Home buying can be a tricky process in a high-demand market like the Greater Houston area. It’s easy to feel overwhelmed. This guide serves as an overview of what to expect. Here are some tips that will help you maneuver your way thru the home buying process.
Examining your finances
If you haven’t yet, then you definitely need to take a close look at where you stand financially. A home is a major, long-term financial commitment and you will want to make sure that you can truly afford it.
- Break out the calculator and break down your expenses. Calculate how much you earn in a month and how much you spend. Don’t forget to include your current debts (credit cards, student loans, car loans, etc.). Ideally, you shouldn’t be spending more than 30% of your monthly income on mortgage payments.
- Get your credit report. This will tell you what your credit rating or score is, and this in turn will help determine the interest rates that lenders will offer you. You should get this as early as possible so you’ll have more time to improve it if needed or to correct errors.
- Factor in additional costs. Remember that you’re probably not just going to be paying for the mortgage every month. There’s also insurance and taxes as well as HOA and condo association fees and private mortgage insurance (PMI) if your down payment is going to be less than 20%.
Lining up your financing
There are many different kinds of loan products out there, from fixed-rate mortgages to adjustable-rate mortgages (ARMs) to jumbo loans.It’s best to remember that there’s no one-size-fits-all when it comes to mortgages. You’ll want to do your research because you’re going to be stuck with your loan for a while.
- Shop around. You will want to make sure that you’re getting the price and terms so get quotes from several lenders, not just one. Then you can compare the rates, points and fees.
- Don’t hesitate to ask questions. This is a significant chunk of your hard-earned cash that you’ll be parting with, so this is not the time to be restrained. Ask the mortgage broker/s for as much information about the loans as they can provide.
- Consider the lender, not just the loan. Is this a company you want to do business with? Are they knowledgeable and responsive? What are their other clients saying about them?
- Get pre-approved. A pre-approval letter from a lender has become something of a requirement in today’s competitive marketplace. It not only lets you know how much house you can actually afford, it also indicates to sellers that you’re a serious buyer whose offer deserves to be considered.
Getting the right help
Sure, you can buy a home without the help of a real estate agent, but why not benefit from the help of a knowledgeable professional? Here are some things to consider when choosing an agent:
- Find someone who knows the area – the Greater Houston area as a whole as well as the specific communities you’re interested in, whether it’s Pearland, Sugar Land or the Inner Loop neighborhoods.
- Get referrals from family and friends. There’s nothing like a recommendation from someone whose opinion you trust.
- Do you get along? It doesn’t pay to go with the agent who seems to have the most qualifications if your personalities clash. You’ll be working with him or her for a while, so make sure to choose the one that you can work with long-term.
Determining what you want
You should know what you want before you start shopping around for a house. Consider not just the features you want your home to have, but the neighborhood you want to live in as well.
- Make a list of your top requirements. Do you want to live close to work? Do you need lots of space? Are you aiming to enroll your kids in a particular school district? Make sure you know the answers to crucial questions like these right from the start.
- Do your research. If you’re working with a knowledgeable agent, then they’ll be able to bring your attention to the neighborhoods that fit your needs and price range. Even if you’re not planning to move anytime soon, research market trends and resale values anyway as these are also an indicator of whether or not the neighborhood is a good one or if it’s in decline. Drop by the neighborhood at different times of the day and different days of the week to get a better feel of the area.
- Make a distinction between wants and needs. You may want your new home to have equestrian facilities, but it’s not a requirement as long as the property has significant acreage. Thisis the kind of thing you and your agent should be clear about before embarking on a search. It’s good to list these down as well.
Finding the right home
You’ll already find plenty of information on real estate listings online, whether through sites like Realtor.com or Zillow.com or the more local HAR.com (the Houston Association of Realtors® website). Shopping online is just the beginning, however – to make sure that you have access to all your possible options, it’s a good idea to:
- Ask your agent about pocket listings – that is, properties that may not be listed on the open market.
- Let your agent know if you’re open to investing in distressed properties. These include foreclosures and short sales.
- Consider new and pre-construction homes. If you don’t need to make the move right away and you’d prefer a brand new home, let your agent know so they can inform you about new and upcoming developments in your chosen area.
- Look beyond cosmetic issues. It’s hard to seriously consider a house that may have dated fixtures or whose walls are painted in a particularly vile color, but try to look at it from an investor’s perspective. If the house is in a great location and is in good shape, remember that you can always repaint the walls and change the handles on the kitchen cabinets.
Purchasing the property
When you’ve found what you think is the ideal home for you, the next step is making an offer. You may need to move fast at this point, particularly if the property is in a sought-after location – this is why it pays to be prepared with your financing early on.
- Your agent will help you come up with an attractive offer. You will want to consider factors such as: the prices of comparable homes recently sold in the neighborhood, current market trends, how long the property has been on the market, the seller’s motivation, and so on.
- Everything is negotiable. The asking price doesn’t have to be the last price – it hardly ever is, in fact, except in really hot sellers’ markets. You can also negotiate more than just the price – there may be pieces of furniture that you’d love to have as well or you may be able to give the seller more time in the house even after you’ve purchased it – these are just some of the things you can discuss in the negotiation process.
- Keep a close eye on contingencies. These usually have to be met within specific time periods and many are designed to protect you from penalties in case you have to back out of the contract.
- Yes, you will want to get a home inspection done. A house can look picture-perfect to you, but have underlying issues that will be expensive to repair later on. A professional home inspector will know what to look for.
- Have extra funds set aside early on. Ideally, the price you offered for the home would be in line with its fair market value, but sometimes the lender will have a different, lesser value in mind. If you have the extra cash to cover the deficit and you really want the house, the deal can still push through.
Closing the deal
There are going to be quite a few people involved in the closing. In Texas, the closing is typically handled by the title company. Some things to keep in mind:
- Closing actually already started when you and the seller signed the purchase agreement.Closing day is when you sign the necessary documents.
- Double-check your documents in advance so you’ll have time to get errors corrected before closing day.
- Review the title report as early as possible, don’t wait until closing day.
- It’s a good idea to come prepared with all of the documents that you think may be needed, even if they haven’t been requested. Lenders have been known to ask for additional paperwork even during the closing day itself.