10 Steps to Prepare for Home Ownership (courtesy of National Association of Realtors)
1. Find out how much home you can afford.
(Contact a lender – NOW. This is the number-one step to make sure your home-buying experience is relaxed and stress-free.)
2. Develop a wish list of what you’d like your home to have (maybe 10 items). Then prioritize the features on your list. (This is very helpful if you are a couple – I’ve found that couples end up having very different opinions on what they want their new home to be – and the worst time to have an argument over this is while you’re sitting in the back seat of my car…)
3. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety, (Okay, this is irrelevant if you’re coming into Boston, mostly. There’s probably only three or four neighborhoods TOTAL that my clients end up looking at, and the price of real estate in each of those neighborhoods pretty much determines where my clients end up living.)
4. Determine if you have enough saved to cover your down-payment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 and 7 percent of the home price (I’d say more like 2-3%). (Expect to be required to put 5% down when you sign the purchase and sale contract. You may also decide to put more down at losing,
depending on the type of mortgage you end up getting.)
5. Get your credit in order. Obtain a copy of your credit report. (Definitely do this – do it online if you want it done, fast. It’ll reduce your stress, a lot, to get this done.)
6. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you. (Isn’t this the same thing as step #1??? Anyway, do some research online, like at bankrate.com to learn all about mortgages.
7. Organize all the documentation a lender will need to preapprove you for a loan. (Two or three years of W-2s and tax returns, records of investments, savings, etc.
8. Do research to determine if you qualify for any special mortgage or downpayment assistance programs. (This can take a lot of time, but can pay off if you qualify. The City of Boston, for example, has first-time homebuyer programs, as does the MBTA (yes, seriously), and you should check with your employer, too.
9. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable. (For example, say you took out a 80% loan on a $386,100 condo, at 4.625% and another 10% second loan, interest only, at 4.625%. Your monthly payments might be around $1,900. But, you have to add your property tax payments to this, which might be $300/month, and your condo fees, which might be around $250/month, and your personal property insurance, which might be $50/month. Yes, it adds up.)
10. Find an experienced Boston REALTOR (You knew this one was coming …)