HOME SLICE
You might remember that in my September column, ‘Why Right Now Is the Right Time to Buy,’ I outlined reasons why the current moment might just be the best time ever to purchase real estate. Since that time, interest rates on a 30-year fixed mortgage fell below 4 percent, and distressed sales continue to come onto our local market. The perfect match of both historically low prices and interest rates are upon us. Buyers are aware that it is a good time to buy, but I am realizing lately when I qualify new buyers that not all of them know where and how to begin the home-buying process. When taking the proper steps, you save time as well as money.
1. Meet with a qualified lender or loan broker and get preapproved for a loan before you go house hunting. This is the most important step in the process, and must be done first. Be prepared to have your credit score run and your finances and employment reviewed thoroughly. Approximately a third of the homes being sold are distressed sales (short sale or real estate-owned property). These homes often come on at attractive prices and can require a preapproval letter with your offer submission. To get in on these potential deals, have your preapproval lined up so you are ready to strike. There are loan products out there that can get you into a home with less than 20 percent down; however, 20 percent is increasingly becoming the minimum down payment. Plan on earmarking or saving 20 percent.
I have had more than a few buyers eager to look at property, motivated by having discovered one house in particular that gets them excited to buy. I get a phone call typically like this: ‘Hi Maura, have you seen that home on XYZ Street? I love it! Can you get me in? It looks really cute online!’ They want to get in and look at the property and then work backwards to find a lender and see if they can afford the house. This wastes both my time and yours. Find out what (or if) you can afford before looking. The National Association of Realtors reports that one third of all real estate contracts are cancelled. A large percentage of these fall apart because buyers are unable to obtain financing once in contract. Call a lender first and know what you can afford.
2. Keep your credit score intact throughout your home-buying process to maintain the preapproval. Although interest rates are low and we are in a buyer’s market, lending is still extremely tight. From the beginning of your search until escrow has closed, keep your credit strong. Lenders will often do a reassessment after preapproval or ask for updated financial statements in escrow. If your financial picture has changed ‘— for example, you financed a new car or ran up a credit card — your debt-to-income ratio changes, thus putting your loan preapproval in jeopardy. Hold off on large purchases and remember your current goal of buying a home. Continue to pay off any outstanding debts that you may have.
3. Find a real estate agent whom you trust. Once you have done all your financial homework and are aware of what you can afford, you are ready to go shopping with preapproval in hand. Ask those who have bought in the area for referrals for local realtors. Buying a home is an interpersonal experience, and the fit should be comfortable. Have a conversation with a realtor prior to getting in the car with one to make sure that you can trust this person with the biggest purchase of your life. A good agent will qualify you as well, and have a firm grasp on the sales process.
Our local Truckee/Tahoe market is very mountain specific and tourist based. Real estate has only gotten more difficult and convoluted with the presence of banks entering the sales process. It is paramount to find a qualified realtor with local knowledge and experience who has successfully navigated and closed sales in today’s market fraught with pitfalls and red tape. Take these steps, in this order, and you will have a positive experience finding a home, or knowing the right time to buy.
~ Maura Mack is a realtor with Coldwell Banker in Truckee, maura@mauramack.com, (530) 582-9775. Comment on this column below.
