I get it. Looking at homes is fun...really fun. You walk in the front door and immediately you conjure up pictures of lazy Sunday mornings sleeping in & enjoying a big breakfast. Saturday's spent mowing the lawn and laying by the pool. Evenings gathered in front of the big game with all your favorite treats spread on the kitchen counter. Tucking kids into bed at night with lullabies and bedtime stories. I get it. When you find the perfect house, you mentally move yourself right in & make yourself well...right at home.
BEFORE you get to the fun part of finding, you've got to check these 5 things off your list...and since I don't know how to be anything but upfront and honest with you: most of them are not that fun. Necessary, but not fun.
1. Save Your Money. If you're currently renting, start saving as much as you can. I know this is easier said than done, but make the sacrifices to do it. Stash away money from tax returns, eat out less & stash that too. Cut back all round and build your down payment. The bigger your down payment the more house you'll be able to afford. If you currently own your house & already have a down payment with your current equity, I'm going to give you the same advice: save your money. Moving is expensive and every hurdle seems to have a $2k price tag, have a cushion so when it happens you don't panic.
2. Talk Budget. Ew, I know. The dreaded "B" word. I used to run when my husband would mention it, but turns out like most things, he was right. Be realistic with yourself and each other. Set aside some time & determine what is a reasonable amount to spend on a mortgage. If you're not sure what that number should be? We've always stuck to the 30% rule, which is that no more than 30% of your take home pay should go towards a mortgage. So, for the sake of ease, lets say you bring home $6,000 a month (this is after taxes), you'd want to set your max mortgage amount to $2,000. Combine that number with your downpayment to find out what your max home purchase price is. I like using this mortgage calculator to play with the numbers. Remember, if you don't have 20% to put down, you'll be required to pay for mortgage insurance -- that number should be included in your max mortgage amount of $2000. So if you have $100,000 to put down, you can afford a $500,000 house and have your mortgage still be below $2000.
3. Meet with a Lender. Now that you have a handle on the numbers you're working with, meet with a lender to make sure you're comfortable with those numbers & get a pre-qualification letter. The lender is going to compare your assets to your liabilities and tell you the cold hard truth of what you can afford. Don't get me wrong, lenders will allow you to stretch as . much as you want, but if you have a lot of other debt, you might want to scale back your monthly mortgage. If there is one thing I cannot stress enough it is this: Do not be house poor.
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4. Hire someone to represent you. Whether it's me, or someone else, you should be represented by someone that knows more about real estate than you do & is not emotionally involved in the process. I realize there is a low barrier of entry to be a real estate agent so let me tell you what a good agent should be able to do. A good agent can tell you if you're over paying for a property, what's going to be built on that vacant lot down the road & if it's wise for you to re-model that fixer-upper. They can give you the actual numbers and then manipulate them for your circumstance. in real estate the numbers matter, do not ignore them. A good agent will also be able to negotiate. On a purchase, the deal gets negotiated at least 2 times, if not 3. They will know where they can scoop up an extra $2k for you...and it isn't usually in the purchase price. A good agent will also be totally upfront and honest, they know the numbers & if they aren't in your favor or best interest, they should tell you, even if it sacrifices the deal.
5. Begin your search. Now. Now you open up those apps and begin the search. Start by first narrowing it to your 2-3 favorite neighborhoods. It's true what they say, 'location, location, location.' You can re-do the kitchen & put in a pool, you can never change the neighborhood. Go on some Sunday drives, park and get out to walk a few neighborhoods you're considering. Drive by the parks in the afternoons, drive by on your way home from work, talk to people, you'll learn a lot. Once you've got your neighborhood selected, walk everything that is for sale every weekend. This will familiarize you with the norms, so that when that good buy pops up? You're ready to make it yours.
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Hi, I'm Amy. When I'm not scouring the valley for the perfect new house, you can usually find me in the kitchen with a gaggle of kids. Chips, salsa and a Diet Coke are usually in hand.