Purchasing your first property can often seem like a daunting task. Having a better understanding of the process and making sure you have a qualified professional agent by your side will help you navigate your first foray into real estate ownership with confidence.
Here are five key tips to keep in mind:
1. Get preapproved
A preapproval is a written estimate from a lender stating how much you will likely be able to borrow based on an initial review of your credit and financial information.
It holds more weight than a pre-qualification. Typically for a preapproval, you will need to provide a lender with a variety of financial documents including pay stubs, tax returns and bank statements.
Getting pre-approved at the very beginning of the process is key. You'll be certain as to how much you can afford, if there are any concerns with your financial picture and/or credit you have time to address them, and if/when you find a home you love you'll be ready to go and not have to scramble.
Even though preapprovals expire typically within 90 to 120 days, your lender will be able to update it for you with a quick phone call and perhaps a few updated documents.
2. Visit at least 20 to 30 properties in person before making a decision
There are many factors that go into determining your perfect home: Price, neighborhood, immediate street, size, views, condition, monthly carrying costs, etc.
Searching online is incredibly valuable but nothing replaces in- person visits. Taking the time to visit numerous properties through private appointments and open houses will allow you to confidently narrow in on your preferred criteria and make an offer with confidence once you do find a home that you love.
Too often, buyers will miss out on the perfect home because they feel they haven't yet seen enough properties to confidently move forward with an offer.
3. Select a buyer's agent early on
Your real estate agent is there to guide you, answer your questions, qualm your concerns, manage the process, and to market you as the best candidate to a seller and his/her agent.
The better your agent knows you both in terms of personality and financial profile, and the better he or she understands your preferences, the better they can serve you.
Look for agents with expertise in the area(s) you're searching in, ask friends, family and colleagues for recommendations, and make sure to sit down for a one-on-one consultation with agent(s) to interview them.
4. Determine your budget and stick to it
In determining your budget, focus on two key metrics and understand how they work together to impact your budget — your liquid assets and the total monthly housing payment you can afford to carry.
Your liquid assets (stocks, bonds, mutual funds, money markets and cash) will help determine your down payment and liquidity post-closing.
Make sure to factor in any closing costs, moving costs, and/or renovation costs associated with a specific property.
Your monthly housing payment (mortgage, common charges / HOA / maintenance, real estate taxes, insurance) should not exceed 30% to 35% of your pretax income, and ideally will not exceed 25% of your pre-tax income.
Be prepared for the possibility of a bidding war.
5. Carefully review "the comps" when determining value
When making offers with your agent, consider comparable units that have sold recently, those in contract, and other active listings. Don't simply focus on those that have sold.
Your agent is there to assist you in gathering this information and the market value will be impacted not only by what has sold but also by what is currently in contract and active inventory at that moment.
Ari Harkov is a real estate broker with Halstead Property and heads up the Harkov Lewis Team, one of the top teams in the nation as ranked by the Wall Street Journal. The team, which focuses on residential sales in Manhattan and Brooklyn, works with both individual buyers and sellers and developers. Ari holds an MBA with honors from Columbia University and currently resides in Park Slope, Brooklyn, with his wife, 2-year-old son, and dog.
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