“How Do I Get Started?” Things You Should Consider Before Buying a Home

As millennials and Gen Z grow into homebuying age, it’s important to stay informed if you want to remain competitive in the homebuying market. Are you interested in buying a home, but unsure where to start? Or maybe you’ve bought a home before, but are wondering what’s different about homebuying in 2024. Here are a few tips for those readers who are interested in acquiring a new home now or in the future.

1. Build a Team You Trust

As you embark on your homebuying journey, you’ll want to be sure you’ve got the right people at your back. So before you start looking at houses, consider retaining the services of some of the following professionals:

1. A real estate agent who will help you find the right deal for you when you are ready to buy a house. A savvy real estate agent or realtor can bring great value to would-be homebuyers in 2024. If a seller represents themselves, instead of letting a real estate agent represent them, this is called a “for sale by owner” transaction, or alternately, a “FSBO” real estate transaction.
2. Many potential homebuyers can put their minds at ease by employing the services of a real estate attorney. Allowing a professional to review the terms of your real estate deal can be a good idea, especially if you don’t have a law license. Some states, like the State of Delaware, will require you to have a real estate attorney to complete a home purchase.
3. Establish a relationship with a loan officer at a lending institution like a bank, credit union, or mortgage company a few months before buying a home. Learning about your financial options early is advisable for prospective homebuyers in the current era. Not only is it typically recommended to understand just what a home mortgage will cost you; but securing a pre-approval could potentially boost prospective homebuyers’ chances as well. A pre-approval letter from a lender might make the difference between your offer and a competing offer on the home you love.

2. Get Your Finances in Order

Buying a home can be expensive! Any Zillow^® browser knows homes can cost upwards of hundreds of thousands of dollars. For this reason, many if not most homeowners will secure a mortgage to finance the purchase of their home. It’s a good idea to make sure your finances are healthy before you seek out a home mortgage.

As stated by Investopedia^®: “Look at your savings. Don’t even consider buying a home before you have an emergency savings account with three to six months of living expenses. When you buy a home, there will be considerable upfront costs, including the down payment and closing costs. You need money put away not only for those costs but also for your emergency fund. Lenders will require it.”

3. Finances – Your Down Payment

When preparing to apply for a home loan and purchase a home, try to budget carefully as you save up for a down payment before you try to buy a house, condo, or other residence. Saving up for a down payment is an important step for many homebuyers, as the more money you put down up front, the less you will have to repay the lender over the life of your mortgage.

Trouble saving for a down payment? Remember to keep in mind that some homebuyers may be eligible for down payment assistance programs. Common groups of homebuyers eligible for down payment assistance include first time home buyers, as well as veterans who qualify for VA loans guaranteed by the Department of Veterans Affairs.

4. Finances – Your Debt to Income Ratio

When you’re in the thick of the homebuying process, even in the early days, try to keep your debt-to-income ratio, or “DTI,” as low as possible. Applicants with higher debt to income ratios generally have less money on hand each month, which means it can be harder for them to make a high mortgage payment. A general rule is to stay within your means and try to keep your credit card usage and other debt obligations like auto loan payments as low as possible.

For the same reason, it’s typically a good idea to hold off on opening new lines of credit until your home purchase is complete. During the loan application process you may be required to agree that you will not open any new lines of credit.

5. Finances – Closing Costs

Remember there can be many smaller costs associated with a big purchase like the purchase of a new home. Your estimated closing costs will be disclosed in the most recent loan estimate you receive from your lender.

6. Research and Visit Your Desired Neighborhoods

Whether you are looking to purchase a home in a high-density urban area, or seeking to take advantage of a United States Department of Agriculture (USDA) rural development loan to build a homestead away from everything, be diligent with your research into the areas you might want to buy in. What are the property taxes like? How are the schools? Where are the best sandwiches? That last item might seem trivial or silly, but even the little things will affect your quality of life after you make a big purchase like buying a house for the first time.

If you are shopping for homes and have the means to visit open houses in your prospective neighborhood, you should do so! After you have viewed the property you might buy, take the time to walk or drive around the sights nearby. Practice your commute. Check Google^® Street View and other Zillow^® listings to see what the area looks like at other times of the year.

7. Learn What There is to Know About Your Home Financing Options

When you’re unsure where to go next on your homebuying journey, consult an experienced loan officer from a trusted lender who can answer all your questions. Also take the time to explore credible sources with helpful information regarding your specific homebuying situation, so when you are ready to apply for a home loan, you can feel confident that you have access to the information you need to make the right choice for your family.

Down payment assistance requirements, which assist eligible homebuyers with purchasing a home, are based on the mortgage insurer or guarantor’s guidelines. Borrower may fund down payment and closing costs. Down payment assistance programs are not eligible for all potential homebuyers. The United States Department of Agriculture Rural Development (USDA-RD) Single Family Housing Guaranteed Loan Program assists approved lenders in providing low to moderate income households purchase or build homes in rural areas subject to eligibility requirements. The maximum loan amount an applicant may qualify for will depend on the applicant’s repayment ability. The applicant’s ability to repay a loan considers various factors such as income, debts, and assets. Regardless of repayment ability, applicants may never borrower more than the area’s loan limit (plus certain costs allowed to be financed) for the county in which the property is located. Eligible borrowers can receive 100% financing without private mortgage insurance. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner. For tax advice, please consult a tax professional. Zillow® is a registered trademark. Investopedia® is a registered trademark. Google® is a registered trademark.