As 2017 came to a close, many area residents are starting to think about their plans and goals for 2018. For many, becoming a homeowner is at the top of their list. Whether you are a first-time homebuyer or a five-time owner, here are five things you should do when entering the real estate market this coming year:
1. Find out your credit score: This is an important first step if you want to qualify for and secure a mortgage in 2018. Knowing what kind of shape your credit score is in will help you know whether you will qualify for a loan and what interest rate you can expect to pay. A higher score will net you a lower interest rate. Checking your credit score is easy nowadays with the plethora of websites offering free credit score checks. If you find that your score is not optimal (below 620), you can start correcting it by fixing any errors on the report, paying your bills on time, closing credit cards you do not use and getting your credit limits raised.
2. Understand what you can afford: While looking at homes online is exciting, prospective homebuyers time is best spent searching after they know what they can afford. Online mortgage calculators are a great tool, but it is important to have a wholistic and realistic understanding of your monthly expenses. Buyers should sit down and look at all their monthly expenses from fixed costs, such as car payments and student loan bills, to fluctuating expenses such as groceries and discretionary spending. An industry rule of thumb is that housing costs, including property taxes, utilities and insurance, should only take up 30-33 percent of your total gross monthly income.
3. Find a mortgage lender and get preapproved: A critical step in purchasing a home is finding a mortgage lender. They can help you understand what you can afford, what you will be approved for and offer guidance throughout your search. Every lender and bank has different products and programs tailored to individual homebuyer needs. For example, at Countryside Bank, we offer a First-Time Home Buyers Savings Plan specifically designed to help people buying a home for the first time save for a down payment. The plan offers an unheard of Annual Percentage Yield of 5 percent It is a custom-tailored program without hidden fees so that people buying a home for the first time can easily save for a down payment, which is usually one of the bigger obstacles. In addition, a mortgage lender can also help you get preapproved which shows any seller that you are a serious buyer and capable of purchasing a home.
4. Reserve funds: Buying a home is likely the largest purchase you will ever make and while you may be inclined to invest all your savings, it is important to have a healthy reserve of cash after you close. Experts recommend having a three to six-month cushion in your savings account. Being a homeowner is expensive -- there are always repairs, maintenance and expenses and it is important to have an emergency fund in case you lose your job or encounter unforeseen expenses, such as medical bills.
5. Find a good real estate agent: Once you know how much you can afford, the fun part of finding the perfect house begins. Selecting the right real estate agent can help provide you with important information on homes you are interested in, including community insights such as schools and other information usually not readily available to the public. The right real estate partner can be as important as being financially prepared.
While buying a house can seem overwhelming to some and even out of reach, the right planning, research and partners can help you make it happen in 2018.
• John Wheeler is president of Chicago-based Countryside Bank. Originally known as State Bank of Countryside, Countryside Bank was founded in 1975 by Jack Wheeler, who believed in building personal relationships and being an active part of the community. Continuing to embrace his legacy is his son, John Wheeler, president/CEO of the bank. He continues the 40 plus year tradition of building relationships and offering products & services to help you build a better life.