The moment you step over the threshold, you just know: this is your dream home.
Many homebuyers have this experience when looking for a home. They search and search until finally they find the one. The one that checks all the boxes and looks perfect for their families.
It can feel like it’s meant to be, but the reality is finding your dream home is only step one. You have a long process ahead of you to complete the purchase and make the home your own.
And of course, the scary thing is that there’s no guarantee you’ll end up living there.
But to help improve your odds, here are four things you can do to make sure you get the home of your dreams.
1. Make Sure You Can Afford It First
You should have your budget in mind before you start pounding the pavement looking at potential homes to buy. You can use an online mortgage calculator to see what the payment will be to know if it’s something you can truly afford.
If you’re worried about that monthly payment, you can increase the size of your down payment and finance less of the purchase. A best-case scenario is you would put down at least 20 percent in cash when you buy.
But that can be a hefty amount, especially if you’re looking in a hot market. You’re not out of luck yet, as there are some other options.
First-time homebuyers can withdraw up to $10,000 from an individual retirement account (IRA), for example, and use that money toward a down payment without paying the 10 percent penalty for early distributions.
You can also consider a piggyback loan, or an 80/10/10 mortgage. Or look to see if you qualify for a down payment grant program, which would allow you to get help with your down payment amount. Grant programs usually only apply to certain homebuyers in particular areas, though.
A final option to consider is home ownership investment. It’s not a loan, so there’s no interest or monthly payments. It’s not a grant either. Companies who offer home ownership investment, like Unison, help can match your down payment funds. In exchange, they’ll share in a percentage of the appreciation or depreciation of your home’s value over time.
2. Make Sure You Work with the Right Real Estate Agent
Buying your dream home becomes a little easier when you have the right team in place around you. That starts with your real estate agent, who can go to bat for you when it comes time to make an offer and get the best deal.
To make sure your real estate agent is the right fit, ask questions like these:
How long have you been in business? Experienced agents will have the instincts you need to make the right decisions — and they’ll also have the expertise to back up those hunches and gut reactions. They’ll likely know local areas extremely well, and might have useful contacts of other businesses and professionals who can help you purchase your dream home.
How many customers do you currently have? If the agent is stretched thin, he or she may not have time to dedicate to you and your needs. On the flip side, if they have no clients, that might be a red flag.
What’s your strategy? You’ll want to know exactly how the agent plans to make this dream home yours. If you don’t like what he or she says, it’s easier to move on now than later.
Do you have references? Ask if you can call and get third-party recommendations on why you should work with and trust this person.
3. Choosing the Right Mortgage
When applying for a mortgage, there are a lot of choices. While a 30-year fixed rate mortgage is the most popular type of mortgage, that doesn’t mean it’s the best for you. A 15-year fixed rate mortgage, for example, might make more sense if you can afford the higher payments. The interest is usually lower, which can help you save money.
There’s also adjustable-rate mortgages (ARM) to consider. These typically charge a fixed interest rate for a certain period (1-10 years) after which the rate becomes variable. Variable rates change each year based on current market rates, and can go up or down.
Think about your budget, cash flow, and future plans. How much risk are you willing to take, and how much uncertainty can you handle? The answer needs to be “a lot” in both cases if you’re considering something like an ARM.
When it comes to mortgage options like FHA or VA loans, you’ll need to first see if you qualify. Then, you’ll need to run the numbers to determine if the interest rates and the fees justify one path over another.
There are so many variables that there is no one right answer to what type of mortgage you should get. A fee-only financial planner could help you do this analysis if you get stuck and aren’t sure what option, of the ones you qualify for, makes the most financial sense.
4. Make Your Offer One a Buyer Wants to Accept
If you’ve found your dream home, it’s possible that someone else has too. Don’t let them swoop in and buy it out from under you just because you put in a subpar offer.
Here are a few simple things you can do to ensure your offer is a strong one that appeals to sellers:
Get pre-approved. For the seller, there’s no point in accepting an offer if they’re not sure you’ll even qualify for a mortgage. Getting pre-approved is a must to show you’re unlikely to run into issues with financing.
Make a clean offer. The more requests you make or contingencies you add to the offer, the less likely the seller will be to accept that offer. It might mean more work for them, or more expense (and less profit).
That said, if you discover major issues during the inspection process, don’t let your emotions drive you into a money pit. Acknowledge the problems and ask that the seller work with you to address them.
Be flexible. You don’t necessarily have to offer more money to put in a better offer. But you might need to be flexible in others areas.
You could offer to close sooner so the seller can get out of the house faster if that’s possible for your situation and appealing to the seller. (A seller who doesn’t have to go anywhere may not be swayed by this offer.)
Or maybe the seller wants to stick around for a few months after the sale. Offer to rent the home back to them until they’re ready to move.
Another way to put this? Understand the seller’s needs (outside of financial gain), and incorporate those into your offer. You may not be able to be flexible on how much money you offer, but you can find creative ways to provide value in other regards.
Be personable and personal. Consider writing a letter that introduces yourself and your family and shares more about how much you love the home. This might not be appropriate in all situations, but it could make a difference for a seller who feels emotionally attached to the property.
You can share why you love the house and how you plan to take care of it, along with what it would mean to your family to have the honor of calling it your home for the years ahead.
Include an escalation clause in your offer. If there’s a multiple-offer situation, it’s possible that you’ll get outbid. But if you really love the house, you might be willing to pay a premium.
If that’s the case (and you have the financial means to do so), you can consider placing an escalation clause into your original offer. This clause usually states that you’ll be willing to pay a certain amount of money above and beyond the highest bidder.
The main drawback to an escalation clause is that you don’t know how much other bidders are willing to offer. You might end up paying more than you can afford or be forced to back out of the deal. Think hard before including such a clause, but know it is an option.
Finding your dream home is an exciting experience, but the most important thing is that you actually end up living in it. Using these tips, you’ll be one step closer to calling your dream home yours.
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