It has been more than five years since the pandemic started, and the Real Estate industry has undergone significant changes as a result. Despite this, many experts predict that the market will become more stable and predictable starting in the 2024 real estate season. Even Zillow is predicting that more homes will be on the market this spring through fall. However, it remains to be seen how much of this is wishful thinking.
Although Real Estate has been a popular topic of discussion in recent years, many first-time home buyers are unaware of the process or where to begin. Here is a rundown of how the homebuying process works in New Jersey and how to prepare for each step:
Save for a deposit
If you plan to buy a new home, make sure to have enough funds to cover the deposit. The deposit amount will depend on the price of the property you are interested in. While a 10-20% deposit is recommended, other options are available. According to a study by the National Association of Realtors, the median deposit for homebuyers is just 14%. Additionally, several loans these days require a lower percentage to qualify, such as 3% for conventional loans and 3.5% for FHA loans. Therefore, it is essential to research all available options and choose the one that works best for you. Which brings me to the next step, which is simultaneous with the first one.
Get pre-approved for a mortgage
Getting pre-approved for a mortgage is crucial before starting to look for a house. Without this step, you risk wasting time and money by looking at properties that are out of your price range. To get pre-approved, provide income verification such as pay stubs, tax returns, and bank statements to a mortgage professional. They will evaluate your debt-to-income ratio and tell you exactly how much you can afford to borrow. In today's fast-paced market, it's important to act quickly when you find a house you love. Getting pre-approved means you can submit your best offer right away and have a greater chance of securing your dream property. Additionally, it will give you a better idea of how much you'll be paying in closing costs, which can include property taxes, insurance, and various fees.
Set your expectations
Once you know how much you can afford, you can start to set your expectations on the type of home you will be looking for and where it's located. Real Estate is all about location, so focus first on areas and neighborhoods before narrowing down to a specific house. When you do find a house, check the surroundings to ensure the area is suitable for you. Is it close to things you like to do, places you like to go to, stores you like (especially grocery stores), access to public transportation, etc. Don't make the mistake of having tunnel vision and focusing only on the property itself.
While you are browsing for homes, a list of "must-haves" will start to form in your head. Get this list on paper so you can share it with your realtor later. Make sure your list includes things your first home MUST have versus things you would like your next home to have. Remember, some things you can't change (how close to a highway, size of backyard), and some things you can change about a home (color of kitchen cabinets, carpet v. hardwood flooring). Buying a home is an emotional process, but it is also a huge investment. Stick to your list so you don't make an emotional decision or settle on something that was a "must" because you just wanted a home. Having this list will make you very prepared and decisive when you're house hunting - you'll feel confident during open houses thinking "I want this home" or "I don't want this home." This market is still very much a seller's market; prepare yourself now so you don't waste precious time later deciding whether to put in an offer.
Find a Realtor you love
As a buyer, you don't pay for the services of a real estate agent. Having one makes the process easier, but you are not required to work with one. There are many moving parts in the process of buying a home, especially your first home. Thus, I highly recommend finding an agent you like and who knows the area in which you are home shopping. An agent can also help connect you with a real estate attorney (if you don't already have one), inspectors, and sometimes lenders and title agents. Do your research on agents and ask friends for referrals. You need someone that you will get along with and someone that knows the area. Share your must-have list with your agent, and listen with an open mind to their recommendations. They will likely give you valuable input to consider in adding to or changing your must-have list.
Making an offer
Once you find a home you love, you have to make an offer on it. In today's market, most homes receive numerous offers. Thus, buyers only have one chance, so make sure it's your best offer. Don't go over your budget that you set with your lender, and make sure you can afford your offer. Also, know that money is not the only factor for sellers to consider when choosing which offer to accept. There is still how soon you can close, whether you'll be making any waivers on inspections, how flexible you're willing to be with sellers, etc.
Coming up: my next blog post on the process from offer to closing, and the fees for buyer and seller. Stay tuned!
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