sidebar shadow
Preparing to Shop

Preparing to Shop

You may be asking - Where do I start?! First, Establish your Real Estate Team

Get a pre-approval

When you're under contract to buy a property, having your mortgage application denied (after waiting several weeks) may cause you to lose the property after having spent hundreds of dollars on loan fees and property inspections. Even worse, you may lose the home that you've probably spent countless hours searching for and a great deal of emotional energy to secure. Some house sellers won't be willing to wait or may need to sell quickly.

Prequalification is an informal discussion between borrower and lender. The lender provides an opinion of the loan amount that you can borrow based solely on what you, the borrower, tell the lender. The lender doesn't verify anything and is not bound to make the loan when you're ready to buy.

Preapproval is a much more rigorous process, which is why we prefer it if you have any reason to believe that you'll have difficulty qualifying for the loan you desire. Loan preapproval is based on documented and verified information regarding your likelihood of continued employment, your income, your liabilities, and the cash you have available to close on a home purchase. Going through the preapproval process is a sign of your seriousness to house sellers—it places a sort of a Good Borrowing Seal of Approval on you. A lender's preapproval letter is considerably stronger than a prequalification letter. In a multiple-offer situation where more than one prospective buyer bids on a home at the same time, buyers who have been preapproved for a loan have an advantage over buyers who haven't been proven creditworthy.

Lenders don't charge for prequalification. Given the extra work involved, some lenders do charge for preapproval. Other lenders, however, offer free preapprovals to gain borrower loyalty. Don't choose a lender just because the lender doesn't charge for preapproval. That lender may not have the best loan terms.

Good Neighborhoods

Good neighborhoods, like beauty, are in the eyes of the beholder. For example, being near excellent schools is important if you have young children. If, conversely, you're ready to retire, buying in a peaceful area with outdoor activities may appeal to you, and being next to a noisy junior high school is your nightmare! Personal preferences aside, all good neighborhoods have the following characteristics:

Evaluating Neighborhoods

You may get lucky and find the neighborhood of your dreams right away. You're far more likely, however, to end up evaluating the strengths and weaknesses of several neighborhoods while trying to decide which one to favor with your purchase. If you're on a budget—and most people are—you may have to compromise and make tradeoffs.

Prioritize your needs

Buying a home when you have budgetary constraints involves making tradeoffs. When push comes to shove and you have to choose a place to live, you must decide what is most important to you.

Research

You should examine the health of the local economy, area amenities such as parks and entertainment, school quality, and crime rates before you buy a home. Here are some sources of information:

Used Homes

Used homes have many great features:

You should still have it thoroughly inspected (inside and out) by qualified professionals before you buy it. The last owners may not have had the time, desire, or money to fix problems. They may also not have been aware of hidden problems. Be sure that the home meets today's building codes; doesn't have environmental, health, or safety hazards; is well insulated; and so on.

Used homes are "done" properties. When you buy a used home, you generally don't have to go through the hassle and expense of buying and installing carpets, window coverings, and light fixtures. The work is already done and everything is generally included in the purchase price. Buying a used home may be the only way to get the architectural style, craftsmanship, or construction materials you want. Perhaps you want plaster walls, parquet floors, stained glass windows, or some other kind of materials or craftsmanship that is unaffordable, if not impossible to find, in new homes.

Like new homes, used homes also have some disadvantages:

New Homes

New homes have some very appealing advantages:

New homes also have some disadvantages:

Condo/Co-op Advantages

Condos increase your buying power. Compare the price of a two-bedroom condo to a two-bedroom detached single-family dwelling in the same neighborhood. On the basis of livable square footage, condos generally sell for at least 20 to 30 percent less than comparable detached homes.

Owning your very own roof, foundation, and plot of land is much more expensive than sharing these costs with a bunch of other owners. For some would-be buyers, the choice is either buying a condo that meets their living-space needs or continuing to rent.

Attached residences generally cost less to maintain than detached homes. Although replacing the high rise's roof, for example, costs more in absolute terms than replacing the roof of a detached single-family home, the cost per owner should be less.

Attached residences have amenities that you couldn't otherwise afford. Most homeowners can't afford expensive swimming pools or tennis courts.

Attached residences are ideal homes for some empty nesters. Perhaps a building with no maintenance hassles and a doorman who'll forward your mail while you're off on one of your frequent vacations might be right for you.

We recommend that you review the past several years' operating budgets and financial statements for indicators of poor fiscal management.