5 Steps to Buying a Home That Won’t Bust Your Budget

Couple standing in front of their new home.

 

Spring is generally recognized as the best time to buy a home. But that means it’s also the busiest time of year in real estate. If you’re looking to buy a house, it can be easy to feel overwhelmed by the competition and all the decisions that go into buying. Here are some tips to get prepared for homebuying.

 Calculate Your Budget

It’s important to know what your budget should be for buying. To calculate that, you have to know how much you can spend. Add up your monthly incomes and figure out where your money goes each month. Once you’ve done that you can figure out the cost of owning a home. Experts suggest keeping your mortgage payment to no more than 25% of your monthly take-home pay. Home ownership isn’t limited to your mortgage. Keep in mind that owning a house means additional expenses like HOA fees, maintenance and repair, furniture and décor, and lawn care in their budget. You’ll also see an increase in utilities due to the increased square footage and transportation costs due to longer commutes.

Make a List of Features You Want

Before you can shop for houses you should know what kind of home you want. Look online to get a sense of the type of house you might be interested in. Consider all the features inside and out to make sure you know what you like and don’t like. The more you can define the characteristics of a house you’re looking for, the quicker you can put in an offer on the one that suits you and your family. You may not find a home with all the features you want. List the absolute essentials and what you can live without. In the highly competitive Spring market, you should be prepared to compromise on some features, but not on the most important ones.

Scope Out Potential Neighborhoods

Where you live is also an important consideration. Narrow down a list of where you might want to live and where you can afford to buy. Use the Internet to do research on neighborhoods to find out about the areas. Drive through the neighborhoods you’ve selected at different times of the day and week to get a feel for the area, to test out your commute during rush hour, and check out the local shops, restaurants and schools if you have kids. You can even chat with folks in the neighborhoods you visit.

Find a Real Estate Professional

In the competitive Spring market, you’ll want to partner with someone who has the expertise and connections to help you find your new home. Real estate professionals can offer you information not available via property listings. Hire someone who specializes in the neighborhood or neighborhoods you’ve selected to get a leg up on the competition. Your agent can alert you to listings that coming on the market in the next month that meet your requirements and set up days and times for you to look at potential homes.

Figure Out Your Finances

As soon as you find the home you want this Spring, it’s crucial that you put in an offer right away. That means you must have all of your financing in order. Check your credit and make sure it is in good shape. Also, make sure you can set aside money for a 10-20% down payment as well as for closing costs, which can total up to 5% of your home’s value.

Get Preapproval from a Lender

Preapproval for a mortgage means you meet all the lender’s requirements and you have the green light for a set loan amount. Having a preapproval letter will likely put your offer at the top of the seller’s stack. To get a loan, meet with lenders as soon as you can to get preapproved or prequalified for a mortgage. Make sure you gather the right documents for the application. You’ll need:

  • A copy of your most recent bank statements for savings, checking, etc.
  • Proof and balance of any retirement accounts (401k, IRA, etc.), mutual funds and stocks
  • Most recent W-2
  • Most recent paystub from your employer
  • Driver’s license

Negotiate More than Price

If you get to the stage where you are ready to make an offer on a house, don’t get too caught up in the asking price. Ask your real estate agent to help you determine the actual value of the home. If it is listed at a good price and you can afford it, paying a $1,000 or $2,000 won’t make a lot of difference. Negotiate other terms contained in a purchase offer instead. If you don’t wish to waive certain rights, consider giving sellers something other buyers might not, like extra time to move out. Your agent can offer you suggestions for you that can help with negotiations.

B178-MN-4-17

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