More Helpful Tips
Chicago Real Estate Buyer's Tips
Buying a home is among the biggest investments you can make — and not just in terms of money. The process can seem overwhelming.
You want answers and solid advice - and peace of mind. As one of the industry leaders in experience and superior service, we will provide the guidance and the information you need to make good decisions, and maybe sleep a little better at night.
Here are just a few tips that can make a buyer's life a little easier, whether you are a first-timer or someone who's been there before.
Get Preapproved Before You House Shop
Many homebuyers don't understand the difference between prequalified and preapproved . That difference can cost you the home of your dreams if you can't get the loan when you make the offer.
Prequalification helps determine " how much house" you are able to afford, but it does not guarantee you a specific loan amount. You can prequalify yourself, before you even go to a lender. (See details below)
Preapproval is a thorough examination of your finances and credit by the lender. At the end of this process, you can obtain a commitment letter that guarantees you an actual loan amount or an amount for a monthly payment.
Conduct your own prequalification and you will be better prepared to be preapproved by a lender. Here's how:
- Determine your total gross monthly income, including all salaries, tips, dividends, interest payments and bonuses earned in your household
- Figure out your total fixed monthly debts, including any car payments, other loans you are paying, time payments, insurance payments, regular savings ( such as for college), alimony and child support.
Now, plug in the percentages that lenders will use.The formulas will vary, But a common one you can use is 28/36.
Multiply your gross monthly income by 28%. That figure is roughly the amount that lenders will say you can afford for a monthly home payment (including taxes and insurance.
Multiply your gross monthly income by 36%. That figure is the maximum that lenders will say you can afford to spend on debts, other than your mortgage.
Finally, subtract your actual monthly debt from the maximum debt figure. That will give you a figure that is a closer estimate of the monthly amount a lender will say you can afford for a home payment.
Note that this is just an approximation, but it can let you know you are in the ballpark. Your next step would then be to find a lender and secure preapproval.
You Better Shop Around
All loans are not equal. All lenders are not offering the exact same rates and fees to every prospective buyer. You need to do a little fieldwork to find a good fit with a lender. Of course, get referrals from friends, family or your real estate agent. Interview several lenders, and be sure to ask about all fees, and the kind of service and support you can expect. Yes, you want a good interest rate, but a rate should not be your only criterion.
What's in YOUR credit report?
Homebuyers often forget to check their credit before seeking a home loan. You may think your credit is fine, but there can be errors in your official credit report (old debts that should have been taken off)- and that is what lenders will look at. Take the time and spend the few dollars to obtain a copy of your credit report from one of the major credit bureaus. You can check for accuracy and have any errors corrected before you see your lender. The three major credit bureaus are Equifax at 800.685.1111; Experian, 888.682.7654 and Trans Union, 800.888.4213.
Consider A Buyer's Agent
You are buying a home. You want to find the very best property for you and your family at the very best price. Your ideal real estate partner is someone who is working totally in your interest - someone who is helping you buy, and not trying to sell you any particular house or property.
A buyer's agent is legally obligated to represent your interest (the buyer) in a real estate transaction. A buyer's agent can generally give you more information about the property and the seller and may be more objective about the property's plusses and minuses than an agent/agency who is representing the seller. Usually, the seller pays the buyer's agent commission. When you are selecting an agent, ask about the type of representation that agent will provide; make sure you understand the pros and cons or limitations of different types of representation.
Look For Resale Value
As you search for that perfect home, pay attention to the surrounding area and the other homes nearby. Be aware of features that can add to the home's value or detract from it. Your agent can help you identify aspects of the home that will make it harder or easier to sell. For example, if most homes have two-car attached garages, you may want to think twice about the house with a single-car garage or a detached garage.
Don't Rely On Memory (Take Good Notes)
It's very important to keep track of which house had the nice second bathroom and which one had a small dining room. Trust us. You are not going to remember. Create a checklist template and take a copy with you each time you visit a house. Make your notes and rate everything about the house and the neighborhood, as soon as you have seen it. Now you have a system that will help you compare features and narrow your choice.
Do You Really Want a Fixer-Upper?
It's very tempting to get a great deal on a house that "needs work." You can even envision how great it will look with larger rooms, new floors or an island kitchen. Stop right there and make a realistic decision. Are you going to do the work yourself? Are you ready to live in a home that's under construction for weeks or months? Are you going to have the time, the interest and the expertise to accomplish your vision? Will you hire professionals? And if so, have you estimated the costs involved and determined that what you want is feasible? Before you make your offer, bring in an architect or designer and get the facts upfront.
Is A Home Inspection Necessary?
In a word, yes. Whether you are buying an older home or brand new construction, a professional home inspection is something we thoroughly recommend. An inspection can catch flaws or problems the seller doesn't know about. Inspections of new construction can uncover such defects as incorrect elevations, missing insulation, incorrect materials used, errors in drywall installation or defective tile installation.
And, please don't let Uncle Joe do your inspection. We have seen more than a few cases where a friend or relative "checked out" the house and missed some serious problems that ended up costing the new owners a lot of money and aggravation.
Hire an inspector who belongs to one of the professional organizations and has a proven track record. Get recommendations, and interview two or three candidates. Get cost estimates and scope of service in writing. Plan to accompany the inspector on the tour and you can learn first hand about the kind of maintenance and upkeep your new home is going to require.
Be A Smart Negotiator
You found THE house and are ready to make an offer. Here is where having the right agent becomes very important. Rely on your real estate agent to guide you in the negotiation process.
Your first offer should leave room to negotiate.
Determine upfront where you will start and where you want to end (after any counter offers.)
As you write your offer, consider the following:
- prices of similar homes in the area
- prices of other homes on the block
- condition of the property - upgrades made and work that is needed
- how motivated is the seller?
Your offer will include:
- downpayment if any
- details about your financing; note that you have preapproval
- spell out who pays what closing costs
- determine what inspections will be conducted, and who pays
- disclosure of defects by seller; repairs that will be made
- timetable for purchase; date of possession
- contingencies/cancel clauses to protect buyer and seller
- guarantees on the condition of the property at time of sale
- date for the closing
If your initial offer is turned down, you will probably make a counter offer. It's important to follow your agent's advice and counsel. Be sure all counter offers are in writing. And if it is just going nowhere after several rounds, the wisest course may to walk away and look for a new property.