Iowa City Real Estate Buyer Tips
Consider location. In Real Estate, location will always remain King. How far is the house from where you work? Can you handle the time/money involved in the commute? If you have young kids or are planning to have them, how far are the grandparents from the house? (They tend to be the best babysitters.) What about schools, restaurants and shops?
Set a budget. It’s nice to say ‘buy within your budget’ but that might not realistic. Do a quick budget estimate, look at some houses that you might be interested in, and then revise the budget or revise the houses. If you really can’t afford a house then don’t buy one.
Know your market. It’s critical that you know the market you are looking in. The asking prices for houses are often not indicative of their true value. The only way to be able to estimate value is to look at as many houses as possible. Have your Realtor provide you with sold data from the past 6 months-1 year depending on the number of comparable properties available.
Don’t end up house poor. Sometimes homebuyers ‘fall in love’ with a house or neighborhood (or even just the idea of owning a house). This can lead to regret when the novelty wears off and you don’t have any money to do the things you’d like. Try living for six months on a ‘pretend’ mortgage payment and see how it goes. Life is simply too short to live mortgage to mortgage.
Make a decision. Once you know your market and you have obtained the data needed, you should be able to purchase a house fairly quickly. If you are looking for the perfect house or trying to time the market, then you will never buy a house. The reality is that you could be happy with many of the houses you look at, so as long as you can eliminate the worst choices then you will be thrilled with your new home.
Don’t blow your budget on remodels and furniture. When many people buy a home, the mortgage payments are so large that they have to be ‘made to fit’ into their budget, straining other priorities. While this is not the best way to buy a house, some buyers then make things worse by spending more money on renovations and home decorating. Unless you buy a total wreck of a house, you do not need to spend big bucks on renovations. You can live with the non-granite kitchen counter and the couch set that doesn’t fit the room perfectly.
Qualify yourself. Ideally, first-time homebuyers would know how much they can afford to spend before the mortgage lender tells them how much they qualify for. By calculating their debt-to-income ratio and factoring in a down payment, buyers should have a good idea of what they can afford to invest, both upfront and on a monthly basis, when it comes to their home.Though there’s not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28 percent of your gross monthly income be devoted to housing costs, called the front-end ratio.Including all debts with housing costs is the back-end ratio, and lenders prefer it to be under 41 percent.
Organize documents. The documents homebuyers must produce to be considered for a home mortgage are those which authenticate their income and taxes.Typically, mortgage lenders will request two recent pay-stubs, the previous two years’ W-2s, tax returns and the last two months of bank statements.
Evaluate assets and liabilities. So you don’t owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month or are you on a shoestring budget? A first-time homebuyer should have a good idea of what is owed and what is coming in. You should understand a little bit about monthly cash flow. Try to track your spending for a couple of months to see where your money is going.Additionally, buyers should have an idea of how lenders will view their income, and that requires becoming familiar with the basics of mortgage lending.For instance, some professionals, such as the self-employed or straight-commission sales person, may have a more difficult time getting a loan these days than others. Gone are the days of the no-doc loan, thanks to the abuses of a couple years ago.
Check your credit. The credit score of the buyer may be the most important factor when it comes to qualifying for a loan these days. To get a sense of where your credit stands, visit with one of my tried and true local lenders located on one of the home page tabs. Scour the reports for mistakes, unpaid accounts or collection accounts.Just because you pay everything on time every month doesn’t mean your credit is stellar, however.
Working with First-Time Home Buyers here in the Iowa City Area is a very rewarding part of my job and I look forward to assisting you with your house hunt. I hope that you will consider allowing me to make your tour enjoyable while providing you with the detailed data you need to make a well-informed decision. -Mike