Whether you are a a first time home buyer or an experienced homeowner, buying a new home can be stressful — that’s where I come in! To get you started, here’s a handy checklist of five things you can do to make the process a lot easier. If you love lists (and I have a feeling that you do!), download the Ideal Home Checklist and start visualizing the home of your dreams!
- Prepare a budget. Yes, we’re starting at the absolute beginning! Having a clear picture of your finances is essential — automatic payments are easy, but it can lead to an out of sight out of mind situation. Start by listing all your monthly fixed expenses, such as car payments, current rent or mortgage, utilities, school tuition, and loan payments. Add categories for other expenses such as food and entertainment.
- List your debts. We’ve looked at your expenses, now it’s time to look at your overall debt load. Wow — there’s some big scary words there, but not to worry, I’ll tell you what you need to know! For example, If you have existing credit card debts, or student loans, get them down in black and white, so you know exactly how much you owe. Next, we’re going to figure out your debt ratio. Easy to figure out — there are plenty of online calculators that can help! For home buying purposes, you need to know two ratios. Your housing debt ratio (expenses including taxes and insurance should be 25-28% of your gross monthly income) and your installment debt ratio (credit cards and other consumer debt should be around 10-15%). Your total debt to income ratio should not be more than 40%.
- Get pre-approved. We’ve talked about this before — if you missed it (no hard feelings), check out our post on the importance of pre-approval. Getting pre-qualified means that you give a lender your overall financial picture, including your debt, income and assets — call back to the first two items on our list! The lender evaluates this information and gives you a ballpark figure of the mortgage amount for which you could qualify. Awesome, right? No more falling in love with something you can’t afford, you now have a better picture what you can spend! Pre-qualification can be done over the phone or on the Internet, usually at no cost. Go one step further with full pre-approval and have a lender give provide you with a solid number they would provide.
- Make a list. More lists anyone? Not to worry, this one is actually fun! Before you sit down with a Realtor, make a list of needs vs. wants. Dig deep and be sure you evaluate both options! You need three bedrooms. You want a swimming pool. This will help you sort out those wonderful deal-breakers in your purchasing process. If more than one person is involved in making the final decision, be sure that you are more or less in agreement about needs and wants. Download my Ideal Home Checklist and get the ball rolling – a time saver for both you and your Realtor.
- Find a Realtor. You know what you can afford, what you want/need, and now you need someone amazing to help you find it! There seems to be an obvious plug that needs to happen here, but really it’s important that you find someone you work well with. Chemistry is important. You need to look for someone who is committed to meeting your needs and who knows the area and price range you’re looking in. Looking in Vegas? Reach out!
Buying a home can be a test, both financially and emotionally — that’s why I am here to help! If you do your homework and thoughtfully prepare for the process, it can also be a fun and rewarding experience.