Buying a Home: How to Search for Houses
The internet and smartphone technology have made virtual house hunting easier than ever. It’s simple to browse through hundreds of online listings, and search tools can help buyers narrow the hunt to homes that meet their needs. You can also set up email alerts to be informed of new listings.
The process of finding and purchasing a new home is far more complicated than simply browsing online, however. Buying a house is a major financial decision, and there are many crucial items to consider when preparing for and carrying out the search. Here are key steps to consider in the process of finding a home.
6 things to do before you start looking for houses
Figure out how much you can afford
First things first. Before you start shopping, you need to calculate how much you can afford to spend on a home. You’ll need to have a clear view of your finances. Start by checking your credit score. Calculate how much you have for a down payment. Then track your monthly income and spending in order to figure out how much money you can afford to spend each month on your home. This monthly budget isn’t just for paying off your mortgage. You will also need funds to cover property taxes, homeowner’s insurance, HOA payments, maintenance and any mortgage insurance.
LendingTree’s Home Affordability Calculator can be a big help in this process. Enter your income, down payment, monthly expenses, zip code and credit score and the calculator will figure out a range of home prices — from conservative to aggressive — that fit within your budget.
Sometimes you may crunch the numbers and realize it’s just not the right time to buy. You can always wait until you are in a better financial place to consider homeownership.
Get prequalified (or preapproved)
Get a document from a mortgage lender saying they are willing to provide you a mortgage up to a specific amount. This additional step will help you home in on your budget while also letting real estate agents and sellers know you are serious about buying a home. Sometimes the terms prequalification and preapproval are used interchangeably. However, usually a prequalification is an estimate based on an approximation of your income, credit and debt, whereas a preapproval is the result of a more rigorous bank process that may involve a full credit check. Sellers may take a preapproval letter more seriously than a prequalification.
Find a real estate agent
A good real estate agent will guide you through the homebuying process from your initial search all the way to the closing. Choose carefully. Start by asking friends or relatives to recommend agents they’ve worked with before, or by contacting your local REALTORS® association for a list of licensed agents with experience in your area. Interview a few different candidates to find one who is a good fit for you.
Pick a neighborhood or neighborhoods
Figure out where you want to start looking, based on factors such as schools, commute time, public transportation, crime rates and amenities. Property taxes can vary widely depending on the neighborhood, and they can have a real impact on affordability. A real estate agent can be a good source of information on neighborhoods, and so can local government websites. If possible, visit different neighborhoods in person to get a feel for what you do and don’t like.
Make your wish list
Take the time to sit down and think about what’s important to you in a home. List everything from how many bedrooms you need to what sort of closet space or outdoor space you’d like. The USDA offers this useful checklist. Differentiate between the list of things that are very important and those that are just nice to have. Figuring out what the “deal-breakers” are will help narrow down the search and identify priority houses to visit.
Ilene Horowitz, president of the New Jersey Realtors Association, advises clients to be open about their wish list. There is always going to be some compromise in the process. “If you get 80% of what you are looking for in a home, you are doing well,” she said.
She recommends buyers think about what’s set in stone (like a home’s location) versus what could be changed with time. For example, if a house hunter wants two bathrooms and finds a great house with one and a half baths, they can upgrade the second bathroom down the road.
Get your documents together
The more organized you are now, the easier it will be to get through the process when you find the home you want. Gather together records and documents before you begin looking at properties. This will let you identify anything that’s missing and give you time to find it or obtain a new copy.
The Consumer Financial Protection Bureau recommends putting together a packet with the following:
- Pay stub for the past 30 days
- W-2 forms (past two years)
- Signed federal tax return (past two years)
- Documentation of other income
- Bank statements (two most recent)
- Documentation of the source of your down payment
- Documentation of name change, if recent
- Proof of identity
- Social security number
- Certificate of housing counseling or homebuyer education, if you have one
How to efficiently shop for houses online
According to a 2018 report from the National Association of Realtors, 93% of buyers now look for homes online. The most popular websites for real estate listings include Zillow, Realtor.com and Trulia. Big real estate brokerages such as Re/Max and Century 21 also have extensive listings online. Listings on these sites often include photos, property details, sales history and school and neighborhood information. They allow you to learn a lot quickly about each property.
