Looking for tips on buying a house? Whether you're a first-time homebuyer or purchasing your fifth property, buying a house can be a complicated process. From finding a home you love to navigating inspections and locking down financing in this limited market, there's a lot that can go wrong.
With over 25 years of experience buying and selling homes in Central, New Jersey, The Aneja Team is here with their seven best home buying tips.
Home Buying Tips: Before You Start Looking for a Home
Here are the necessary steps to take before you start getting serious with your home-buying search. Make sure all of your ducks are in a row by following these tips!
1. Check Your Credit
Credit is one of the most important factors when buying a home. Unless you've saved up a ton of cash to purchase a house outright, you're going to need a mortgage loan.
The loan amount you qualify for depends on a few things, including:
- The down payment you have saved
- Your income
- Your credit
While you might not be able to ask for a large raise or save up $10,000 extra in a few months, one thing you can always work on is your credit.
Here's How to Check Your Credit
Most banks allow you to check your credit report for free. If yours doesn't offer this, you can check it on websites such as Credit Karma. A credit report will tell you everything you need to know, like what's negatively impacting your credit score, and provide suggestions to improve it.
Once you have your credit report:
- Fix any issues you see
- Pay attention to any recommendations made
- Determine which debts to pay down first
- Consider speaking with a credit expert who can help you boost your score
2. Research Local Sales Prices
During your research phase, you'll need to decide what kind of home you want and determine how much it costs.
For example, do you want a single-family home? Are you open to a condo or a townhouse? How many bedrooms and bathrooms should it have?
Once you have an idea of the exact type of home you want, talk to the Aneja Team to get an idea of what that type of house costs in your area.
This helps you have a realistic idea of what your ideal home would cost so you can adjust expectations accordingly.
A real estate agent is able to show you active listings as well as homes that were recently sold. They can narrow it down by neighborhood, so you can understand prices before making the leap.
3. Have Cash for the Down Payment & Closing Costs
In addition to a strong credit score, you will need a down payment for your home.
The amount you'll need for a down payment depends on a few things:
- The type of mortgage loan you'll be using
- Whether you're using down payment assistance programs
The loan you qualify for dictates the amount you need to put down on a house. For example, a VA loan requires 0% down while a conventional loan usually requires 3% down.
Of course, the more you put down on a house the lower your monthly mortgage payments will be. 3-5% is the minimum amount needed for most home buyers, but keep in mind that you will have to pay monthly mortgage insurance if you put down less than 20%.
In addition to having cash for a down payment, you will also need to pay closing costs. These include costs such as lender fees and title company fees.
There are down payment assistance programs available through state and local government programs. They're mostly for first-time homebuyers that meet certain income requirements. They can help you with the cash needed to put a down payment on a house — talk to your mortgage lender to learn about programs available in your area.
4. Consider All the Costs
The monthly cost of owning a home is a lot more than just your mortgage payment. When you just look at the mortgage payment, you might be thinking, 'Hey, this is a lot cheaper than my rent!'.
Depending on where you live, mortgage payments can cost less than rent. However, there are additional monthly costs that come with owning a home.
Monthly Housing Costs Include
In addition to your mortgage, each month you will also pay:
- Property taxes
- Homeowner's insurance
- Flood insurance (if the home is in a flood zone)
- Earthquake policies (if needed)
- Mortgage insurance (if you put less than 20% down on the house)
Upfront costs include:
- Down payment (0-50% depending on the loan)
- Closing costs (range from 2-5% of the home's purchase price in New Jersey)
- Moving expenses
- Any immediate repairs needed
Home Buying Tips: Before You Start Searching for a Home
Now that you've made sure your credit is in a good spot, have the cash needed to close on a house, and know what your monthly budget is, it's time to get serious about your home search.
However, before you start booking viewings with a real estate agent or attending open houses, there are a couple more steps to work through.
5. Get a Pre-Approval Letter
Mortgage pre-approvals are important to have when you start looking at houses and making offers.
What is a Pre-Approval Letter?
A pre-approval is given to you by a mortgage lender — it's a letter that states the highest mortgage amount you qualify for with that lender.
When you're ready to start seriously home shopping, get a pre-approval letter before you look at houses. This process involves pulling your credit report, so if you want to shop around with multiple lenders, make sure to get it all done within a 30-day timeframe.
In addition to a credit pull, pre-approval requires verifying your income, debt, and assets.
Home financing is stressful, but taking the time to thoroughly review your own finances and get pre-approved will be a huge help in the long run.
It's common for lenders to provide a pre-approval letter for a mortgage you might not be able to actually afford. Don't feel pressured to spend above your budget if you get into a bidding war — stick to your initial budget and price range.
6. Get to Know Your Deal-Breakers
Knowing what you don't want is almost as important as knowing what you do want in a home.
You'll need to distinguish between "dislikes" and actual deal-breakers.
For example, you might like a kitchen with granite countertops but, if everything else is up to par, would that be the difference between making an offer on a home?
On the other hand, a genuine deal-breaker could be a house that needs a new roof — this is an expensive and necessary repair. If the roof only has a few more good years left, it's a big cost you'll need to budget for. You might not be ready (or willing) to make that type of repair on a home you just purchased.
Deal breakers could also be features of a home that you can't actually fix in a reasonable way. For example, if you want a three-bedroom home, but a house only has two without any space to build on to the existing house, that could also be a deal breaker.
Now is the time to utilize the expertise of a real estate agent. They're able to break down what can (and can't) be fixed, and when to walk away from a house that doesn't fit your specifications.
Searching For Your Perfect Home
Now that you have everything figured out, it's time to start searching for your dream home!
7. Set Up Notifications for New Listings in Your Budget
While there are many online real estate listing services out there, they don't always have the newest data.
Real estate agents have access to a tool that isn't available to the public — it's called the Multiple Listing Service (MLS). This is where homes are listed for sale and is where all of the online listing websites pull information from.
When you're working with a real estate agent, they can set up notifications to email you every time a home with your criteria is listed. This includes:
- Your price range
- Number of bedrooms and bathrooms
- Type of home, i.e. single-family, condo, or townhome
- Desired city or neighborhood
Finding a real estate agent who is attentive, helpful, and genuinely acts in your best interest isn't always easy. Your real estate agent should thoroughly understand exactly what you're looking for and remain realistic about your budget, timeline, and homes on the market in your area.
8. Remain Competitive, But Reasonable
When it comes time to make your offer, you'll want to be competitive within reason.
It's not easy to determine the exact price a house will sell for, especially in today's competitive market. While many houses go for over the asking price, you still don't want to overpay.
Your real estate agent can help you negotiate a strong offer based on a fair price for the house and how homes in the surrounding neighborhood have recently sold.
Don't forget about the many other incentives you can offer to a seller besides offering extra money over the list price. For example, you could let the seller decide when to close, say you'll cover the cost of necessary repairs after the inspection, or offer to pay some of the seller's closing costs.
Ready to Find Your Dream Home in Central New Jersey?
If you're looking to purchase a home in Central New Jersey, we're here to help you through every step. Browse our online property listings or contact us to get started.
We can answer any questions you might have, help you understand all of your needs and deal-breakers, and negotiate the best deal for you.
