Written by Andrew Goodman
Question: I am going to purchase a new home early next year and I want to be ahead of the game. Can you tell me what my first steps should be to save money and make the process as smooth as possible?
Everyone has a different process and a different way of doing things. One way may not be better than another, but in my experience here are the steps you should follow in order to save as much money as possible and to enter the process with knowledge of your local market:
1. Contact a Realtor: Choosing a realtor is difficult, but if you read one of my earlier columns I explain traits you should look for in one. Selecting a realtor is crucial. He or she is there to guide and assist you through the entire home buying process, help you understand the market, and hopefully help you save some money — among a vast array of other things.
2. Contact a Lender: I would usually tell you this step should be the first step, but a realtor can help recommend a reliable lender and may also help explain some of the programs as they fit to the type of home you are looking for. Be sure to discuss these topics with your lender:
a. Loan Program and their associated down payment requirements
b. Monthly obligations
c. FHA vs. Conventional programs vs. other loan programs
d. Mortgage insurance
e. Qualified priced range
A lender should be able to pre-qualify you in a matter of minutes. However, to be ahead of the game, supply the lender with copies of all information required before looking at homes (such as W2s, tax returns, bank statements, pay stubs, etc). By doing so, your lender will be able push you along in the approval process, which could ultimately help you eliminate contingencies when submitting an offer and give you the upper hand against any bidding competition.
3. Choosing a location: Choosing a location should be done prior to viewing homes with your realtor. You should have a good idea of where you want to purchase prior to looking at any specific home. Obviously, certain neighborhoods demand different price points, but after speaking to your lender you should have a good idea of what areas fit within your budget.
Feel free to use your realtor to get an idea of some areas that are in your budget. The location you choose may also be affected by the loan program you obtain. For instance, if you are purchasing a condo and are obtaining a FHA loan, you will only be able to purchase in a FHA-approved condo complex.
Your realtor or lender will be able to help you determine which complexes are FHA-approved in the locations you are interested in. I recommend driving through a few neighborhoods that have caught your eye so you have a good feel for them. All that is left is finding the right home. Some things to look at when choosing a location:
a. School districts
b. Community amenities (if in a condo/HOA)
c. Parks and recreation
d. Future development plans
e. Length of commute (city traffic)
4. Determine a Need and Want list: Come up with two lists. One is a list of items you must have in a home. Think about the number of bedrooms/bathrooms, parking, size of the yard and more. Then come up with a second list that is a wish list. These would be items that would be very nice to have but wouldn’t necessarily keep you from purchasing a home that had everything on your “needs” list.
Once you have determined your price range, location, needs, and wants in a home you are ready to start looking.
I do not recommend looking at homes too far in advance. Chances are that if you see a home months or weeks before you are ready to purchase, it won’t be available when you are ready. But have your realtor send you properties or feel free to do your own search online so you have a good idea of market trends and what to expect to find within your search criteria.