Buying Advice

Overwhelmed? You’re not alone - many people find the process of buying a home daunting. No two buying experiences are the same, but this list provides an idea of the different steps you may encounter when buying a property.

What's Right For You?

Before deciding which house to buy, think about your lifestyle, your current and anticipated housing needs, and your budget. It’s a good idea to create a prioritized list of features you want in your next home – you'll soon discover finding the right house involves striking a balance between your "must-haves" and your "nice-to-haves."

To start, consider your lifestyle. If you love to cook, you'll want a well-equipped kitchen. If you're into gardening, you'll want a yard. If you're planning your office at home, you may want a room for a separate library or work space. If you have several cars, you may require a larger garage. Use this list as your search guide.

Next, think about what you might need in the future. As you consider your housing needs, it's important to consider how long you may live in your home. If you're newly married, you might not be concerned with a school district right now, but you could be in a few years. If you have aging parents, you may want to look at homes that offer living arrangements for them as well as you.

It’s important to think about your new home’s location just as carefully as you do about a house’s features. Location is a huge part of any move. In addition to considering the distance to work, you need to evaluate the availability of shopping, police and fire protection, medical facilities, school and day-care, traffic and parking, trash and garbage collection, even recreational facilities.

Perhaps the most important decision is deciding on the type of home you want. Do you want a condominium or a co-op? A town house or a detached single-family home? Do you want brick, stone, stucco, wood, vinyl siding, or something else? Do you prefer a new home or an older one?

Through all of this, make sure to talk to your real estate professional about where you want to live. While more buyers now use the Internet to gain access to listings, or available properties for sale, it is still a good idea to use an agent. The agent brings value to the entire process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction. CENTURY 21 professionals have the expertise to help their clients narrow down their choices by sharing market trends and local information.

What Can You Afford?

Now that you know what you’re looking for, the next step is figuring out what you can afford. A review of your income, savings, monthly expenses, and debt will be necessary.

Early on in the process, you’ll want to get pre-qualified for a mortgage loan, which helps determine how much you can afford. It enables you to move swiftly when you find the right home, especially when there are other interested buyers. It also indicates to the seller that you are serious and can afford to buy the property. A pre-approval is a simple calculation done by a mortgage lender that tells you the amount you'll be able to finance through a loan and what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home.

Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. It pays to check with several lenders before you start searching for a home.

The price you can afford to pay for a home will depend on several factors, such as:

gross income
the funds you have available for the down payment, closing costs and cash reserves required by the lender
your debt
your credit history
the type of mortgage you select
current interest rates

Another figure lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI).

Each buyer is unique – and a mortgage professional can help you find out just what you can afford. Your income and your debts will typically play the biggest roles in determining your price range. It's simple to make an estimate, just run the numbers for yourself using our Affordability Calculator.

What If You Already Have a Home?

Buying a new home and selling an existing home at the same time has it’s own set of difficulties. But with planning, you can ensure everything goes smoothly.

Before putting your house on the market or committing to buying a new one, take a look at the prices of houses in the areas where you’ll be both selling and buying. You'll need a realistic idea of how much similar houses are going for. Since you're both a buyer and a seller, you'll need to protect yourself in your weaker role while letting your stronger role take care of itself.

What if you're unable to perfectly time the sale of one house with the purchase of another? You may own no houses for a time, in which case you’ll need money in the bank and a temporary place to live. Or, you may own two houses at once. That’s why it’s important to have a back-up plan. Here are some options to consider:

Research short-term rental and storage options (family, friends, storage facilities, containers).
A bridge financing is a loan for the down payment on a new home backed by the equity in your old house, typically at prime plus two percentage points.

Another option is a no-ratio mortgage. A no-ratio mortgage is usually made based on the buyer’s down payment, credit scores or assets. Income isn’t used or reported, and therefore will not exclude a borrower from receiving this mortgage. Rates are often higher but you can refinance later.

Alternatively, you may be able to draw on a home equity line of credit on your old home. However, you might pay a penalty fee if you sell the house within a year.

Buying a Second Home

Buying a second home isn't that much different than buying a first home. Affording it usually depends on your ability to qualify for a mortgage on the second home. Benefits include tax breaks, a getaway for the family on vacations or holidays, a future retirement home, renters making your mortgage payments for you, or just a smart investment.

Many people see buying a second home as an investment opportunity. You'll need to identify sources for your down payment, since you're not selling your current house and using the proceeds, and you'll need to expect a larger monthly obligation for housing expenses.

Keep in mind that if you declare it as a rental, your mortgage might be slightly higher. Work with your lender to create a customized loan program with the best combination of rate, points, and closing costs for your needs.

Shopping For a Home

An important first step is selecting a buyer’s agent to help you find your dream home. He or she can represent the buyer’s interest in a real estate transaction. Before making a decision, however, have a realtor explain the pros and cons of using a buyer’s agent versus a sales or dual agent. A CENTURY 21® agent can guide you through every step of buying your next home.

When you’re ready to visit houses, ask your CENTURY 21 professional champion to arrange showings, and be sure to keep track of the properties you’ve seen. Each time you view more properties, refer to your “what’s right for you” notes to immediately eliminate any that clearly do not meet your standards. And bring a digital camera to record what you see – you’ll be happy to have the record afterwards.

After touring each home, write down what you liked and didn’t like. Develop a rating system that will help narrow the field. For example, pick the house you like best on day one and compare all other houses to it. When you find a better one, use the new favorite as the standard.

Working with an Agent

Buying a home is one of the most important decisions you will make. That's why it's in your best interest to choose an experienced real estate agent who listens to and understands your needs, and works in the area where you want to live. When you choose a CENTURY 21 Agent, you're dealing with an experienced professional who understands your concerns and will provide you with the personalized service that makes all the difference. CENTURY 21 is in 42 countries, 7,800 offices, 104 languages, and represented by 143,000 agents who understand the life changes that real estate decisions can bring. What should you expect in your first meeting with a real estate agent? A CENTURY 21 agent typically will talk to you about the neighborhood where you want to live, home prices, schools, transportation, and the surrounding commercial and residential areas.