Basics to Homeownership
Hello ladies.Last week we talked about credit scores needed to qualify to purchase a home. This week as part of our three-week home-buying series we’ll discuss all the basic information needed to purchase a home. I have learned a lot on this journey and most importantly I learned I’m not as ready as I thought I was. It took me a while to come to that realization, but I want to be as prepared as possible. I was unaware of the fees associated with home-buying and additional costs before and after purchasing a home (i.e. inspections, insurance, renovations, taxes). I want to share the things I’ve learned while embarking on this journey so that you too can enter this chapter as prepared as possible.
Step 1. Before purchasing a home, the most important thing to know is your credit score and understand what you can and cannot qualify for. CONGRATULATIONS! If you tuned in the week prior you’ve already mastered this step. There are resources where you can check your FICO score and really get a deep look at everything that is affecting your score. You can pull your score at www.myfico.com or via your bank (click here to see if your bank qualifies). Please be careful because there are different versions of FICO and the newest version is FICO 9.
Step 1a. If credit repair is necessary, DO NOT FRET. There are tools available via Google, YouTube, and Facebook groups. Please do not pay anyone to fix your credit unless you have absolutely no desire to do so yourself or do not have the time to dedicate to this process. All the information you need can be found for FREE. If you pay for anyone to assist you, you may want to hire a lawyer who can lead this process for you to help you understand financial/credit laws. Facebook groups that I use are: Credit Warriors Each One Teach One, Dream Catchers: Live Richer w/ The Budgetnista, Credit Makes $ense: Prosperity Partners w/ Netiva Heard, and The Frugal CrediTnista (also ran by Netiva Heard). Be active and READ. Do not expect anyone to do the work for you but if there is information you are seeking you will find it using these resources.
Step 2. Research your local market and home-buying trends in your area. Grab a newspaper and search the Real Estate section to gauge prices and how far money can take you. This will give you an idea as to where you can afford to live and how much home your money will buy you. This is important because when you speak to an agent it’s helpful to be specific on where you want to live and what your housing needs are. The more information you have for them the easier it will be for them to narrow down homes within your purchasing range. Attend council meetings in the area that you want to invest in to know plans for that community. Each city updates plans to address growth and development and it will be in your best interest to read, understand, and familiarize yourself with such plans and projects.
Step 2a. When you get a pre-approval from a lender you will have an exact loan amount to know what you qualify for. Your market research is not meant for window shopping. It’s meant to understand the neighborhood trends and pinpoint the communities that will be best for your family to invest in based on your family’s needs. Check out your city’s planning commission, zoning, and city plans. These should be found on your city’s website or at your local libraries.
Step 3. Choose an agent that works for you! Currently I am interviewing my third agent. Yes, you read that right – I interview each agent I plan on working with. I want to know how long they’ve been in business, their expertise on first-time home-buying programs, possible assistance programs, grants, and credits I can qualify for, and the length of time and success rate it usually takes them to close on a home. I need my agent to be knowledgeable in real estate and the community I’m investing in and assist me in navigating the market to find the home that works for me and my needs. I know exactly what I’m looking for and an agent has two times to send me information outside of my parameters and they are fired. Agents will get you to sign with them and you should. Just because you sign on with them does not mean you cannot get out of the “contract” due to their ineffectiveness to provide you with the best services you deserve. Before you sign, make sure you READ and understand the stipulations that will allow you to quit working with them. Buying a home is investing in the community and school system and that should not be taken lightly.
Step 4. Give your finances a reality check. About six or so months before you plan to buy a home cut back on your expenses. Limit unnecessary spending. DO NOT use your credit card if possible. Buying a home is expensive and there are associated costs that will sneak up on you. Add as much money to your savings as possible to cover those costs. Keep your credit card utilization low (10% and under is best). Stay put at your job until after you close on and receive the keys to your home if you’re thinking of getting a new job. Keep your debt-to-income ratio minimal. For those of us with student loans, make on-time payments and/or get on an income-based payment plan well BEFORE you begin your home-buying journey.
I have lots of information to share about my journey to becoming a homeowner. These steps have really helped me. They are numbered in the order that made most sense for me to start my journey and in talking to others who have been successful with this process. Please feel free to ask questions or share your journey/suggestions! May the keys be with you soon.
-Chantelle