First-time home buyers, now is the perfect time to buy a home in Brooklyn. Interest rates are low, historically low. It makes sense to start the home-buying process now before those attractive interest rates start creeping up and before the real estate market picks up speed in the spring.
Are you lacking confidence about the home-buying process? Does taking on one of the largest, long-term purchases of your lifetime make you anxious? With a little planning, research and a solid game plan, you can be confident you’ll find the best home for the best price when you buy a home in Brooklyn.
Get answers to the following questions from your Brooklyn real estate agent, Charles D’Alessandro, for a smart home-buying process.
1. Do you know you want in a home versus what you need in a home?
Before you buy a home in Brooklyn, you must be clear on features you need in a home and which features you can live without.
Will your aging parent be living with you? Do you have a physically challenged child? If so, handicap accessibility is a must you will not compromise on.
Ever say, “Oooooo,” when thinking about granite countertops and stainless steel appliances in the kitchen? These extras are probably wants that you should be willing to compromise on.
Help yourself make logical choices over emotional ones before you begin shopping for a home. Write down your top five needs and top five wants on a wish list before you buy a home in Brooklyn.
Knowing the costs of what you want versus what you really need, will help you negotiate a better deal and help the home-buying process run smoothly.
On a side note here, if you are thinking about buying furniture, don’t. At least don’t buy it yet. Buy your furniture after you buy a home in Brooklyn. Your furniture should fit the house. The house should not have to fit your furniture.
2. Which neighborhoods do you want to live in?
Thanks to the internet, information abounds at your fingertips, and that’s a good thing when it comes time to buy a home in Brooklyn. Get online. Learn about different neighborhoods in Brooklyn.
Are commute times, schools, crime or recreational facilities a priority for you? What about noise levels? Select three to five neighborhoods you want to live in and focus on them only. Your Brooklyn real estate agent can help you identify and target Brooklyn neighborhoods based on your priorities.
Use your priority list to evaluate each property, and remember, there’s no such thing as the perfect home.
3. Have you created a budget to buy a home in Brooklyn?
You don’t want to waste time looking at houses you really cannot afford when it’s time to buy a home in Brooklyn. Creating a budget before you begin shopping for a home is part of a solid game plan.
To get an idea about what you might be able to afford, start here: If you earn $100,000, with a 30-year fixed-rate mortgage, for example, you might be able to afford a one-family Brooklyn home between $500,000 and $550,000. This figure may increase when looking at a two-family home with an income-producing unit.
Now, figure monthly expenses and debt into a monthly budget – property taxes, insurance, maintenance, utilities, student debt, car loans, HOA fees if applicable and even day care if needed. Now you will have a better idea how much of a monthly house payment you can handle each month.
Read about home affordability here: Average U.S. Family Can Afford 63% of Homes
4. How is your credit?
Lenders look at your credit report and credit score to decide whether or not to lend you money to buy a home in Brooklyn. They use your credit report and credit score to determine how much and at what interest rate to lend you money for a home.
Lenders also use the 43% rule when considering your overall debt to determine whether or not you will have trouble making monthly mortgage payments. Your monthly mortgage payments, which include your home loan, principal, interest, taxes and insurance, plus your car loans, utilities and credit cards, etc., should not exceed 43% of your gross annual income.
If your credit is bad or your credit score is low, clean it up before purchasing a home in Brooklyn. Your credit score can be improved easily by paying every bill on time and paying down high credit card debt.
By the way, think twice before getting caught up with long-term 0% financing furniture offers. This kind of financing will affect your credit rating in a poor way which will affect your ability to get a mortgage.
Order free copies of your annual credit reports from the major credit bureaus: Equifax, Experian and TransUnion. Read over them and make sure the information reported on each credit report is accurate. If you find errors, get them corrected.
5. How much should you save when you plan ahead to buy a home in Brooklyn?
Have you saved enough money to qualify for a mortgage and down payment to buy a home in Brooklyn? Saving and setting aside 20% of a home’s purchase price for down payment is ideal.
A small down payment means money in the bank for unexpected emergencies, which is comforting. Some lenders may take as little as 5% down, but the cons seem to outweigh this pro.
- The smaller the down payment, the higher the mortgage you’ll need to qualify for.
- If you do qualify with a down payment of less than 20% and a higher mortgage, your monthly payments will be higher.
- A larger down payment can influence your interest rate and the type of loan you can get.
- With a down payment of less than 20% of the purchase price, you’ll be required to purchase private mortgage insurance (PMI). PMI can add hundreds to your monthly payment depending on the size of your loan. If you’re a first-time home buyer, check with the state of New York and our local government for mortgage and down payment assistance programs.
6. Are there other costs involved?
Meet with your lender while interest rates are low. But before you begin shopping for a home, you’ll want to know what it will really cost you. Ask your lender:
- How much house can I afford?
- What will my rates be?
- What will my monthly payment be for different home price amounts?
Then ask your Brooklyn real estate agent:
- How much will home inspections cost?
- Will there be any attorneys’ fees?
- What about transfer fees?
- And taxes?
Be aware of the costs of extras you’ll want to buy once you move-in such as window coverings, patio furniture, a lawn mower, garden hoses, etc.
7. Should you get pre-qualified or pre-approved before you buy a home in Brooklyn?
Sellers want to know that buyers are approved when they buy a home in Brooklyn. Plan ahead here. Get a mortgage and get pre-approved before you buy a home in Brooklyn. By the way, getting pre-approved is more important than getting pre-qualified. Know the difference.
A mortgage pre-qualification is simply a determination that may be obtained through calling the lender. It states whether or not you will qualify for a loan within the lender’s current programs and standards. It states the amount of the loan for which you will qualify.
A mortgage pre-approval carries a little more weight. To obtain pre-approval, fill out an application with the lender, verify employment and income with W-2 forms, pay stubs and 2 to 4 months of bank statements. If you are self-employed, verify employment and income with your current profit and loss statement, a current balance sheet and personal and business income tax returns for the last 2 years. The lender will run your credit report after gathering this information about your employment and run your application through an automated underwriting process.
Being financially prepared could make the difference between being able to buy a home in Brooklyn or not, but buying or selling in Brooklyn does not have to be stressful. Visit Michael Reinhardt Brooklyn Attorney at http://brooklynattorney.com/free-e-books/ for a free booklet regarding the process of home ownership.
If you’re first-time home buyers who want to buy a home in Brooklyn without anxiety, call Charles D’Alessandro Your Brooklyn real estate agent with Fillmore Real Estate. Call (718) 253-9600 ext 206 or email [email protected] today. With over 27 years of experience and expertise in Brooklyn, you can be confident about the home-buying process with Charles.