Home ownership has long been considered an essential part of the American dream, and with housing markets still hot, many are considering jumping into the fray and making a home purchase, either as first-time homebuyers or as move-up buyers.
However, before you start home shopping, there are a number of things to consider. Buying a home isn’t just about finding a place to live, it is the most complex transaction and largest investment most of us will make in our lives. Ensuring that that investment is well-suited to your needs and your life can maximize your long-term success as a homeowner. Learn more about the 5 things you need to know before you start home shopping.
1. Consider Your Reasons For Buying — Over The Long Term
A home purchase is an investment, and one that is not without its own set of unique costs. Closing costs, interest payments, insurance, taxes, loan fees, and home maintenance costs can add up, and for that reason it’s important to understand how every part of your home purchase fits into your life. Buying a home as a short-term investment, or because of fear of missing out on market upswings, can lead to impulsive decisionmaking that is contrary to your long-term financial goals.
Before you buy a home, think about your reasons for doing so, and your plans over the next few. Do you plan to change jobs, or even your career? Do you want to maintain flexibility to move to a different area? To start a family, or have a child go off to college? All of these considerations will influence your decision on where to buy, how much house you’ll need, and how much you want to invest. Understanding where you stand on these long-term considerations can help you to ensure your purchase will be successful, and help you to make good decisions even when the home shopping process calls for you to make decisions under stress.
2. Know Your Financial Situation
Getting a good handle on your finances before you start home shopping is essential. Take the time to make sure your credit score is as good as it can be, as great credit scores can help you secure the best possible terms for your mortgage. Starting early can help you to take steps to maximize your credit score and financial position to ensure that you’re getting the best deal on your mortgage rate.
Understanding your overall financial picture can also help you evaluate how much you can afford to put down on a home, and how much house you can afford. As our explainers on homebuyer purchasing power articulate, everything from a home’s price, to your financial picture, to changing interest rates can have an impact on how much house you can — and should — reasonably expect to buy. While it’s often beneficial to stretch to afford a home if you expect home prices to increase, knowing your limits is an important part of ensuring you’ll be able to afford your home over the long-term, maximizing the expected value of your investment and allowing you to ride out any market conditions.
Getting pre-qualified and pre-approved for your financing isn’t just a great way to understand what you can offer on a home, it makes your offer more attractive to sellers who may be fielding multiple offers.
3. Know Your Home Shopping Priorities
Writing down a “wish list” — broken down into “must haves,” “nice-to-haves,” and “deal breakers,” can help you to clarify your home search priorities and focus your search. Think about things like school districts, walkability and access to public transportation, work commutes, and neighborhood amenities as you create your list. Be honest with yourself about these categories, and understand that it will be rare for a property to tick every box — knowing where you’re ready to compromise and where you aren’t can help you maximize your homebuying investment.
In a hot Chicagoland market where inventory goes fast, knowing what you want — and what’s not worth considering — can be a critical part of striking while the iron is hot and getting the best possible deal as soon as it hits the market. While it’s always fun to conduct a broad home shopping search and check out lots of potential homes, once you’re ready to move, being focused is a significant advantage.
4. Understand Your Market With A Great Agent
The next step in preparing for a home search is understanding your target market. While publicly available information can help you to check out average home prices and get a general sense of what’s happening in your market, there’s no substitute for a knowledgeable agent with a comprehensive local focus.
A great local agent can help to point you toward “hidden gem” neighborhoods and properties that might suit your needs, and can even help you to source inventory. The best deals often don’t last long enough to even make it to many of the publicly available listing sites, so working with an agent early can give you a much fuller picture of what might be possible in your desired neighborhoods and price points.
Choosing an agent can be a challenging process. Plan to ask around among friends and family for recommendations, develop a list of questions to ask, and be prepared to interview a few agents to choose one who shows an understanding of your needs and priorities. An outstanding agent will be ready to ask you about your needs, and will listen to your answers and offer feedback and options that are unique to you. You’ll be working with your agent extensively throughout your home search process, so choose wisely. A great agent is a trusted partner in the most important investment you’ll make, and can serve as a resource well beyond closing, helping you to make future home and investment property purchases.
5. Think About Your Home Shopping Timing
While much of your homebuying timeline will be dictated by your own personal timing, including job changes, school schedules, and other life events, it’s always true that real estate has some pretty significant seasonal swings. Spring and summer, for example, are the most active times for the market. A rise in inventory and a busy market with lots of activity can mean more homes available for you to consider. But it can also mean a more competitive environment, with homes moving quickly. The fall and winter months, by contrast, are characterized by a bit of a slower market, with less inventory available, but also fewer buyers competing for homes as they hit the market.
Your agent can help you understand how your priorities fit with this market seasonality. If you’re more flexible on location, home features, and neighborhood amenities, but more fixed as to what you’re prepared to pay, waiting until the weather — and the market — cool off may give you the opportunity to search at a more deliberate pace, with inventory lasting a little longer and offers receiving a little more consideration. If, however, you have a lot of items on your “must have” list, the busy spring and summer market may allow you to evaluate a wider variety of inventory that meets your needs.
When Home Means More, You Need A Team With More To Offer
When you’re ready to buy a home, having the best team on your side can make sure your purchase is successful. At Baird & Warner, we know that home is about so much more than just four walls. Buying or selling a home is a big deal, and our homes have never been more important. That’s why your local Baird & Warner agent is with you at every step of the way, from finding the perfect home to connecting you with local experts in mortgage and title. Whether it’s the beginning of a story or the end of a chapter, we’re here to help.