I’ve decided to buy a home, now what?

If you have been on the fence about purchasing a home, chances are you have already been looking at homes online to see what’s out there. Before you call the Realtor, though, there are some things that you should do first. It is very likely that, at some point in the process, you are going to feel some pressure to make decisions quickly, particularly in a market where there are a lot of buyers and a shortage of homes for sale.  There is an adage in real estate that goes something like this: “the home you want to think about today and buy tomorrow is the same home that someone else thought about yesterday and is buying today.”

The key to successfully dealing with these situations is to be prepared. Here are few things you should do before you move from looking around online to physically walking through your future new home candidates.

Know Your Payment Thresholds

You will often hear or read advice that says something like “get pre-qualified or pre-approved so you know how much you can afford to purchase.”  This is great advice, but it doesn’t go far enough.  You need to know more.  There are several payments, along with corresponding loan amounts & purchase prices, you need to know.

First, you need to know what your comfortable monthly payment is and what that translates to in terms of loan amount and purchase price, which is usually the loan amount and whatever your down payment will be.  Your comfortable monthly payment should not be determined by your lender, it should be decided before you even speak to one.  This is what you believe you can afford in the context of your situation and desired lifestyle.  Your Loan Officer can convert this payment into an accurate loan amount and purchase price.

Second, you should know the maximum loan amount and purchase price you qualify for and the total estimated mortgage payment for that amount.  This is important so you know where your ability to negotiate absolutely ends no matter what the circumstances are.

Finally, you should have incremental estimates for loan amounts and purchase prices between your comfortable payment and your max payment, perhaps every $10,000 or $20,000.  This information will prevent you from guessing or anxiously waiting for an answer when you are under pressure.

Make a List of Needs and Wants

Before you set out to look at homes, make a written list of features and amenities that you required, those you want, and others that would be nice but really aren’t important.  As cliché as this sounds, many people do not actually write it down.  This is a mistake.  In the heat of the moment a mental list can get jumbled. There is also a calming effect in being able to look at a list that you know you created with thoughtful consideration. It will remind you of those things that were originally important to you.

In a hot market, you may find yourself competing with several other prospective buyers.  You could be in a position where you need to submit a very competitive offer quickly or you may even be actively bidding against other buyers. In these situations, you will be under pressure to decide exactly how competitive you are willing to be.  Having payment information readily available and a firm grasp of what is truly important to you will make it easier for you to make an informed, calculated decision.