New Year, New Home: Preparing to Buy Your First House
In the housing industry, 2019 is set to be the year where millennials take control of the market. With 45% of new mortgages being obtained by the young generation, many couples across America are taking the steps to buy their first homes or make good real estate investments. Buyers of all generations recognize that the interest rate honeymoon of the past has ended and locking in a good interest rate is as popular as beer at a tailgate! Whether you are a millennial making your first purchase or a savvy 2nd or 3rd-time buyer, here are some important tips to consider in the 2019 market.
Your Buying Power May Be Shrinking So Think Fast
The first step in a savvy real estate search is to make sure your finances are in order. While getting pre-approved may not be on the top of your things to do list for 2019, you have to lead with your finances. Because we are now in a rising interest rate environment, time is not necessarily your friend. Talking to a lender is the best way to have a clear idea of whether your income, debt and credit scores are at the level needed for a purchase. A trusted and professional lender is not going to push you into buying something that is not affordable. Don’t put this important step off, start with a lender recommended by a trusted real estate professional or someone that has successfully closed a loan for friends, family or you. The sooner you get started the better. An easy borrower/buyer is a person who has income that is very straightforward (ie. You get one big fat paycheck or maybe two from an employer) and your credit score is squeaky clean (say 650 or higher at least) and you have very little debt. Most people have more complicated financial pictures and yes they still can buy real estate – so dive in and find out what your financial picture is and what if anything you need to do next.
A credible lender will have you complete an application and they will run your credit report. The next step is for you to turn in documents to support your income and assets (bank statements, tax returns, and other documents. Your loan officer will then either submit your file to their underwriter (good) and get a pre-approval or they will run a computerized program to give you a pre-qualification or a desktop underwritten approval (less credible than a pre-approval in the eyes of many listing agents). Your credit score tells lenders how trustworthy you are when it comes to your debts, which means that having a bad credit score can close a lot of important doors to you. The biggest impact on your credit score is credit card debt, so ensure you have either paid off all or most of your credit card debt before shopping around for mortgages. If you are buying a home with a loved one, lenders will look at both of your scores. It’s in your best interest, to be honest with each other about any past credit issues.
Search Around for the Best Mortgage
Just because you’ve been pre-approved for one mortgage does not mean that it is the best one for you. Mortgage brokers are specialists who shop around to find the best mortgage for your situation and can help save you the most money possible in the long run. A direct lender may have a more streamlined underwriting process and may have more control during the initiation of the loan. Big banks often offer more competitive rates but rarely move as quickly as direct lenders or smaller lending institutions. A good rule of thumb is to contact at least three institutions for mortgage rates and deals before settling on one. At the end of the day remember, if the loan doesn’t close it doesn’t matter what the rate was, you won’t get your home. You want loan officers with experience and great communication skills. Your lender is an important partner in the buying process and hopefully, they will under-promise and over-deliver on your financing.
Finding Your New Home Or Investment
A great real estate professional is essential to making the home/property search a success. You should spend between 30-45 minutes with an experienced agent discussing your desires, the market and a strategy for finding you the best property at the best price. Experience, personal references, reviews and reputation are all good indication that a real estate professional is in the know and competent. Communication is really key in the process of buying. Finding a property is competitive, getting your offer accepted is competitive and negotiating the best terms can be complex. Every buyer wants “a great property, in a great area, at a great price” so you have to be ready to work to be successful. A great agent will help you narrow down the possibilities and focus on the best opportunities. Owning Southern California real estate can be one of the best investments made by most people, let us help you on this journey.
Teresa Mack leads one of the largest urban luxury boutiques in Los Angeles with 65+ agents and a stellar team she knows the Los Angeles market—and all of the roadblocks buyers can face. Check me out at TeresaMack.com or give a call for a free buyer consultation (Call or text 323-377-9379). You can also check me out online to make your buying experience as easy as possible.