Tips for Buying A Home in Spring 2016
Many potential homebuyers still use spring as their target to “start looking” for their new home. If this is true for you, here are some tips for buying a home in spring 2016.
- Speak to a loan officer now to see if there are any issues with your credit, debt levels or income. A good loan officer will outline any “tweaks” needed and give you a loan amount you should qualify for if everything is in order. There were several key changes in 2015 which affected mortgage underwriting guidelines including the inclusion of student debt and income included. There are also some good sources for understanding your credit and how to repair your credit. An early start in making sure your finances are in order will make for a less stressful home search later.
- In your conversation with your loan officer, you should also have a discussion about the different loan products available. Many people will automatically go for an FHA loan (which is great for a lower down payment) but you should also consider whether the other loan alternatives may be a better option. Make sure you have a good grasp of what the loan payment would be under the different alternatives available including PMI and loan fees. Also, are you getting the best interest rate? Note that there are other loans other than FHA which have lower down payments. Conventional loans are now available as low as 3% down. Ask questions if you don’t understand. This is a big deal and you have every right to make sure you understand what’s going on.
- Regarding the down payment, most loans will require a down payment. Down payments generally range from 3.5% for FHA up to 20%. If you don’t already have the money saved, you will need a plan for getting it or closing the gap of what’s needed. Your loan officer should also let you know about closing costs for your home purchase. Typical closing costs are mortgage origination fees, attorney costs, escrow of taxes, etc. Expect about 3% of the purchase price. Often, these can be negotiated as part of the offer but not always. Again, you should have a plan for taking care of this cost. You may also want to talk to your lender about available public funds (such as the IHDA down payment assistance program).
- If you will need to sell your home before buying, there are some things that make sense to do now. If needed, now may be a good time to do those small repairs around the house that might be issues for potential buyers. Are there rooms that would show better with a little de-cluttering and fresh paint? Is your furnace more than 20 years old? Are the harvest gold kitchen appliances screaming from the 80’s? Is the carpeting soiled and worn? You may not be in a position to make major investments in the home you are selling but are there affordable investments that will counter the impression of your home being dated or lacking proper maintenance? The investments made toward improvement or repairs should increase either the marketability or market value of your home. Talk with a realtor so that you get a feel for the impact of these changes on the marketing of your home.
- Now for the fun part …. Determine your wants and needs for your new home. It will help maximize your home search time if you already have a good idea of what’s important to you. Think about location, schools, your lifestyle and which architectural styles appeal to you most. Do you want a family room, attached garage, big backyard, updated kitchen, etc. What are your deal breakers? The clearer you are in what you want, the easier it is for your real estate agent to help you find your dream home.
- Finally, what’s your exit plan for your current residence? If you rent, how will you handle it if you close earlier or later than your expiration date? Do you need to discuss this with your landlord? If you own your current home, do you need to sell it first?
Buying a home requires some planning. If you’d like a consultation to discuss buying your home in spring 2016, please contact me.