HOME BUYERS: ARE YOU MAKING THE RIGHT MOVE?
Buying a home could be the single most important decision you will ever make, both financially and emotionally. If you do your homework and prepare thoughtfully for the process, it can also be a fun and rewarding experience. Happy home hunting!
Whether you are a first-time home buyer or an experienced home owner, buying a new home is always stressful. Here is a quick checklist of five things you can do to make the buying process more productive.
1. Prepare a budget.
You need to have a clear picture of your family’s finances before you even think about calling a real estate agent or applying for a mortgage. List all your monthly fixed expenses, such as car payments, current rent or mortgage, utilities, school tuition, and loan payments, and other expenses like food and entertainment.
2. List your debts.
If you have existing credit card debts, student loans or other debts that require regular monthly payments, list them down, so you know exactly how much is you monthly repayment. Figure out your debt ratio. You need to know two ratios – your housing debt expenses (including taxes and insurance) and your installment debt ratio (credit cards and other consumer debts). There are many mortgage calculators online e.g. DBS Bank, UOB, OCBC, etc.., will help you calculate Total Debt Servicing Ratio (TDSR) which is capped at 60% of all borrowers’ gross monthly income.
3. Get pre-approved.
#1 and #2 above are important because you want to get pre-approved for a loan before you start shopping. This is an important element to safeguard you from falling in love with something you can’t afford or can’t get a mortgage for. Be sure you understand the mortgage pre-approved from the bank – don’t overlook the importance. Getting pre-qualified means that you give the bank your overall financial picture, including your debt, income and assets. The bank evaluates this information and gives you a ballpark figure of the mortgage amount for which you could qualify. Pre-qualification can be done over the phone or on the Internet, usually at no cost – POSB, Citibank, Maybank, etc.. Pre-approved, on the other hand, means that the bank evaluates your debt ratio, your credit report, and your overall ability to repay a loan and says, “Yes, I would loan this buyer X number of dollars to buy a home.”
4. Create a wish list.
Before you begin working with a real estate agent, you need to make a wish list of needs vs wants. Be sure you know the difference! Do you need? Would you like to have a swimming pool? You need to be very upfront with your real estate agent – what constitutes a deal breaker in your purchasing process. If more than one person is involved in the final decision, be sure that they are in agreement about needs and wants. If one spouse wants a short commute and the other has vision of a seafront condo, you could have a problem. Resolve these issues ahead of time.
5. Find a real estate agent.
Once you’ve done your homework, it’s time to start looking. You want to find a real estate agent (maximum three) who represents you and puts your interests first. You may need to visit several firms and interview several real estate agents. Chemistry is important. You need to look for someone who is committed to meeting your needs, knows the area and your budget.