So how do you narrow it all down? Search functions on these websites let buyers define their search by a number of categories, including location, bedrooms, price range and even amenities like a clubhouse or a pool. Using the detailed search function will help you wade through the sea of listings online, especially if you have defined specific must-haves.
Horowitz warns buyers not to be too restrictive in their searches, as there may be a great property that’s just short one thing on your wish list.
One suggestion: Try flagging homes you like and then making a chart based on where they stand on your top priorities, your preference and any deal-breakers.
Most of these sites let buyers set up email alerts for future listings that meet their specifications as well. Set one up and you’ll be informed immediately of any new listings. Real estate agents will also set up alerts like this for their clients.
Other ways to shop for houses
Real estate agent or brokerage
Agents often have a great sense of what’s available in their local market. They may be able to point you toward neighborhoods you hadn’t considered, or homes you’d overlooked. Local real estate brokerages often post listings in their front windows to browse. Check them out or head in and meet an agent to see more options.
For sale by owner
Sometimes sellers prefer not to use a real estate agent to avoid paying a commission. They may list their home on online bulletin boards such as Craigslist, use the website ForSaleByOwner.com or use a yard sign. According to the National Association of Realtors, 7% of 2018 home sales were for sale by owner. Be mindful that when an owner isn’t using a seller’s agent, they may not want to pay a buyer’s agent commission or deal with agents at all. In these cases, it’s up to you to decide if you feel comfortable buying with the advice of a real estate attorney, or if you want to use a real estate agent and pay your own commission.
This one can be a long shot. If you see a home you like, you can approach the owner in person or by mail to see if they are interested in selling. You might also consider asking an agent to do this on your behalf, Horowitz said, as they can use their experience and advocate for you in the process.
What to do when you find a promising home
Walk through the property
Go visit the house and walk through the whole thing, including the basement and any outdoor areas. Open the closets and the cabinets. Get a real sense for how much space is inside and how much storage there is. Try to visualize how your things would fit inside.
Take the time to look at the condition of the house
Look at the ceilings for any signs of water damage or leaks. Check if the roof appears to be in good condition. Same goes for the basement. Of course, a more professional inspection will probably follow, but this is your first chance to get an idea of what kind of shape the house is in.
Focus on the bare bones, not the decoration
Don’t get distracted by fancy furniture or new cabinets, Horowitz said. She tells buyers to focus on the “bones” of the house, its overall area, room layout and setting. Over time, a terrible driveway is a much harder thing to fix than an old kitchen sink.
Understand the nitty gritty
Make sure you get answers to questions about basic utilities, heating and cooling, taxes and possible fees. Is the house on a sewer or a septic system? Is it connected to public water or a well? Are their monthly HOA fees? Central air conditioning or in-window units? What about restrictions or community rules about renovation? These things might not be front-of-mind when visiting a house for the first time, but they will matter down the road.
Make notes and take photos
Agents will usually hand you an information sheet for each house. Take notes on them about things you did or didn’t like. You might think now that you’ll remember each house, but once you’ve seen a dozen, things may start to blend together. Taking photos is another great way to remember each home, and also may give a more accurate impression of the space than the stylized pictures online. Some agents even recommend you give each house a numerical rating at the end of the tour as a way to rank your preferences.
The bottom line
Buying a home is a big financial decision. Put in the time to prepare for the process, including getting prequalification or preapproval for a mortgage. Don’t be afraid to ask questions, especially of your real estate agent. Take it step by step and keep your overall priorities in mind.
6 in 10 Consumers Think Now Is a Good Time to Buy a Home
June 18, 2019
Homebuying season is underway — and demand is strong. Perhaps encouraged by lower mortgage interest rates, a large number of people who would like to buy a home in the …
Buying a house is one of the biggest financial transactions of your life. Unless you’ve got hundreds of thousands of extra dollars laying around, you’ll be financing the purchase with …
Young adults are getting married later than previous generations. In 1980, the median age for men and women at their first marriage was 24.7 and 22, respectively. In 2018, the …