This time has finally arrived where I have decided to start looking into purchasing a home for myself. Quite a few of my close friends have already jumped head first into real estate, and even one of my buddies has a few investment rental properties.
The following is his reply to my simple question. It’s so details and give such good, real world real estate advice, I had to SHARE!
I officially have 11 months left on my apartment lease. I need to buy a house. Start now, yes?
Eh... I'd say it is too early to really look at properties. But it is the perfect time to start getting your credit score in order & saving for a down payment. Also start considering what you want, what you need, and what neighborhoods support the lifestyle you're looking to live. I'd say start looking for a property 2 - 3 months prior to your move out date. And get a pre-approval letter before looking at anything. Lets say this... You get pre-approved for $300k. Target a specific neighborhood, and put in an offer on what you like. You go under contract, and you'll spend a few weeks getting shit done for due diligence. Then you'll probably spend another few weeks with other crap trying to close.
2 - 3 months gives you enough contingency to move out without being under the gun & trying to get some month-to-month offer from your landlord. Also... You have runway to back out of the deal if something nasty pop's up & find something else. 20%+ down payment will help get you a better interest rate, and it will also help avoid PMI. If the property is FHA approved, then you can get it for as little as 3.5% down. My experience with Quicken Loans is they're easy but expensive. Others are more work, but they're a bit hungrier for your business...and that sometimes means the capital costs less or they're a bit more open to a wider pool of potential customers.
I’d say the biggest one is do this on your timeline. If you let external factors drive your decision timeline, then you’re probably not going to get the best possible deal.