this and look back on the home as the 'one that got away'.
Rest assured though, I will never pressure you into a home purchase and, as your Buyer's Agent, I will always be honest with you as to my opinion on the home and the pricing. I will also provide you a Comparative Market Analysis for any home in which you have an interest because I want you to feel comfortable with the pricing and I want you to get a home you like in the neighborhood you want for a fair price. If I tell you the first or second home you look at is a great home at a great price in a great neighborhood, please know it is because I believe it, and not because I want to pressure you into buying a home. The last thing I want is one of my clients overpaying for a home.
Once you find a home you like, it is good to go back and view it a second time, possibly at a different time of day. This will allow you to see it 'fresh' for a second time and coming at a different time of the day will give you more insight into what it would be like to live in the home.
I need to sell a home. Should I sell or buy first?
In the end, this decision is going to rest with you. There are a few questions to consider:
- Are you using the equity in your current home to complete the purchase of your new home?
- Are you able to qualify for your new home without the sale of your current home?
- Is temporary housing a viable option for you?
Some sellers use a second lien or other type of short term financing to close on their new home when they have equity in their current home. Some sellers write a contingent contract on their new home (contingent on the sale of their current home). Most sellers will only consider a contingent contract if the buyer actually has their current home under contract. Some sellers sell their home and move into temporary housing while they buy their new home. Some sellers sell their current home but then lease it back for a period of time in order to find and close on a new home.
Whichever method suits you best, know that I will use my experience in these situations to help you work your way through this tricky time so that you have low stress and peace of mind.
Why should I buy instead of rent?
There are some strong arguments for owning a home instead of renting. Owning a home offers tax benefis from the mortgage interest and real estate tax deductions. Additionally, homeowners are able to lock in their monthly payments with a fixed rate loan whereas renters will be constantly at the mercy of escalating rents. Locking in a monthly housing payment allows homeowners to make investment plans because, generally, their won't be substantial changes to their expenses. Owning a home also allows the homeowner to build up equity and increase their net worth. Data collected in 2003 shows that the average renter's net worth in less than $5,000 while the average homeowner had a net worth of $172,000.
You have to live somewhere. In the end the question becomes do you want to pay someone else's payment and make them rich or make your own payment and increase your own wealth?
