1. Straighten out your money $$. Fix your credit and find ways to help increase your credit score. Paying off major debts, to lowering credit card limits, to closing out collections or derogatory remarks on your credit report are a great start. Improving your credit will not only help your interest rate and qualification process but also, in WI, it can help lower insurance costs since credit is a rating factor. Be wise and consider waiting on big purchases such as a new car or furniture until after the purchase of your new home.
2. Attend a homebuyers’ class and consider pre-counseling. There are great homebuyers’ classes online and in person where you can learn about the process of buying a home from getting preapproved, to the mortgage and buying process, etc. Many of these homebuyers’ classes also offer homebuyers’ pre-counseling sessions where you can learn about debt and budget-management to help you be aware of your finances, expenses, income, and ultimately to help you determine how much “Home” you can afford.
3. Save! Save! Save! Save for a Down Payment early which may mean giving up some of your morning coffee runs or shopping splurges, to using digital coupons while shopping for your groceries. Be mindful to save money for home inspection costs, administration, and processing fees, as well as closing costs i.e. appraisal and title fees, etc. Do not forget about budgeting for items you may need to buy after moving in! Sometimes appliances may not come with the home, thus you may need to consider saving money for these items and other moving in expenses.
4. Getting Pre-approved! Start by exploring all the different mortgage options out there (FHA, Conventional loans, to VA loans and USDA loans). Also, do some research to see if there are any payment assistance programs through your city or state. Get a preapproved letter; whether it’s a pre-approval letter from a local credit union or a mortgage broker, make sure you have copies or easy access to all your tax records, W-2’s, paystubs, assets, etc.
“Preapproval” means an offer to lend you a specific amount of money (determining how much “home” you can afford) since a mortgage lender has reviewed your finances, creditworthiness, debt and income to determine you as a qualified candidate. Do not be surprised but be prepared to answer questions when lenders ask you specifically about certain payments or loans you may have. Prequalification is only an estimate of what you might be able to borrow based on financial information you provide, and a credit check on you. Getting preapproved rather than prequalified gives you the competitive edge over other buyers where you start house hunting and put in a competitive offer with no worries.
5. Create a list of your “Must Haves” in a home. If you know you have a big family having a 2 bedroom and 2 bathrooms might not be the right home for you. Be firm and ask yourselves what are “must haves” in the home that you need and what are other features of the home you can live without. From the # of bedrooms and bathrooms, to desired location/school district, crime rates in the neighborhood, to having a finished or non-finished basement, etc. Create that list and revised as necessary but remember the bigger picture, the real estate market has changed dramatically in the past few years and because of Covid-19. There may be more buyers compared to homes for sale. It might be great to be aggressive in your offer but know that even if your offer does not get accepted for the first home you really like; the right home just has not come around yet. So, stay positive and do not let your guard down, finding the right home may take a little more time.
6. Find a buyer’s agent. Finding a home by yourself can be hard especially during this pandemic. Get a buyer’s agent who will help you with the negotiation process from putting in an offer, negotiating contingencies, etc. Ask friends, co-workers, and family members for recommendations on a buyer’s agent. Read up on their reviews and do not be afraid to ask them questions and state what your expectations are with them.
Find a person who is honest and trustworthy, well experienced, someone who will understand your family’s needs, who is culture-sensitive, as well as someone who will put you and your family’s interest ahead of them and their commission. Be cautious as well, some buyer’s agent may ask you to sign a contract for 1 month, to 5 months or even more, so I would not recommend signing multiple buyer’s agent contracts. Do not feel obligated to stick to one agent either, if you’re butting heads with an agent or feel they aren’t doing anything for you, its ok to move on and find a new agent who would put your interests first.
7. Buy homeowners insurance. Many times, homeowners only buy the minimum coverage or what the mortgage lender is requiring which may not even be the adequate coverage needed to rebuild a home. The purchase price of a home and the actual replacement cost of the home (the cost to rebuild the home after it is destroyed) are completely different. Be sure to find an independent insurance agent who can look at multiple insurance carriers to find you the most competitive rates with the best coverages needed to take care of your home. For example, many homes may have finished basements which may need extra coverage in case of sewer or water backup. In addition, some features of the home may also affect your home insurance costs from the age of the roof, to the electrical and plumbing updates, etc.
Make sure to gather as much information about the home, any claim reports, or prior losses on the home. The information from a home inspection or appraisal that was recently done, or an MLS report of the home will greatly help to get a more accurate quote for a home insurance policy. Remember not all insurance policies cover all kinds of natural or flood disasters. If the roof is damaged some policies may only pay for a new roof if it was due to a fire, hail, or windstorm. Be sure to ask your agent about what kind of coverages you will need on your new home and do not buy the bare minimum to keep costs low.
8. Put in a competitive offer. With our journey as first-time homeowners, we found that the market was already competitive. There were more buyers than homes for sale. Do not be afraid to work with a “For Sale by Owner” instead of a real estate listing. When you do find the right home be aggressive and put in an offer that you can afford and that is within the home’s value. Write a personalize letter to set you apart from other buyers and it might help you seal the deal. Talk with your agent through the whole offer process, from how much earnest money you are comfortable to put down, what contingencies you want to put in place, in case you need to back out of the home due to major damages or issues in the home’s infrastructure, etc.
There will be a lot of pressure from both sides and it can be very stressful and exciting all at the same time; from putting in an offer to starting the closing process. Do not let anyone pressure you to do anything you don’t want to, if there are things you cannot negotiate with the seller on and things you cannot live with for you and your family its ok to back out of a contract but know the stipulations and know what it may cost you. Therefore, finding the right agent and being firm and set with your “Must Have” list is important for any first-time homebuyer.
9. Prepare for Closing. When the seller accepts your offer, the closing process begins. From the contingences that can be set in place such as home inspection, appraisal, financing, title fee to preparing to do the final walkthrough before your big closing day. Read every document and ask questions of your agent and mortgage lender. As you approach your final walkthrough day, make sure to check items that are to stay with the purchase of the home are there or if electrical or plumbing issues were to be fixed make sure those items have all been remediated or signed off by a licensed general contractor. Some neighbors are often welcoming and would swing by to say hi when you are visiting the home before closing. Be friendly and get to know them as well.
10. Keep up with routine maintenance and check-ups/tune-ups. As a first-time homeowner when looking at homes you can tell if major appliances, furnaces, water heaters, ac units are regularly checked for maintenance by the dates listed on the appliance. Make sure to also keep up with routine maintenance so you know what to budget for such as if your ac unit should be at the end of its lifetime. Routine maintenance and tune-ups also help prevent damage from water losses, other in- damages, and insurance claims that may cost you more on your home insurance premiums.
Contact Paroubek Insurance to speak to a personal insurance advisor to make sure you have the right coverages in place to protect your family and your new home.