How to Buy a Home in a Crowded Market
How to Buy a Home in a Crowded Market

Potential homebuyers in the market for a new home this summer are going to be met with lots of competition, and it’s going to be fierce.  This market is shaping up to be one of the most competitive in years, with the most prepared buyers getting the homes of their dreams, and the ones that aren’t ready learning a lesson about how to buy a house in a crowded market.

Well, we thought that we’d help those new home buyers with advice on how to buy a home so that you can be prepared going into the market to do battle with other potential buyers, and arm yourself with the knowledge that will put you ahead of the crowd.

Save Up Your Money

Before even starting to save towards the house, a great first step is to work on paying off as much debt as you can.  Getting rid of high-interest credit cards and nagging student loans can only help you when you’re ready to buy by lowering your debt-to-income ratio, a key barometer of financial health that mortgage companies look at when assessing your ability to buy a house. 

You should also try to save anywhere from 3-6 months of expenses for an emergency fund.   Why?  Well, there’s not going to be a landlord to call when the roof leaks, or you need a new dishwasher or fridge.  You have to replace that stuff yourself.  So unless you want to go without or live on bread and water, you’ll need those savings.

Now it’s time to put away cash for everything else.  You’ll have the down payment, closing costs, and your moving expenses to deal with.

For the down payment, you can put anything from nothing to the full amount down, but typically, mortgages are at 3.5% to 20% for the most popular loan programs.  While there are zero down mortgages like the VA or USDA loan, those are not able to be used by every borrower. 

FHA loans require a 3.5% down payment, but they also require PMI to be paid every month.  Putting down 20% on a conventional mortgage is the best way to avoid paying PMI, so that all of your payments will go towards paying off your loan.

Closing costs are the fees that your lender and title company charge to process the mortgage transaction, and can often be rolled into the mortgage, so while you can pay them upfront, you aren’t required to.

Depending on how far you are moving and how much you’re bringing, your moving costs can vary wildly.  Call around to the various moving companies around you to start to gauge how much it will cost you to get moved into your new house, and what you will need to save to do so.  You’ll also have to budget for your repairs and updates if you’re planning those as well.  Don’t forget about new furniture – if you’re in a condo and moving to a house, you’ll have more rooms to fill.

Get Pre-Approved

Once you’re comfortable enough with your finances to buy a home, it’s time to get pre-approved for your mortgage.  Contacting your mortgage company and having us verify your financial information and submit your loan to preliminary underwriting gives you a preapproval letter, which is what signifies that you are a serious buyer to sellers, and are ready to buy a home.

This also lets you know how much you can borrow, giving you a shopping budget to find a home in.  Knowing that lets you shop for a home you can afford. 

The preapproval letter gives you a leg up on the competition.  It’s like starting five yards ahead in a forty-yard race against other buyers, and lets you make an offer on a home as soon as you’re ready.

Start Shopping

Now it’s time to grab a real estate agent and get to shopping.  Since you know what you can afford, it’s time to get a list of home features that you want to have.  If you want a pool, or a big backyard, or a finished basement, go for it!

Just stick to your budget and know the value of what you want.  Find out how much it would cost to add improvements after buying the home and compare it to the cost of the home you’re looking at.  It may be cheaper to buy a home and add a pool later.

Make sure that you’re making a good investment. Your real estate agent can help you with making that determination, as long as you hired a good one.

Make sure that you don’t make a hasty decision on the location or the layout of your house.  You can’t move your whole house, and you can’t fix a terrible floorplan.  This can kill the resale value on your home, because if you don’t love it, why should they?

However, you shouldn’t let fixable issues run you off.  So there’s a hot pink bedroom.  It’s just paint.  You can replace shag carpeting as well.  Just remember the old maxim: buy the cheapest house in the most expensive neighborhood.  This lets your home grow in value.  Remember: the National Association of Realtors says that the average homebuyer takes 10 weeks of shopping before they find their house.  It’s not how you shop, it’s what you buy.

Offer Up

Now you’ve found your perfect house in the perfect neighborhood, and you’re ready to submit an offer.  Work with your real estate agent to submit an offer.  If you end up in a bidding war, don’t go nuts.  Make sure that you stay in your comfort zone, price-wise.  This is why you got pre-approved for your mortgage, so you can buy a home with a strong offer.

Remember that the seller wouldn’t be selling if they weren’t prepared to.  You both want the transaction to happen, and your real estate agent will help you negotiate.

After your offer is accepted and the house is under contract, you have finished the hardest part of the process to buy a home.  Now you need to work through the contingencies.

Contingencies are the conditions that have to be met in order to put the home purchase through.  They let you back out of a sale without forfeiting your deposit if there is an issue.  Never skip these, no matter how wildly competitive the market is.  They are a huge part of the sale and protection for the purchase.

Part of this process is the home inspection.  This is where you have a professional come to the home to ensure that it’s fit for purchase.  Inspections can reveal sagging beams, cracked foundations, or other structural issues that would fall on you to repair after the purchase.  You have the right to a home inspection – take it!

Many homeowners also take the opportunity to inspect for termites or radon, which are advisable depending on the age and location of the home.

The lender will also require an appraisal, which evaluates the value of the property.  This helps keep you from overpaying for a home.  If the appraisal is too low, your agent and mortgage company will work to find solutions.

Final Approval

Now it’s time for the final approval.  We are going to dig through all of your finances to finalize the loan.  It’s very important that you not open credit cards, take on debt, or change jobs during this time, as changes to your financials can keep you from getting the mortgage.

Once you’re approved, it’s time to close on the house!

That’s right, it’s time to sign papers like you’re at an autograph show.  Before you move in, you’ll pay the closing costs, prorated property tax, homeowner’s association fees and homeowner’s insurance.  You’ll also work through all of the paperwork.  As you go, if you see something that doesn’t make sense or you don’t understand, ask!  This is the biggest purchase of your life and your name that’s going on the documents, you need to understand the process.

Once you’re done, you have completed the process to buy a home!  Congratulations!

Call The Home Loan Expert Team in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515, and Nashville at (615) 810-8555.  You can always apply online with our 5-Minute Loan Approval at for your VA Loan, and for your other mortgage needs, and we’re also open on Saturdays and will come to you to help close your loan. We work hard to make it easy on you.  Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?

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