Insider Tips for Buying a New Home
• It’s homebuying season! Buying a new home can be the experience of a lifetime, and nothing compares to the thrill of finding your perfect house. But people often let their emotions lead, and sometimes impulsiveness can make buying a home a little difficult. Here are some tips to help you score your ideal new home.
• Manage Your Credit Score
Avoid opening new credit cards or taking out loans for three to six months before you apply for a mortgage. That includes co-signing loans for someone else. All can affect your credit score, and you don't want to raise any red flags when trying to finance your house. Request copies of your credit report to verify that there are no errors and work on paying the full balance or, at least, more than the minimum each month to help improve your credit score.
• Know the Difference Between Pre-qualified and Pre-approved
Pre-qualification is often the first official step in buying a new home and can sometimes be a requirement to complete before a real estate agent will agree to work with you. However, the pre-qualification number isn't a formal commitment to lend a certain amount, especially if there's no formal application. It's more of a snapshot of your finances that gives you a better idea of what kind of mortgage is within your reach. Keep in mind that the information in the pre-qualification letter will only include the information that you've shared with your lender; nonetheless, it is an important factor. It's often beneficial to use a calculator to help plan your budget and finances for your pending pre-qualification.
Preapprovals involve a more complex than pre-qualification and are based on verified information. The lender will run a full credit and financial analysis, including work history, tax returns, debt repayment history, savings, and other assets.
• Review Your Property Survey and Inspection
Property surveys reveal important information about exactly how much of the yard you'll own, any improvements or changes that have been made, and potential obstacles you'll face as the owner. For instance, if you plan to build a workshop in your backyard or make other significant additions, you want to be certain where your property ends and what your rights include. Make sure that you know who owns the fencing, whether driveways are shared, and where the flood hazards are.
When it comes to property inspections, sellers often have their homes pre-inspected in order to mitigate the risk of buyers from walking away from a deal because of an undisclosed or unknown issue, like foundation or outdated electrical. However, even when an inspection has been done by the sellers, buyers should consider hiring their own inspector to get an unbiased report. And, if you're buying new construction, getting an inspection is still important to avoid any surprises.
Another thing to keep in mind is that with these surveys, it's common to find property encroachments. When this happens, you are aware of the encroachment and willing to assume any risk associated with it. Keep in mind that buying a home from a house flipper would almost definitely require a survey be done.
• Visit the Home Several Times Before You Buy
Make a point of visiting the home on several different days at varying times, so long as time allows. When it rains, look for leaks in the basement. If it's chilly, find out if there's a draft coming through the windows and walls. Stopping by in the evening may reveal that a neon sign nearby will make it impossible to sleep or that the noise from a local community center is louder than you can tolerate.
• Meet Your Prospective Neighbors
Chat with the folks across the street and get their take on the neighborhood. What do they like about the area? What are their gripes? Even a perfect house can become unlivable if the surrounding environment isn't very friendly.
• Personalize Your Offer
Buyers who include personal notes in their offers often motivate sellers to choose their bids over others. When you visit the house, look for clues about who the owners are. Then find ways to connect through shared circumstances or common interests. Perhaps you both have children or grandchildren, graduated from the same alma mater, or share a love of bird watching. Tell them what drew you to the property. Be sincere – people want to know that a buyer will love their house as much as they did, so don't be afraid to open up.
• Come Prepared With a Counteroffer
Negotiation is par for the course when buying a new home. First, there's the initial bid and then there's the number that the seller will come back with. From here, you need to decide what your counteroffer will be. Ideally, you'll have an idea of what your counteroffer will be when you make your initial offer. That way, you can respond quickly and efficiently, something that's especially important if you're caught in a bidding war. Planning ahead is also a great way to ensure you stick to your budget.
Be sure to work with a mortgage loan officer to build a strategy. In a hot market, you'll need to make your best offer and be prepared to keep looking if it's at the top of your budget. However, there's more negotiation in slower markets.
In addition to the price of your counteroffer, you should also consider splitting closing costs. When you split the closing costs or take them on entirely, you may be using more money out of pocket, but you won't have to adjust your financing, and the seller will receive the price they're looking for.
• Buy Off-season
Housing prices are lower during winter than they are in summer, so hold off on buying until then if you can. Listings tend to be more plentiful in the warmer months – patience and diligence are key when house-hunting in winter. But you may get a better price by not competing with everyone else.
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(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)