The first and best thing someone can do once they know buying a home or condo is in their future, is to get pre-approved!
Getting pre-approved is a lot faster and easier than you may think. You'll meet with a lender and talk to them about your financial situation. They'll go over all the numbers and work backwards into a monthly payment that feels most comfortable, coming up with the purchase price from there! It is crucial to do this as soon as possible for several reasons.
1) If you get pre-approved early and something comes up with the credit report that needs to be remedied there will be time to fix it and adjust.
2) Getting pre-approved gives you a clear idea of what you can afford. It's best to do this before going to look at options so you know you're looking exactly in your budget. It's devasting when clients fall in love with a home and later find out they won't be able to make an offer because it doesn't fit the budget.
There are always costs associated with a home purchase. These fees go towards the attorneys, lender, title company, and the city in which you're buying in.
In Chicago, the general rule of thumb is that closing costs are typically 1.5-2% of the purchase price.
This percentage can also tend to be a little higher for properties with a lower purchase price since many of these fees are fixed and can skew the percentage higher when the purchase price is lower.
If you're not cash heavy, there are ways to package this extra percentage into your loan so the funds can be financed and it would need to be clearly communicated before making an offer.
Private Mortgage Insurance, also known as PMI, is insurance for the lending institution on loans where the buyer is putting down less than 20%. PMI is much more affordable today than in the past, which is why PMI can sometimes have a negative definition when speaking with older friends and family who have purchased years ago.
PMI is based on your credit score, so if you have great credit you'll have a lower PMI payment. It's also based on the amount you put down under 20%. If you put down 3% you'll have a higher PMI payment than a buyer who puts down 15%. PMI also gets removed from your monthly payment once you hit the 20% loan to value ratio. For a lot of buyers PMI is a reasonable alternative to pulling out more money in cash from their investments or saving up for a 20% down payment.
The best time to sell is around 60-100 days before your targeted move date. The average amount of time under contract is 30-45 days. With that being said, if you need to sell you're likely also timing it up with your next home purchase. We'd want to make sure we have enough time to list your current property, find the right buyers with a strong offer, and line it up with your next home purchase. It's never too early to start the conversation!
The most important thing we'd want to do to start is connect you with a lender to go over your financial situation and determine if we will be in one of two scenarios:
1) You need to sell your current home and close prior to buying your new home.
2) You financially don't need to close on your current home to buy your next home.
If you fit into option one, it just means that we'd need to work closely with the timing of listing and going under contract on your current home, and buying your next home. We'd need to make sure the close date on the home you own is BEFORE the close date on your next purchase. While searching for your next home we would also be writing up a contingent offer, letting the owners of your next home know that the offer is contingent on your current home closing.
If you fit into option two it'll provide you with a little more flexibility with the timing of your home sale and purchase. It's possible you'd want to close on your new home before closing on your current home to have some time to make updates and move into your new home with overlap. It's also possible your current home would close before your new purchase and we'd be able to negotiate a seller post close possession which means that you'd be able to live in your current home after the new buyers close, to provide you with time to find and move into your next home.
1) Declutter
2) Make repairs and updates
3) Paint with neutral colors
4) Reach out to your agent to take photos in the summer/ fall if you think you could be listing during the winter months