What an exciting time – engagement parties, couples’ showers, calling your friends to tell them the good news – you’re getting married! Soon you’ll be thinking about building your home together, and the best part: you have options! Gathering information and doing prep work will make for a smooth process. As a busy Mr. & Mrs. To-Be, you’ll appreciate the legwork put in prior to starting to tour homes with your Realtor.
Here are 6 must-do’s and questions to think on prior to taking the plunge into homeownership together (before, or after I do!)
1. Time it right – for your sanity.
You may feel like you’re in the twilight zone, and that’s normal. Buyers, without planning a wedding, begin the home buying process a good 3-4 months prior to needing to be moved in a home. Not only are you buying a home, you’re also planning a wedding. We advise our newly engaged couples to start the process 4-5 months before their wedding so they are not overwhelming themselves. Just as venues and wedding coordinators alike, we as real estate professionals want to romanticize the process for you and your honey to find that perfect fit in a home. Breathe – take the time you need.
2. Figure out your purchase power
Knowledge is power! Your first step is to find out the answer to this question – and NO, Zillow’s calculators will not take into consideration your debt-to-income ratio or true credit score. Furthermore, any lender you choose to work with will always work numbers off the lowest middle credit score out of the two of you. I’ll explain here: there are three credit reporting agencies – Equifax, Transunion, Experian – and lenders will use the middle score of those three. If there are two people on the loan, the lender will use the lower of the two middle scores. Example: Borrower 1 has scores of 789, 760, 759; Borrower 2 has scores of 689, 702, 714; the Qualifying Score will be 702. Save yourself the math, and let your lender do the work!
Be advised, your lender letter of pre-qualification will be good for up to 90 days or unless your financial situation changes. Consult with the Real Estate Professionals at The Lewis Group on the difference between pre-qualification and pre-approval. It could mean the difference of winning a multiple offer situation versus losing a home.
3. Avoid being House Poor – It’ll [help] keep a happy marriage.
Just because a lender pre-qualifies you up to a $300,000 purchase price doesn’t mean you should buy a $300,000 home. You each have bills, and only so much income to cover those bills on top of a mortgage, property insurance, and extra property taxes. Avoid becoming house poor by reviewing your numbers together after being pre-qualified so you have a starting point for a comfortable monthly payment. You’ll also want to plan out costs for buying, and any improvements, furniture, or renovations you want to do on your new home!
4. Myth busted: You do not need 20% as a down payment.
Mortgage lenders exist that will qualify borrowers for as little as 1% down payment on a conventional loan. Some of you are reading this with eyes wide open, ‘really?!’ Yes, really. Connect with us to get the introduction. Exploring your options before dipping into mom and dad’s wallet is something they will thank you for; especially if they are helping fund the wedding too. As increasing real estate prices and mortgage lending rules become more stringent, family members are gifting funds toward the down payment to support the nest egg at surprising rates. Payment gifts from parents doubled in 2016 from 2015 from 7% to 15%. That’s incredibly generous of mom and dad! There’s even evidence of couples substituting traditional registries for humbly asking their wedding guests to contribute toward a Go Fund Me account to donate to a down payment on their first home. Not so fast Mr. & Mrs. Savvy, you’ll want to consult with a local mortgage lender before you dive into that idea – strict rules apply so make sure you consult your lender before collecting funds in any creative way!
5. When does your lease end? How much does it cost to break that lease?
Your real estate professional will need to know these numbers and dates – don’t be shy, she can use that information to coordinate your closing/possession dates, as well as use whatever equity the seller of that dream house has built up as leverage to request more dollars in closing costs contribution to help you!
[Market] Trends are changing – don’t lose out on a home
While you plan out your timeline for buying, know that there will be homes you’ll miss out on as interest rates right and all of a sudden in late 2018 or early 2019 and you could be priced out of the neighborhood you love. For every point interest rates increase, you lose about $10,000 of buying power. Ouch! Furthermore, it is the trend we as real estate professionals are seeing more often – newly engaged couples are putting the house before the wedding, chronologically anyway. And why not? Studies are showing that you couples are getting married older than your parents did, and many feel comfortable taking that leap to start building wealth together!
You may have some time on your hands before you propose, or even walk down the aisle. Keep your nest egg savings up, and do some research by simply giving me a call at 404-786-7153, or start the dream search for your own Home Ever After.