Preparing to Buy a Home

I think one of the most common questions that I receive as a real estate agent is: We are getting ready to buy a home soon, where do I start? I think this is a great question, especially because it is a proactive one. I am ALL ABOUT being proactive especially in this market, you want to set yourself up to be in the best position possible to make the best offer on the home that you want. Here are some great steps to get yourself prepared for buying a home, so when you call me and tell me you're ready to start looking for a new home - you'll be ready to rock.

Know your credit score. Scary! I know. At least I know it was for me. I knew that I had some blemishes on my credit, and it was pretty easy to ignore that they existed, until we decided we wanted to own a home. I had no choice but to face it head on. Some things are surprisingly easy to clear up, others take a little bit of work. So good thing you're being proactive and getting these things taken care of before they would prevent you from getting qualified. Ask your mortgage broker what you should work on paying off first, to increase your credit score? If you know your credit is good, and you brag about your credit score (my husband), then great! You're awesome, also a hero of mine and this step, for you, is a breeze.

Speak to a trusted mortgage broker. Get in touch with a mortgage broker. Here is a secret, it costs you zero dollars to have a conversation with a mortgage broker. They are in the customer service business, just like I am. They understand that you have to play a long game. They should be trying to wow you with their wealth of knowledge and their great customer care, so that when you are really ready to buy a home, you will use them! A mortgage broker is your numbers person when buying a house. They are going to work with you to determine not only what you can afford but also steer you in the right direction when it comes to preparing yourself financially for buying a home. Initially, they don't even have to run your credit, if you completed your first task of finding out what your credit score is. Don't have anyone in mind? Contact me for some great recommendations!

Make a budget. Sit down and make a monthly budget. A mortgage lender is going to tell you what the bank will loan you to buy a home. This number, especially in South Jersey is complicated. Let's say you are approved by a mortgage lender for a $300,000 loan. You like two homes that have a sales price of $300,000. One of the homes, the property tax is $7000, the other home the property taxes are $9,500. There is roughly a $208 difference in your monthly payment between these two homes that are listed at the same price. Know what you can afford to spend on your mortgage per month, and we can work to find a home that meets that monthly budget, not just the sales price.

Lines of Credit. Not only will your mortgage broker look at your credit score, and ask you what your income is, but they also take into consideration something called your "debt to income ratio". This includes: student loans, car loans or leases, credit cards etc. Most lenders are looking for a debt to income ratio of less then 36%. This number can vary, depending on the program, and there are some exceptions. All things that you will talk about with your mortgage broker. Also, common sense will tell you, don't add anything to your debt. Maybe a question to ask your mortgage broker after they know all your information: What would be more beneficial to me before buying a home: paying down my debt or saving more money?

Savings. Your down payment on your home will vary depending on what program you qualify for. A common misnomer is that you need to have 20% of the purchase price saved for a down payment. That is not true! With an FHA loan, you are usually required to put a minimum of 3.5% of the sales price down as your down payment. For a conventional loan, you are looking at usually a minimum down of about 5%. Both these scenarios you will have an additional fee of mortgage insurance every month tacked onto your mortgage payment. If you do have 20% to put down on a home, you can avoid the mortgage insurance. Luckily, with a conventional loan, you can drop off your monthly mortgage insurance once of have paid off (approx) 33% of your loan.

On top of your down payment you will need to consider closing costs. Depending on the taxes of the home, and the time of the month you settle, the average closing costs in South Jersey are anywhere between 8,000 and 12,000 dollars. If you are thinking there is no way you have that kind of cash lying around, don't worry! There are ways we can negotiate a deal to help to alleviate some of these costs to you.

Another tid-bit, for my friends and family especially. Just because you hire me as your real estate agent, doesn't mean that I will know anything about your financial status! The conversations had between you and your mortgage broker are confidential. Unless you want to talk to me about it, I don't have to know in order to represent you. All I need to know is what you qualify for, your monthly budget and how much you have for down payment. That's it!

Overwhelmed by all this information? It's allot! My job as your real estate agent isn't just finding you a new home, it's educating you on every step of the process, so that you can make the best decisions possible and taking the stress off of you. Even if you're not thinking of buying until a year from now, I would love the opportunity to chat with you, answer your questions, and help you get on the right track!

Need a quick answer? Ask me a question below!

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