Step Zero for buying a home!
What you need to know BEFORE starting your home search!
STEP ZERO for buying a home
Home ownership is a great investment for your future. No matter what time you buy a home (buyers' or sellers' market), there’s a very good chance and historical proof that over the long term, owning a home is a great investment. You don’t only get to build equity (and equity can ‘magically’ increase when housing prices in your area increase!) but there are also some tax benefits to owning a home.
If you can own more than one home, that’s even better! You can rent it out for more income.
A good idea for first time home buyers is to purchase a duplex, or fourplex, and live in one unit, and rent out the other units, having the other units help pay part or all of your mortgage! Now that’s smart!
But, before you even think about buying a home… you need to take STEP ZERO.
What?!? What is Step Zero you ask?
Step Zero is ‘preparing’ to buy a home. Things you need to do, and figure out, before you really get serious about buying a home. Let’s go into what is involved with Step Zero.
Decide you are ready to make the move and buy a house. Home ownership may not be for everybody. There are ‘costs’ of buying a home too! Taxes, maintenance, repairs, etc. Some people like apartment living, where maintenance and repairs are done for them. (This doesn’t build you equity though!) Another reason why it might not be the right time to buy a home is if you plan, or think, you be in a certain area fro a short time.
Get your finances in order! Check you credit reports and credit scores. You get to see your credit report for free. Click here for you credit report. Good credit helps you get a better interest rate. If your credit isn’t the greatest, work on improving it. Need help or advice on improving your credit? Contact me and I can recommend some people to you. (Be careful of scammers out there!)
Save up for a down payment, or figure out how you will get one. Do you have money saved up? Will a family member give you a gift of money for your down payment? Can you ‘borrow’ or use from your 401k or IRA? (The short answer is Yes you can!)
PRO-TIP: If you have a bunch of cash literally ‘under your mattress’ and not in a bank.. now is the time to get it into the bank! You might think, “Oh, I have this (literal) cash (that has never been in a bank) I’ll use as a down payment. NO! If you are also getting a mortgage for the rest of the amount, this cash will cause a problem! Get it in the bank now! Lenders (and the government) want to know where this money came from. Most lenders only look back 2 months of bank statements, so if your money has been ‘accounted for’ for 3 months, you should be good. Let's discuss if this may relate to you.
Figure out what area you would like to live in. Do you want (or need) to be close to school or work? Close to family members? Are the school districts important to you? Do you like urban or more rural areas? How about mass transit or public transportation? Do you work from home where you are pretty open with where you can live?
Figure out how much you can, or want, to invest in a house. Make a budget. What can you budget monthly for housing? It’s good to find a monthly amount you can (or want) to spend, as opposed to 'I can buy (or want) a 500k home'. Why? Well, in New Jersey (and many places) property taxes play a big role in your monthly payment. If you buy a home for $500,000 with 20% down and your taxes are $18,000/yr and insurance is $1500.00/yr at a 6.5% interest rate, your payment will be approximately $4150.00 If your taxes happen to be $12,000/yr, your monthly payment drops to approximately $3,650.00! If your monthly housing budget was 4150.00, you can buy a $600,000 home with that same monthly payment! (Keeping the same 20% down, adds another 20k to your down payment, but you get the idea.) Check out this mortgage calculator that you can check out different pricing scenarios.
Let me help you find ‘lower’ tax areas in New Jersey, where your housing budget can go further!
Step 6) You're almost done with Step Zero!
After you’ve done the above for Step Zero, we have a couple more steps for you to complete.
a) Find a Real Estate agent, well, you found him already, ME! Contact me before you are ready to buy!
b) Let’s have a buyers consultation to go over the things above to make sure you are ready, AND to go over the home buying process and what to expect.
c) Let’s get you a mortgage person to help you if you aren’t working with one yet.
d) Let me put you in my database with automatic emails to you with properties that may be of interest to you.
e) Search Zillow, Trulia and Realtor.com or whatever sites you like, BUT CONTACT ME and not the agent listed on those sites. Why might it be a bad idea to contact them? They might be working for the Seller, and not you, the Buyer. They might not have your best interest at heart. When we work together, I have your best interest in mind ALWAYS! It’s my fiduciary duty!
f) If you see any open houses, let me know! It would be my pleasure to go with you! If it’s a house you like, we can even put an offer in that day! (Before anyone else gets it, and if you completed all the steps of Step Zero)
That's it! That's Step Zero! NOW....let’s work together and get you your next (or forever) home!