Amazon recently announced their search for a second headquarters and it got me thinking about buying a home.
The thought of 50,000 new employees in one campus location will definitely spur new home buyers. Seattle has exploded from the number of mid-westerners and Californians moving to the state for work. Prices are continuing to rise and for most of us, this may create a panic to buy (FOMO around prices) or anxiety around buying a home.
So how can you make this daunting task a little better? Prepare, prepare, prepare. Don’t be forced into a rushed situation and know your needs ahead of time. As they say..
Preparation + Opportunity = Luck
When to Buy
Why am I writing a post on buying a home after Labor Day? Because buying a home when others are too busy is a great time!
You may not always have a choice on timing, but if you find yourself waiting for a good deal then November to January is a great time to make an offer. With the holidays and school starting, many families may be busy and buyers can be a little scarce.
In a seller’s market, buying in the off-season may mean more bargaining power.
How to Prepare to Buy
1. Identify a lender or two you are interested in working with. These may be credit unions in the area, your current bank, or a referral.
2. Decide if you need a pre-qualification letter or a pre-approval letter. Nuanced differences – I know!
Pre-qualification is a step before pre-approval. This is where you can give a lender an idea of your current status without verification with documents and a hard credit inquiry. This will give you a general idea of what you can be approved for without dinging your credit
3. Check out your credit score to make sure everything looks right and no errors exist. A great site for checking this is Credit Karma.
If you are close to a credit score cut off point (i.e. excellent credit vs good credit) then the rates available to you may change. Take a look at what is affecting your credit score. Determine if it makes sense to pay down some of your debt or wait for one of the hard inquiries to fall off your credit report.
4. Know some of your numbers:
- If you are renting, what will it cost to end your lease early?
- What size house are you looking for?
If the loan is considered a ‘jumbo loan‘ then lenders may require you to meet more hurdles.
- Will you put down 20% of the purchase price?
This will mitigate paying primary mortgage insurance on top of your monthly payment for the loan.
- What is your housing expense ratio? Lenders generally look for your expenses to be below 30%.
Calculate an estimate: Annual salary x 0.28 / 12
Will your mortgage payment, insurance, taxes, and HOA fees be below this amount?
- What is your debt to income ratio? Lenders generally look for your debt payments to be below 40%.
Calculate an estimate: Annual salary x 0.36 / 12 Will your debt payments be below this amount? This generally includes student loans, car loans, minimum credit card payments, child support/alimony, and other required monthly obligations.
5. When you are ready to buy a home in the next 60 to 90 days, get your pre-approval letter. Find out when the pre-approval letter will expire. When the pre-approval letter expires, more documentations and another hard credit inquiry may be required.
So what do you think? What other tips for buying a home do you have to share?
When you are ready to chat with someone about how buying a home fits into your long term financial future, schedule a consultation with me!
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The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.
