Purchasing real estate can be a complex process, and it’s essential for people who want to make a smart wealth-building decision to buy the right property that suits their long-term needs. To prepare yourself for this life-changing event, be sure you take the following steps before starting the process.
Make sure you plan to stay a long time
Real estate purchases and sales have some of the highest transaction fees of any type of assets, so target a hold date of at least seven years — if not 10 or more. Otherwise you’ll be losing equity on each transaction.
If you don’t think you’ll stay in the property for a long time, keep looking until you find a property that you can call home, or keep renting until you decide you’re ready for a commitment.
Get your financing in order
Meet with a lender and have them pull your credit report about six to 12 months before you start the purchasing process. This way if there are any derogatory marks on your credit, you can work toward clearing those issues.
Also, have the lender qualify you based on your income and credit so you know the price range you can afford. Check an affordability calculator first so you can go in with a general idea how much you can spend.
The lender can offer valuable advice, such as risky behaviors to avoid until you close escrow on your home. You’ll want to be sure you don’t make any large credit purchases, or transfer savings around between accounts. In addition, it’s essential to keep a consistent full-time work schedule, and make on-time payments for any loans, bills, or rent.
Find an agent
Ask friends and family, and do some online research to find a few real estate agents who know your area well and have good references. Interview at least three and discuss your plans with them.
The agent you choose should have at least five years experience in your local jurisdiction and be a full-time sales professional. It helps if they can show you that they’ve closed five to seven deals each year for several years. Verify that their license is in good standing with the state agency that regulates real estate sales professionals.
Take your time
You should study the local areas and take your time purchasing property. Buying real estate will most likely be the largest purchase of your life. Once you close escrow, there is no changing your mind. It’s all yours, and if you end up not liking the house and you sell within a few years, it could cost you significantly.
There are no “incredible deals” in real estate. There are only deals a buyer thinks is the deal of the century until they figure out (usually a few months after the purchase) why it isn’t the “incredible deal” they thought they bought.
Buying a home can be a great long-term wealth accumulation strategy, but it also can turn out to be a bad decision that will bring many regrets. It is a much more complicated process than most people know, and also significantly more involved than it was just 10 to 20 years ago.
Educate yourself as much as possible and plan the process well so you end up with a home you love and will keep for a long time. Doing the proper research and homework, plus making smart, deliberate decisions, is key to your real estate ownership success.