Your Guide to Buying a Home
Whether you’re feeling too cramped in your small apartment, you’re tired of paying rent, you need a change of scenery, or you need to upsize or downsize your current home, buying a new home is a refreshing yet intimidating process. Roost Real Estate is here to dispel any myths or fears you might have had by laying out buying a home in easy steps with this homebuyer’s guide. Whether you’re a home buying guru or this is your first venture into the real estate market, we can help you out.
Just follow the steps below and we’ll show you how buying a home is a rewarding experience and doesn’t need to be feared (no matter how overwhelming the experience may seem). Have more questions? Reach out to us at Roost and we can help you from square one.
Step 1: Check Your Credit Score
A good credit score is a good place to start when examining your home buying future. When applying for a mortgage, a bank needs a credit score to assess how much is a safe amount to lend you. The higher your credit score indicates to the lender you have a stronger likelihood of repaying the loan on time. However, you don’t always have to have great credit in order to secure a loan for your home. Some things a lender will look at include:
Debt-to-income ratio: In most circumstances, having a lower debt-to-income ratio (a smaller percentage of your income going toward credit debt) is in indicator that you aren’t in over your head when it comes to finances. You understand what you can pay for and what you cannot afford instead of living extravagantly and paying with it via credit cards. This could be an indicator of your financial responsibility, which lenders will put under the microscope.
Credit history age: The older your credit history, the better. This also means you should refrain from opening new lines of credit shortly before applying for a mortgage as a lender could take that as a sign that you are out of money and need to borrow.
Payment history: Staying on top of your credit card payments is always the best option. Falling behind, missing payment, or letting credit accounts go delinquent could dissuade lenders from lending you money for your mortgage. If you can’t handle paying your credit card payments, a lender may not trust you to make substantial mortgage payments.
If you have a credit score from 580–619 and are interested in buying a house, we suggest starting now to raise your score a bit before applying for a mortgage. The more you can improve your credit, the more you may be approved for. For a plan on how to raise your credit score, check out resources like this one from myFICO.
Step 2: Figure out Your Budget
Before you go out shopping for your dream home, make sure to establish a reasonable budget for how much house you can afford. By doing this, you won’t find your dream home only to be crushed when it turns out that it’s simply out of your financial restraints. To help get an idea of what your budget will be, check out this mortgage calculator that will help you find a reasonable amount to be spending on a mortgage for your specific income. Or, simply abide by the rule of thumb that no more than 28 percent of your gross income should go toward housing.
Just because you are approved for a massive mortgage doesn’t necessarily mean you should search for a house at the very top of the borrowing spectrum. Take into consideration any funds you may want to put away, expenses that may come up or how much current debt you could want to pay off. Searching for a house at the maximum price you were approved to borrow could put you under future financial strain and stress, and who wants that?
Step 3: Find the Right Real Estate Agent
Buying a home is one of the biggest financial investments you’ll make during your life, which makes finding the right Realtor to see you through the whole process is huge. You see ads plastered on billboards and bus stops, but who should you really be picking as your agent? Just like any major decision, realize there is no rush. Rarely would you go to the car dealership and splurge on an expensive exotic vehicle with no prior research—finding the real estate agent right for you shouldn’t be any different.
Throughout your Realtor search, you should be asking a few questions:
Check Out Their References
Ask for some recent clients they had worked with through their home buying process. Ask them if any of their references will give a particularly gleaming or upsetting review of that agent beforehand, just so neither of you will be completely shocked at the responses you get.
While you’re asking past clients about the agent and their experience, make sure to ask what they were selling or buying and if it seemed like a similar scenario to yours. If the clients you speak with were all purchasing multi-million dollar homes while you’re seeking a small condo, perhaps start searching for an agent with a portfolio full of small condos. Similarly, seek information in regard to how much a home was acquired for in comparison with the asking price—finding an agent who can be your best advocate is a huge plus.
Ask About Their Credentials
Searching for prime real estate agents means also looking for a series of acronyms after their name. Different designations reflect different levels or types of training and certification your real estate agent has worked for. Some to look out for include:
CRS (Certified Residential Specialist): Extra training in regard to handling residential real estate
GRI (Graduate REALTOR Institute): This is a real estate professional who has gained in-depth knowledge on technical subjects as well as the fundamentals of real estate by electing to complete additional training.
ABR (Accredited Buyer’s Representative): This Realtor completed additional education for representing a buyer in a transaction.
SRES (Seniors Real Estate Specialist): Additional training for helping seniors who are buying or selling real estate
And to ensure your chosen real estate agent is upheld to the code of ethics, ensure they can call themselves a Realtor (with a capital R), which is a titled only granted to those who become members of the National Association of Realtors (NAR). If they happen to have a “Best of…” award, that is also a good indicator that they are doing something right in the industry.
Lastly, making sure you get along with your Realtor is an important factor. While this may not be the biggest differentiator in terms of their real estate prowess, having an amicable relationship for this (sometimes lengthy) process will make it a fully painless process. Ensure they’re on top of the market, accessible and not afraid to speak up—especially when it comes to negotiation.
Step 4: Buy a House
While this step is labeled “Buy a House,” we all know it isn’t that simple. However, realize now that a lot of the tedious legwork is behind you: You’ve worked on your credit score, found out how much you can borrow, applied for a mortgage, and found the right real estate agent for you. Now you need to find the home you want and put in an offer.
You’ve done your due diligence and researched potential neighborhoods you’d like to live in. Your Realtor should be in-the-know about all a neighborhood has to offer and help point you in the right direction. The in-depth knowledge an agent is able to offer is invaluable. If you’re looking for a residential neighborhood with a great school and a few parks, a Realtor can pinpoint the prime area for you. Likewise, if you already know the area you want to live in, the agent should be familiar with current availabilities. They have information the public isn’t always privy to, which could be just the information you need to find your dream home.
Once you’ve picked the home you want to move to next, your Realtor will place an offer. This is where your agent becomes your biggest advocate as they are now responsible for offering, counter-offering and negotiating terms on your behalf as they work with the seller / seller’s Realtor. In the end, you want to rest assured that your agent is doing all they can to get you the keys to the home you’ve chosen. Their skill and know-how are especially crucial when it comes to homes that are highly desirable in neighborhoods where demand is high and available homes are low. They will understand your limits and negotiate as best as possible with you.
Buying a Home Doesn’t Have to Be Scary
By following these steps and teaming with the right real estate agent for you is one that will make the homebuying process painless. By breaking down the entire process into small, bite-sized steps, you can avoid feeling overwhelmed and have the peace of mind that everything will work out in the end. Roost Real Estate, situated in the heart of Minneapolis’ bustling North Loop, has the years of experience and broad knowledge to help you along your journey.
Whether you’re just starting the search for a home or have your eyes on one that was just listed, we can help you find exactly what you’ve been dreaming of. Nothing makes us happier than getting people into a house, and our expertise can do just that. Let us help you and, in turn, give back 25 percent of our profits to the Twin Cities Habitat for Humanity so even more people have a place to call home.
Have questions about how to get started with buying your home? We’re here to help! Reaching out means you’ll soon have a new place to roost.
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