Purchasing a home can be an excruciatingly slow process. It usually starts with an online search but the real work begins when you begin visiting homes. When you find the home you want to purchase, things can really start to get bogged down. Between making an offer, obtaining financing, establishing and meeting deadlines, dealing with contingencies, all of which require loads of paperwork, have the potential to create speed bumps that can significantly slow the processor or roadblocks that can bring it to a full stop.
Here are 10 practices which can help you keep your home purchase on track and get you in your new home as soon as possible.
1. Enlist the help of a REALTOR®
Find a Realtor intimately familiar the town or towns and types of neighborhoods you would like to live in. Be sure you choose a Realtor who communicates and listens well.
2. Get all the information you need up front
The home-buying process can be confusing—especially if you’re a first-time buyer. Your Realtor can answer all your questions and provide you with information you didn’t know you needed. You shouldn’t feel guilty about peppering your agent with questions, but getting the most important ones resolved early on will help maneuver those speed bumps and road blocks.
3. Get your paperwork in order
The buying process requires reams of paperwork. Get everything together beforehand: At least three months of bank statements, pay stubs, letters of explanation for any unusual expenses. Clearly document any family member’s cash gift toward the downpayment. Be aware that self-employed people and business owners will be required to provide at least 2 years of tax returns. See more about self-employed and business-owner requirements here.
3. Get pre-approved by a trusted lender
Skip the pre-qualification and go for the pre-approval or commitment from a trusted lender. Pre-approval is not a commitment to lend you money but a lender’s way of saying they will likely lend you a certain amount as long as you clear the underwriting process. A pre-approval will be granted only after reviewing your credit score, current debt level, income and employment (past, present and future.)
Find an experienced mortgage loan officer with a proven track record. Your Realtor is a good source for lender recommendations. Many Real Estate Brokerages have lenders they partner with and they are most often the best sources for your pre-approval. Keep in mind that after the pre-approval, you can still shop around for other lenders. Thus, if you decide to go with a different lender, you will have have already gathered all of the required paperwork and will have identified any snags, however, until you have a loan commitment be aware that you may be asked to provide more information. Our lending partner is EverBank. You can find out more about Everbank here.
4. Be narrow-minded
Whittle down your must-have list to the bare minimum and put very little weight in the nice-to-have list. Nothing on the nice-to-have list should be considered when determining which houses to view. Also, do not waste your time looking at homes that do not conform to your must-have list. Staying focussed on the must-haves will help you choose a home in short order.
5. Look for a home that has been on the market for longer than others
Homes sit on the market for a long time for a couple of reasons. Most often because they were overpriced when they first hit the market. Overpriced listings that do not have aggressive price reductions get stale and miss out on a lot of opportunities to sell. Look for homes that have had recent price reductions which are in line to current market values of similar homes. These sellers are most likely very motivated especially if the home is vacant.
Another reason a home lingers on the market is because it needs updating. Look for homes that are in good repair but have older kitchens, baths and floors. These homes generally fetch less on the market and you can use what you save on the price to update the home.
6. Make a strong offer
Don’t lowball—even if you’re convinced that the pink bathroom with formica countertops justifies a $20,000 reduction. Most homes are priced with all of the flaws taken into to consideration. Make sure to have your Realtor prepare a comparative analysis and determine what the market value is. If a home is overpriced, don’t bother making an offer. The seller isn’t ready to sell. If it is priced fairly, offer a fair price, don’t lowball.
Other ways to make your offer stronger include a large earnest money deposit – at least 5% – a large downpayment or second earnest money deposit, a quick closing for motivated sellers of vacant homes, and fewer contingencies.
7. Waiving contingencies
When you’re making an offer on a home, it’s standard to throw in some contingencies which will allow you to walk away from the deal with your earnest money deposit intact if the contingencies are not met. Standard contingencies include, but are not limited to, appraisals, inspections, and financing.
If you’re looking to buy in a hurry you may be tempted to waive some contingencies. Only do so after considering what the consequences may be and be prepared to accept them. For instance, if you forgo the appraisal contingency and the bank appraises the home at a lower price than you offered, don’t expect the seller to lower the price for you, although they may if you can’t get financing and have a financing contingency in place. If you have committed a large enough cash downpayment you will still get your financing and will most likely pay the price you offered.
If there is any concern at all that you will not get financing for any reason including the bank appraisal, do not waive the financing contingency. If you have the cash to cover the purchase price, consider waiving it. You can obtain a mortgage after the purchase.
9. Write a letter
If you can’t eliminate contingencies or offer more money, and the sellers aren’t moved by a quick closing, consider writing them a personal letter. Tell them about the children you plan on raising in the house, or about your love for the home’s unique characteristics. Keep it short and complimentary.
10. Don’t let the seller see any signs of desperation
Beyond writing a quick closing date into your contract, don’t hint to the seller you are in a desperate need of a home as it could hamper negotiations.
Stay focused on your goal and use a Realtor who knows the area. Be candid with your Realtor about your finances and your needs. Open communication with your Realtor will help her help you achieve your goal.