Buying a Home in 2016
2016 Market is very HOT!
So buyers need to keep an open mind and be prepared to mover very fast when then find the home that meets most of their needs. I will take you through a few steps one how you can be ahead of the game. But before we get to that in step four we need to make sure you're on board with the first three steps.
Buckle up and let's get going!
Clean Up Your Credit Score
Once you start looking for your dream home, it's easy to fall in love with one. But will you be able to qualify for a loan? Now if you have CASH that's a different story, I can get you a good deal and very fast! But, most of the people need to get a loan from the bank in order to purchase their first, second or third home... So, here we get to step one. Clean up your credit score, also called a FICO score. Go over your history and clean up the things that are wrong, pay back debts that have been sitting there unnoticed and stay on track with your monthly payments and loans. Lenders need to know that you are able to make monthly payments on time and that you will pay them back in a timely manner, that is why they look at your credit history.
-Pull your credit report (Experian, Equifax and TransUnion) you can get a FREE report once every 12 months. It will not include your credit score, but you will have an idea of what is going on.
-Dispute any errors. Study found that 5% of credit reports contain errors. This may take a while, and you may need documentation to make your case. But once you remove bad info you should see a bump in your score.
-Erase one-time mistakes. If you make a late payment or two - who hasn't? Call the credit company and see if they can remove it from your report, most of the companies will do that for you.
- Pay on time. If you're often late with payments, now is the time to change that. Commit to always pay on time.
-Give yourself time. Unfortunately, negative items can stay on your credit report for up to seven years. Some good news, changing your habits will make a big difference in your payment history, which accounts for 35% of your score.
Save for your Down Payment
So, you are looking to buy a home this year, next important thing is the down payment. Trim some unnecessary expenses and start saving for your home. It's a lifestyle change and that is the only way you can get it done. Look at the bills you have and TRIM/TRIM/TRIM
-Start with your coin jar. This maybe a strange one but saving all your loose change can add up very fast and have a big impact on you're saving. According to a financial blogger J.D.Roth you can save as much as $700
-Next curb those dinner and drinks out. This can help you save up to and over $5,000+ a year if you spend about $40 three times a week
-Turning down your thermostat just 3 degrees could cut almost 10% off you electrical bill ($20 a month on a $200 bill, that's $240 a year)
-Replace you costly cable service with a Netflix streaming and save over $2,000 a year and that is just a few ideas...
-Open a dedicated account. Personally I do way better when I have to take to money to a different account and save it there, rather than a savings account. This way it will stay there make sure you don't have Debit Card, Online Banking or Checks for that account, the only way for you to take the money out is by going to the bank. One other way of doing it is by automating your savings. For the past few years I've been doing this amazing system of transferring dedicated amount to my savings account every Friday and that can be a big help as well.
-Check out down payment assistance programs. Talk to your lender they will help you figure out if one of the programs can be applied to you. Depending on the city and the state you may be eligible for a down payment assistance programs, which provide money to help people buy a home. Most offer up to $15,000 typically in the form of a grant or low-interest loan. They all require your income to be below the area median. Once you have your down payment you are ready for your next step
What Can You Afford?
Now that you have your credit fixed and saved some money for the down payment its time to talk to a lender. Knowing what you can buy is the key to your search. You don't want to fall in love with a home and then find out that you cannot afford it. Follow the 28/36 rule. 28 refers to your monthly housing payments, things like mortgage, insurance and taxes, they should not be more than 28% of your gross monthly income. 36 refers to your debt-to-income ratio. This will combine all your debts like credit cards, car loans, colleges and a home loan.
Start you search early in the year
No you are ready to buy a home! Congratulations!!!!! Let's talk about today's market and how you can be ahead of the game.
Even though the market is hot at the moment, you still need to get out there and before the rest of the buyers get there. Yes, we have less inventory, so a lot of buyers just put a hold of their search at this time. Which make the best time for you to go shopping! Good deals come on the market all the time, only difference in today's market is, that we have to act FAST. More than 85% of buyer's who plan to purchase in the next year will be looking for home in spring or summer of 2016, according to the most recent Realto.com survey. So, buyers who start their search early face less competion.
Have you thought of a NEW HOME
In today's market a few banks are coming back with good construction loans. If you cant find the home of your dream, you might want to build one. Talk to a REALTOR that knows the process and can guide you through the steps of getting a new home built for you.
Looking for a qualified REALTOR
Looking for homes can be exhausting and tiring. My advice is to interview a few Realtors and find the one that you want to work with. Don't jump from one agent to another or ask five of them to send you stuff. They all get the same information and will send you the same things. Here is a list on how to pick a good agent:
- Meet with prospective agent in their broker's office. From the start a good agent will ask if you have been preapproved by the bank and what kind of loan you are getting. He/She should ask what you are looking in a house. A good agent is a good listener and asks questions. Watch to see if the agent makes not your needs
-Listen for the agent to explain agency relationships to you. The law requires agents to explain whether they will be working for you or not. If the agent does not offer you a buyer's agency agreement, he/she is representing the seller and not you. If the agent does not explain agency to you, go elsewhere.
-Ask if the agent will be showing you only in-house listing or if he will show you anything on the market that will fit your list. An agent does not have to take you to see houses if you have not been qualifies by the bank. Nor does they have to take you to see houses you can't afford. Keep that in mind
-Expect a home-buying education for the agent and not a sales pitch. Competent agent help their buyers to think clearly as the home-buying process unfolds.
-Agree to sign a buyer's agency agreement after you have met with an agent. Working with a seller's agent is a mistake, according to an article by Amy Fontinelle of Forbes' Investopedia. Any information you reveal will become leverage that the seller can use in a purchase negotiation. A buyer's agent is legally required to maintain your confidentiality, disclose material facts to you and maintain loyalty to you.