My husband, Dan, and I bought three homes in six years. As much as I’d like to pretend I’m Jennifer Lopez with a real estate portfolio sprawling across multiples states, we never owned more than one home at a time. Rather, we bought and sold our homes because life took our family in different directions. First, we bought a townhouse in the Lincoln Park neighborhood of Chicago, IL. Then, we purchased what we thought was our “forever home” in Knoxville, TN. It wasn’t. We returned to the Chicago suburbs where we signed our last closing documents. Dan and I learned a few things along the way. I also asked Realtors to share their tips with you about what you should do before buying a house.
Check your credit score
It’s never too soon to prepare yourself financially for buying a house. As soon as you get the buying bug, find out what your FICO score is. A FICO score is the most commonly used credit score and a good FICO score is in the 670-739 range. You can get a free credit report from the three credit bureaus or Credit Karma.
Jason Finn, Co-Founder of the Real Group Team at Baird & Warner, advises buyers to check their credit to “ensure there are no surprises.” Finn says, “I’ve had buyers tell me they had perfect credit and that they’d have no problem getting a loan. Then, the buyers would find a large ding on their credit report that they didn’t know was there. Issues may need to be resolved before the buyer can get a home loan.”
Get pre-qualified for a mortgage
After you resolve any potential issues on your credit report, it’s time to find a qualified mortgage lender. Lisa Finks, a Broker at Compass in Winnetka, IL, suggests that you ask for referrals from your Realtor or from family and friends. Finks says, “Some institutions that would seem to offer great rates and service do not have a very good track record and clients are sometimes surprised to find that out.”
You might have a complicated financial situation. That may be because you are an independent contractor, own a business, or hold significant real estate investment properties. That’s why Finks recommends starting the process early to find a qualified lender. “If a plan to deal with a complex financial situation is already in place with a recommended lender when the clients go shopping, the ability to bid fast on that dream home is a real advantage to winning it,” says Finks.
Set aside money for those hidden costs before buying a house
Valerie, a first-time home buyer told me, “I was surprised that I needed to save more than just the 20% deposit. There were so many additional costs.” Lori Bolton, a Sales Representative at ReMax Escarpment advises, “Have money set aside for both the deposit and closing costs which include lawyer fees, movers, and any extra utility connection costs.” Jason Finn adds, “I also like to make sure my clients have considered having some funds in reserve in case they need to make any unexpected repairs in that first year.”
Avoid making big purchases before the closing date
You’ve checked your credit score and it’s good – congratulations! You’ve prequalified for a mortgage and you are ready to bid on your dream house. Excellent. You even set aside money for those pesky additional costs. You’re killing it. So, don’t mess things up now. No pressure.
Aida Vega-Medinilla, Broker/Owner of Horizon Real Estate, says a common mistake that home buyers make is: “They start to buy things for the new home before the closing, affecting the debt ratios of the loan qualification.” In other words, your lender will run a second credit check before closing. If you’ve engaged in behavior that drastically alters your debt to income ratio, it’s possible that the deal may fall through. So, wait until after the closing to make any significant financial purchases.
Attend open houses and get to know the real estate agents
Our family spent many weekends touring open houses over the years. Our kids, ages six and under at the time, would comment, “Hmm, these floors are sloped. That toilet doesn’t seem to work. The windows don’t feel well insulated.” We thought it was adorable…until we would visit a friend’s house who didn’t plan on selling any time soon. So, attend open houses and make your assessments, but remember to keep your house criticisms to yourself.
Julie Jensen, a Broker at Baird & Warner, recommends attending open houses in your area of interest and getting to know the agents. Jensen says, “If you like any of the agents you meet at the open houses, do some research on them. Expect the best agents to proactively reach out to you after the open house to earn your business.” Checking out houses and interviewing potential real estate agents? Multi-tasking at its best.
Get to know the neighborhood before buying a house
When Dan and I moved our family from Chicago, IL, to Knoxville, TN, we made the mistake of buying a house in a city we didn’t know at all. We toured homes in one weekend, and we bought our “forever” home. Huge mistake. That’s why I strongly recommend renting instead of buying if you are moving to a new city that you don’t know well.
Let’s say you are comfortable with the city, but you don’t know the neighborhoods that well. Jason Finn recommends spending time there, and not just when you are looking for homes. Finn suggests you ask yourself, “Do I like to go out to eat a lot or do I prefer to stay in and cook? Which neighborhoods have great brunch places or which places are located near well-equipped grocery stores?” Visit your potential neighborhood on mornings and evenings and on different days of the week.
Then, once you’ve found your top neighborhoods, focus on those. “Buyers who neighborhood hop, looking in four or six locations, often wind up disappointed,” says Finn. “If your search is too distributed, it can be exhausting and time consuming. You could find a great home in neighborhood A that you think is the one. By the time you’ve hit Neighborhoods B, C, D, & E, and are ready to circle back, that dream home in Neighborhood A may already have sold. Chances are good if it is the best home on your list, someone else feels the same way and is ready to act.”
Know what you want and what you don’t want before buying a house
Make a dream home checklist. A common mistake that home buyers make is that they see way too many homes, according to Chris Cash of Chris Cash Homes at Keller Williams Infinity. “Home buyers should make a clear list of wants and needs ahead of time, and stick to only seeing homes that check off most of the boxes on the list,” says Cash. In addition, Lori Bolton recommends that you consider certain features that home buyers often overlook like the floor plan, the traffic flow, and whether there is a front hall closet. “I note stop signs or street parking restrictions,” says Bolton. “Where is the laundry room? Where do you come into the house with groceries?” As you figure out what you want in a home, Bolton says to be patient. “Don’t rush! There are always houses coming on the market.”
Visualize yourself in your future home
You made your list of wants and needs, but is it really you? “Buyers say they want things like an ‘open floor plan,’ because it’s popular right now or a ‘chef’s kitchen’ because it looks great,” says Finn. “However, later they find themselves needing a little more separation in their space and using their chef’s kitchen to stack up delivery food bags.” So, take a minute to visualize your new home and how you will use the space. “Spend some time really thinking about how you use your space now, and consider how that will change over time,” says Finn. “It may not be what you first assumed.”
Look past the floral wallpaper and neon green dining room
Remember that you aren’t buying a home for the current homeowner’s décor. Julie Jensen says a common mistake that home buyers make is they don’t see past the paint colors, wallpaper, oak trim, and carpet. “It’s a huge shame to miss out on the right house at the right price when cosmetics gets in the way,” says Jensen. On the plus side, if you can see past the gaudy décor when others can’t, you may get a great price on a beautiful home that simply needs a little love from you.
Buying a house for the first time? Don’t look for perfection
Your first home will probably not be your forever home. So, instead of looking for perfection, Chris Cash advises first time home buyers to consider the return on investment. What will your home value be down the road? As you look for return on investment, remember to consider the schools in the area before you make your purchase. This is true whether or not you have kids of your own.
Retirees: visit your new city at least three times
When you consider moving to a different city, explore what your new life will be like before you make the move. Cash recommends that retirees visit the potential retirement place at least three times. It’ll be worth the investment. “Get a sense if you can make it there full time,” says Cash, “or get two places to live, one near family and one in a warmer or vacation-like environment.”
If you’ve purchased a home in the past, how was your experience? Any words of wisdom to share with us?