Here are a few important tips for all you Boston real estate buyers out there. Although we are seeing a big uptick in first-time home buyers due to the tax credit, this tips will be helpful whether you are buying your first home or tenth home.
1. Get a Buyer's Agent - The real estate industry has significantly changed in the past 10 years. My number one recommendation is to get a buyer's agent to guide and advise you through the process. Good agents close more real estate transactions in a month than most people will in their lifetime. Good buyer's agents have seen it all and are prepared with creative fixes for every bump in the road.
2. Get Pre-Approved Early - Before you even start looking for a home you should speak with a professional mortgage broker to get pre-approved for a loan. This pre-approval won't cost you anything, and you can shop-around for the best loan price later in the process. Knowing the price you can afford will save you time and keep you on target. It will also help prevent you from falling in love with a home you can't afford.
3. Beef-up Your Down Payment - today, most buyers will need more than 15 percent down to purchase a home. Starting last April, buyers with less than 25 percent (and refinance customers with less than 25 percent equity) need to pay an additional .75 points; which may or may not be rolled into your rate. Usually, the more you put down, the lower your rate. Also, the more you put down, the less you will pay over time. A mortgage of $500k at a 30-year-fixed-rate of 5% will cost you $466,273.38 in interest. Many buyers believed that the opportunity cost of not having their down payment money to play the stock market or use to maintain their lifestyle was just too high. Then came the recession and foreclosures on "zero equity" properties skyrocketed. When dealing with the roof over your head, be conservative and put the money down.
4. Read Everything - all that paperwork is not for show. The HUD statement (closing paperwork) has the breakdown of all your costs. Read it! There are often mistakes and typos on the HUD statement. Details, details, details! The condo associations documents, though daunting, are critically important. Will there be any assessments soon? Is there a scheduled increase in condo fee? Can you sell prior to the developer selling 90 percent of the units? What about 50 percent? Perhaps there are rental restrictions or easements on your property. All these items are explained in detail in the condo documents....so make a cup of joe and read them!
5. Familiarize Yourself with the Location - before you right the check, make sure you know the neighborhood well. Practice the commute you will need to do daily and visit the local restaurants. Purchasing a home is a commitment, and unlike leasing, it can take a long time and a lot of money to move if you dislike your neighbhood.
6. See the Inventory - take the time and see as much inventory as you can. Be open to properties your Real Estate Agent suggests, even though you may not like the photos or you are not familiar with the neighborhood. Photos can be quite deceptive, and you may love the new area. The best way to really understand what a property is worth is by seeing similar homes. It will also give you the confidence to move forward when you find the perfect place.
7. Shop for a Mortgage - I am not just talking about rate here. Of course rate and terms are important, but the most important aspect to consider when taking a loan confidence that the bank will come to the closing with all the funds. Are you using a broker who shops rates at many banks? If so, which bank will your loan be coming from? Is it even in the same state? It is often better to work with a local mortgage banker rather than a broker. A mortgage banker has the ability to push the process along if paperwork gets stuck, and will not just be sitting at his or her desk waiting for a call from California for a week if your name was spelled incorrectly on a form (this actually happens). Oh, and ask for a cell phone number.
8. Ask Questions - don't be afraid to speak up! There are no stupid questions in real estate. You are putting a lot of money on the line. Make sure you understand everything that is explained to you, and ask anything that comes to mind.