The most important aspect of purchasing a home? Understanding the nuts and bolts of how it works. Consider taking advantage of local home-buying seminars, often offered by banks or nonprofits. Such resources will explain aspects of a home loan, like the criteria lenders use to evaluate a borrower, the documentation buyers will need to provide and what each portion of a mortgage payment goes toward. Even better: these seminars are usually free.
5. Interview at least three real estate agents
Just about everyone knows a real estate agent or five, which explains why 52% of home buyers find their agent through a friend. But don’t just settle for the first agent to cross your path—remember, a house is a huge purchase, the stakes are high. In the same way you’d want to thoroughly vet a surgeon before upcoming surgery, make sure to do the same here, too. Here are some questions to ask a real estate agent before deciding which one is right for you.
A real estate agent can also help in the education department, according to Christine Lutz, director of residential brokerage for Chicago-based Kinzie Real Estate Group. “An agent will often have relationships with lenders that buyers can work with to determine a budget and down payment percentage and get pre-approved for a mortgage.”
6. Go mortgage shopping
In the same way you wouldn’t buy the first house you set foot in, you shouldn’t commit to the very first mortgage you meet, either.
“Mortgages are not one-size-fits-all,” says Scott Haymore, head of mortgage pricing and secondary markets at TD Bank. He advises buyers to find a lender they trust and to discuss their financial situation. A lender will then help buyers “understand what financing options are available.”
7. Ballpark your closing costs
Buyers sometimes forget, amid their scramble to make a down payment and monthly mortgage fees, that that’s not everything they need to pay for. Another sizable chunk are closing costs, and they’re no small chunk of change, ranging from 3% to 6% of the purchase price thanks to taxes, transfer fees, and other expenses. So, make sure to budget for this expense too, just so you aren’t blindsided come closing time.
8. Ponder the future
Home buyers sometimes think of the purchase “inside a vacuum,” says Jeremy Hallett, CEO of Quotacy.com. That’s why he advises “making sure you have a will in place. Buyers should also consider a term life policy that runs at least 20 years and would pay off the home if something tragic happened—$20 a month buys a $500,000 policy.”
Robinson adds that before buying a home, you should have “an emergency fund established with enough money to cover three to six months of living in case you’re faced with an unexpected financial hardship. Considering your retirement savings is also important; you should continue making contributions towards your future.”