Buying your first home? Get ready to make important decisions without knowing what you are doing. This is an experience many become overwhelmed with because of the number of things you need to take into consideration. On one hand, is the financial aspect of the decision. Can you afford this property, what’s it going to cost each month, is it going to go up in value, what kind of work does it need, and so forth?
Then, there are the fun aspects of actually selecting a property that you want to live in. Does the home meet your needs? Is it big enough, does it have room for a pool, can the walls handle your big-screen television and so forth? There are so many challenges that you have to go through when buying your first home but the easiest way to manage everything is by working with a realtor.
Where New Homebuyers Struggle
While the process of buying a home is challenging enough, there are specific areas that will cause more work than others. These specific areas can impact everything from the affordability of the property to whether or not you even get it. This is why you should be aware of the potential challenges you will have to deal with and how to best be prepared for them.
- Financing: Start with the toughest aspect of the entire process, getting your financing in order. Your income-to-debt ratio will break down whether or not you can afford the monthly payments for the property. That means you need to do everything you can to raise your income as well as lower your debt to give you as much wiggle room as you can get. The higher your income, the more you can borrow from a lender.
- Selection: Shopping for a house is more difficult now that there is a smaller selection of homes that are available. However, while there is not a great selection, there still are homes in the area you want to buy in that are available and within your price range. It’s important that you determine other areas you would not mind buying in as they may have something that fits your needs or your budget better.
- Initial offer: What should you make as an initial offer? This seems like an easy decision but how do you know what will be taken seriously and what will be an insult? You want to find a good place where you can still come up from but not so low that you are not taken seriously and never even get a call back from the seller’s realtor. Ideally, try going ten percent lower than the asking price, especially if the property needs work. This is a safe area to start but if the property needs more work or has been on the market for some time, you may want to go twenty percent lower initially. However, make sure that you can afford the numbers before making an offer.
- Timing: Believe it or not, timing will play a big role in whether or not you get a house. Right now, there are dozens of people who will make an offer on a property. Some will be low, some will be lower and the owner of that home is really waiting for someone who is going to come in and take a serious look at their property and make an offer at or near the asking price. If you are not committed to doing that right now, you will not be taken seriously. However, even if you do have the mindset that you really want a property, it’s important to understand that your timing may not work for the seller whether it’s when you can get free of your current property when you are able to get the financing or something else. You want to be as ready to go as possible when you make an offer because you may literally only get one shot before an owner makes their decision.
- Requests: After the inspection, you may see some things that need to be addressed. These things are an opportunity to either get repairs made on the house at no real cost to you or to drop the asking price. For example, it’s determined that you will need a new air conditioning unit within a year of moving in. If a unit costs $10,000 to buy and install, who should cover that cost? This is where challenges come into play as the owners will not want to cover the cost and neither will you. Requesting either a drop in price or that they handle the air conditioning replacement seems logical on your end, but it may not be to them. That’s why you need to navigate these waters carefully and not make it look like you’re trying to win every battle.
Every negotiation is really a battle of give and take. In real estate, the negotiations are short while the groundwork is what really takes up the time. Your realtor will manage most of that but it’s important to know what you can do to either make yourself a better candidate or to increase the options that you are giving your realtor throughout this process.
Realtor Tips For New Buyers
When you are thinking of buying a house, the first thing you need to do is contact a realtor. Simply asking them what it takes to buy a home right now will give you more than enough information to know whether or not you qualify and how to get qualified. It’s hard to believe but for such a challenging process, your realtor really handles 90% of the work. The reason is that they know the checklist that each purchase must go through and they also know what you will need to do to have a realistic chance of getting the house you want.
One area realtors beg people to pay attention to is their debt-to-cost ratio. Getting your income as high as possible while keeping your debt as low as possible is essential to being able to afford a home, especially with increased interest rates. Borrowing $250,000 now versus two years ago means an increase in monthly payments of over $400 a month or more in some cases. You have to prove to a lender that the increase will not keep you from being able to afford the property and that’s work that starts well before you start shopping.