In my Rich Kids Guide to Buying a Home, I take you through the step by step process of a home purchase and everything that entails. For those of you who are new to my blog or my website, I wanted to provide you with a quick guide as to what you need to do before you are even seriously ready to purchase a home. Each week, I meet a lot of great people out there who may or may not be ready to officially start looking. Hereâ€™s a checklist of things to do to before you are ready to buy:
- Get Pre Approved - I say this over and over again, but seriously, speak with a lender before you even start working with a real estate agent. A lender is going to tell you if you qualify for a loan or if youÂ will need a co-signer, how much you are qualified for, what those monthly payments will be, and how much all those little extras (closing costs, taxes, insurance) will cost you. You may be able to afford the monthly payments for a $500,000 condo, but did you also factor in home owner fees (typically $350-$500 for non full service), Â taxes (about 1.25% paid twice a year or can be rolled into your mortgage), and closing costs (can be from $6000 on up based on a $500K condo due at close of escrow)? Especially in todayâ€™s market, pre approval is key before you do anything else. Like GI Joe used to say, â€œknowing is half the battleâ€.
- Put down the AmEx, Push the Porsche Purchase Back, and Stop Going to Maxfield - When you are applying for a loan and are actually in the escrow process, wait until you close before you start spending. High card limits and car/ furniture financing can all bring down your credit score. I would put the breaks on all these expenditures at least 2 months before seriously considering buyer. Let your friend put their credit card down for a table at Teddyâ€™s. - you have more important things to invest your money in.
- Spend Below Your Max - I know youâ€™ve been preÂ approved for 700,000, but if you really stretched, never went out, and ate romen nightly you could squeeze yourself into a unit for $750,000. Donâ€™t go there - itâ€™s not worth it!
- Suze Orman Alert - Do You Have Your Eight Month Emergency Fund in Place (or parents willing to always bail you out if you get into a financial pickle)? - My readers know I am obsessed with Suze Orman - what can I say, I love a tough lesbian who is good with numbers! Make sure you have at least eight months worth of salary in savings that will cover all your home owning costs, insurance, food, car, etc. I know this is pretty obvious, but youâ€™d really be surprised at howÂ little people prepare before buying a home.
- Finding the Right Real Estate Agent - Find an agent who specializes in the areas that you areÂ looking to purchase. Sure, you want to help your cousin Lexi who just moved to LA from Laguna Beach and got her license last week, but is she really all that familiar with the market up here? I am all for giving new agents a break - I wasÂ once one a few years back. Really knowing the inventory and having relationships with local agents is what is going to get youÂ your dream home at the best price. Shameless plug alert: I preview and typically review on my blog all worthwhile inventoryÂ in the $1,000,000 and under mark, as the bulk of my rich kids readers are first time buyers. I run into many buyers that have friends as agent who simply send them MLS listings with no explanation,Â for them to explore on their own. Ironically, I even have people who have agents who call me after reading my blog for buying/property advice.Â Really look at who is working hardest for you and has the most to offer you with regards toÂ the buying experience.
- You are Working on the Project I Met You at , Is it a Conflict of Interest for You to Represent Me? - I have beenÂ getting this one a lot, as I work on a few different new construction projects about town. The answer is no, it is not a conflict of interest. Having intimate knowledge of a building, the history behind it, and the key players (developers/lenders) gives you the advantage when coming up with an offer strategy. My role is toÂ facilitate a synergy between all parties involved and to push the developers into getting you the best price. Even if I was listing a single family home and you wanted to buy from me on that, I have a legal fiduciary duty to make sure I offer you the best council and advice regardless of the situation.
- Youâ€™ll Know it When You See It (and if itâ€™s meant to be it will happen): There is always that special look in my clients eye when theyâ€™ve found the right home. When you find that special place, make an offer! I hate to sound pushy, but I see too many people losing out on their dream homes because they didnâ€™t step up on a good deal. Conversely, if the offer or buying processÂ doesn not seem to be workingÂ in your favor, it probably wasnâ€™t meant to be. I really believe in that philosophy, especially if you have tried everything and then some to make the purchase happen.