4 Tips for Successfully Navigating the Homebuying Process
Since the start of the pandemic, many people have seen the value in caring for the space they call home. Several bouts of quarantine have meant extra time indoors realizing how our living space can impact our daily wellbeing. Data from Comscore showed an incredible amount of growth in consumers purchasing a home, shopping for home furnishings and appliances, and investing in home improvement projects in 2020, which continued into 2021.
Over the past few years, trends related to homebuying have received a surplus of media coverage, as the pandemic has brought robust changes to the industry. Here are the top considerations you should make before deciding to purchase a home.
1.) Consider the lifestyle differences between renting vs. buying
For those preparing to buy a home after renting for many years, it’s important to remember the new responsibilities you will need to take on as a homeowner. Renters tend to have little to no responsibility for maintenance and have more mobility if looking to move. Being a homeowner means you’ll be in charge of handling your own maintenance and paying property taxes and insurance, yet the sense of independence, tax benefits, and equity you’ll receive are great benefits.
2.) Create a strong homebuying team to navigate each step of the process
Since buying a home will likely be one of the most expensive purchases you’ll ever make, it’s essential to build a team of professionals who have your best interests in mind. To start, you’ll want to select your Mortgage Lender. An experienced residential mortgage lender such as Metro Credit Union can assist you in obtaining pre-approval, which is a necessary step to determine your maximum monthly housing expense. Upon pre-approval, it’s time to find a realtor and home inspector, who will help you find your ideal home and identify potential issues with the house before you purchase it. Finally, you’ll need a closing attorney, who is the liaison for all parties and ensures the seller owns the property and is legally able to sell it to you.
3.) Become familiar with the four C’s of mortgage lending
To qualify a buyer to purchase a new home, a lender will check four key elements related to your financial history: your credit, capacity, capital, and collateral. Your credit will show your bill paying history and determine if you’re a desirable candidate for a mortgage. Capacity means your lender will review your income, employment history, savings, and monthly debt payments, alongside your capital, which is your readily available cash and savings, investments, and retirement funds. For collateral, your lender will require an appraisal to support the value of the property you’re looking to purchase, which must have a free and clear title to be insurable. The insight collected from the four C’s helps to determine the interest rate you receive on your mortgage and how much you’re able to spend on your home.
4.) Understand the difference between pre-qualification and pre-approval
Although these terms sound similar, they are two very different concepts, and it’s important to know the difference. A pre-qualification is a rough estimate of what you might be able to borrow from a lender based on a brief conversation about your background without requiring any supporting documents. A pre-approval is more serious and is treated the same as an actual loan application, with the exception being the property address will be listed as “to be determined.” A full application is taken which includes a credit pull, two-year history of employment, and all asset information.
Once you’ve given thought to the above considerations, you’ll be in a great position to begin exploring your mortgage options.