How to Start Searching For Your Dream Home Online
After lots of thinking, lots of running numbers and lots of conversations with those you trust, you’re ready to start your home search. Your next step: Opening up a browser window on your computer or phone to find the property that makes your heart flutter. Right? Wrong.
Searching for a home is one instance in life where you can have too much of a good thing. Without knowing what you’re looking for, you can quickly find a lot of homes that strike your fancy, but might not be the best fit (and might not even be on the market anymore). If you’re serious about buying, the time you spend paying attention to homes that weren’t going to work for you is time when another buyer can end up with your dream home.
So before you even think about looking at homes online, follow these steps to make sure you’re starting in the right place.
Need to sell before you buy? Here’s what to do first.
Though you’ll be tempted to focus on the search for a new home, your first priority is beginning the process of selling. Follow our tips for getting your home ready to sell, what the right Realtor should do for your home and finding out the value of your home.
You can build in some extra time and “insurance” in your search by making offers with a sale contingency or asking for an extended closing or making an offer with a settlement contingency.
Figure Out Your Budget First
While you might focus on the aesthetic appeal of your dream home, not knowing what you can afford can set you up for disappointment. The biggest mistake? Relying on the “affordability calculators” on the major real estate sites that simply divide a property’s value based on the average mortgage.
Here’s why this isn’t the best way to determine your budget: Your mortgage might be far different than the average mortgage (especially when it comes to interest rates and length) and there might be more expenses necessary relating to the home (private mortgage insurance, homeowners insurance, repair costs and potential HOA fees, just to name a few).
To develop a better picture of affordability, do this:
Calculate debt-to-income to budget a monthly mortgage payment.
Instead of calculating based on a home’s price, go backward by calculating what you can afford based on your current budget. Calculate all sources of income and divide by 12, then calculate your average monthly expenses (minus rent). Subtract expenses from income and divide the leftover amount in half. This amount can be considered your maximum monthly budget for your mortgage payment.
Base your purchase price on your down payment.
Ideally, you’ll be able to get a conventional mortgage — we say “ideally,” because this route allows you to skip private mortgage insurance (an extra monthly cost for mortgages with less than 20% down). If you have $60,000 available as a down payment, then you can afford a $300,000 home.
The price range you can consider is another factor based on your market. In a buyers market, a seller might consider an offer below asking price. In a sellers market, you may need to go above asking price for your offer to even be considered. From your purchase price, add 5-10% to develop a threshold that considers these variables.
Tip: When it’s time to input your price range into a real estate search engine, end it at an “odd” amount. For example, setting a threshold of $309,000 instead of $300,000. You might luck out and find a home with a price cut listed at $303,000 or $307,000, then make up the extra costs with other asks (like repairs or a credit for closing costs).
Get Prequalified — Or Pre-approved
If you’re looking to buy fast, getting prequalified now makes all the difference. Sellers consider offers from prequalified buyers more favorably as this signals less risk. Need a lender recommendation? We can help. Once you’ve narrowed down the choices, apply to be prequalified for a loan. This won’t take long: You’ll enter info about income, your credit score, monthly debt and desired home range.
If you’re very serious about your search, your chances of offer acceptance are higher with a pre-approval. This requires a little more time upfront. You’ll give a lender documentation relating to income (pay stubs, tax records and all info about any other assets) and debts, which will then be verified. If you clear these hurdles, your lender will give you a pre-approval letter that states you’re ready to go when it comes to getting a mortgage.
At this stage, you'll want to find a Realtor you can trust. They’ll be able to arrange showings fast and help send listings that fit your criteria — maybe even before they’re listed.