What you should know before you start the house hunt.
The decision to buy your own home is, arguably, the biggest decision you will make, and potentially one of the most rewarding. But, deciding where and what to buy can be a daunting process that makes even the toughest among us break out in a cold sweat. Doing everything you can to give yourself an edge can be the difference between months of stress and the fulfillment of the quintessential American dream. In order to get that edge, try treating house hunting like you would a real hunt.
Before beginning any hunt, you need to know your own strengths and limitations. For prospective home owners, this can be summed up as readiness.
One of the first things you should ask yourself is if you are truly ready to own a home. It may seem like a great idea, but have you truly considered what home ownership involves? Aside from the price of the house, there will be maintenance, utilities, home owner's association fees and emergency repairs that you will be responsible for. And, let's not forget those property taxes. Making sure you are not just mentally and physically prepared, but also fiscally prepared for home ownership is one of the best things you can do for yourself.
The first thing that you should do is get your credit report and score from all three reporting bureaus about six months before you start your hunt. Make sure that the information is correct, and pay off any lingering bills and debts so that they are removed from your report.
Aside from your credit score, banks look at the types of credit lines you have open, preferring people that can demonstrate the ability to keep different types of credit (like a car loan and a credit card) open and in good standing. Banks also want to make sure that you're not job-hopping, generally preferring that you've been in the same job for more than just a couple of years. Some loan programs will go even further, wanting you to provide proof that you can not only afford the monthly mortgage payment, but that you have a reserve (sometimes equal to two or three month's worth of mortgage payments) you can keep in savings.
A great way to test your fiscal preparedness is to use an online calculator to get a rough idea of a mortgage payment (one you would realistically be comfortable with) and start setting aside that money in a separate savings account instead of spending it. See how that affects the rest of the bills you have due and your lifestyle. Can you comfortably afford the monthly payment? Do you mind the lifestyle changes you've had to make? As a bonus, if you start this test six months before you start looking at houses, you've built up a great reserve and can even put some of that towards your down payment.
Lastly, remember that the mortgage is only part of the equation when buying a house. Among other fees you may encounter, you should be prepared for a deposit (or earnest money deposit) which is an amount you accompany with your offer to prove you are a serious buyer (on average about $1,000), the down payment (at least 3.5% for a FHA loan, and 5% - 10% for a conventional loan), closing costs, and moving costs.
Know The Terrain
Before you consider the actual house you're looking for, you need to think about where you want that house to be. This needs to be a deeper decision than just going for the current "hot" neighborhood. You should consider the potential commute to your job, the economic stability of the area, the business that are within and around it, as well as the government and community amenities that are available. Just as with the house itself, it is a good idea to make a list of those things that are most important to you in a neighborhood. What are the police and fire departments like? What is their average response time? Is a community center important to you? How about youth sports or community activities?
Lastly, even if you have no children, and even if you don't plan on ever having children, look into the school system. Not only can the quality of the schools help give you an impression about the rest of the neighborhood, but it can be an important selling point if you choose to move again in the future.
Know Your Quarry
As obvious as it seems, many people overlook the importance of knowing what type of house they are looking for before they begin the search.
Make a list of the features you are looking for in a house. Consider all aspects of the house, from the number of bedrooms and bathrooms to kitchen features such as granite countertops. Try to keep the list as realistic as possible for your budget. Next, number that list in order of priorities and be willing to compromise on those items that end up on the bottom of your list.
Also, be flexible about the homes you consider. Try not to look strictly at the very top of your budget. Not only should you give yourself wiggle room when it comes time to make an offer, but some houses below your budget that have some easily fixable cosmetic flaws may end up being a better value, or allow you to get into that neighborhood you so desperately want. This is especially true if the only thing holding you back from making an offer is paint color. This is, perhaps, one of the easiest and least expensive fixes you could make in order to get what could potentially end up as your dream home.
Finally, consider how long you plan on living in your new house. Will you be there for the next few decades or just the next few years? If you may be moving down the line, try to keep the house's resale value in mind when you're looking. Things like having the largest house in the neighborhood, extensive landscaping and a swimming pool may be enticing, but may end up hurting you in the future when you want to sell. While this doesn't mean these houses should be avoided, don't buy on these extras specifically as an investment with an expected return; buy for your enjoyment instead.
Get Yourself A Guide
Now that you know your target neighborhood and have a good list of what your home should include, you have to find homes that fit the bill. But, have you ever looked at a real estate listing? It can seem like a foreign language. While you should definitely familiarize yourself with some of the basic abbreviations and terms you'll see consistently (there is a brief list below), the best thing you can do is find a real estate agent. (We at Godby Realtors are ready to help you in your hunt! Call our office at 973-539-9151.)
Many people are tempted to forego using a real estate agent because they feel they have a good idea of what they want and can find all of the information they need online. However, a real estate agent not only has information on the house you want, but has the added value of knowledge gained from experience in working with the market in which you are looking. Your real estate agent is your guide, answering questions about the neighborhood, house, and anything you want to know about the process of buying a home. Of course, finding the right real estate agent is an important factor, making sure you get someone who understands what you want and is responsive to your questions and concerns.
When looking for an agent, one of the easiest places to start is by talking to friends and family. Find out who they've worked with and what type of experience they had. Once you have some names, you should check with the New Jersey Real Estate Commission to make sure the agent is properly licensed; you can also look online to see how long the agent has been in business to get an idea of their experience. While online, take a look at some of the agent's current listings (you can use the agent's own website as well as Realtor.com). This can give you an idea of the agent having a good familiarity with the area and the price range you have set for yourself. Finally, talk to the agent. Discuss what you're looking for not only in the home, but also in your agent. What type of guidance do you want? How would you like to communicate? Are you more of an email communicator, or would phone calls be best? Make sure that the agent seems like a good fit. Consider asking for references. You can even interview more than one agent; just be up front from the start that you are doing so.
Basic real estate lingo:
- 4B or 2B: The number of bedrooms in a home, four and two respectively.
- Dk: The house has a deck
- EIK: Eat-in kitchen
- FDR: Formal dining room
- Fixture: Anything of value that is permanently attached to the house or land. Fixtures can include wall-to-wall carpeting, light fixtures, and landscaping. They can also be a frequent subject of disputes between the buyer and seller, so try to get them specified in the contract.
- Gar: Garage
- HDW or HWF: Hardwood floors
- LR: Living room
- MLS: Multiple listing service. A service not open to the public, but used by real estate brokers to collect, compile and distribute information about homes listed by its members.
- Pwdr Rm: Powder room or half-bathroom
Use The Right Ammunition
One of the last things to consider is your ammunition, in this case your offer price. Having a real estate agent will help immensely when it comes time to make an offer. Some things to consider are the condition of the home, any improvements made, and the situation of the seller. Also, consider what agents call comparable sales. Take a look at other homes in the same neighborhood, that are similar to your own in size and amenities, and see what they've sold for to use as a basis to make your offer.
Now that you are prepared for your hunt, go out there, find an agent, and get the house of your dreams. Happy (house) hunting!