The five steps you should take before stepping into an open house.

Buying a house involves so much more than just touring homes and picking out your favorite property. Here are the five steps you should take before ever stepping into an open house.

Step 1 : Determine Your MAP

Determine your MAP (maximum affordable payment) to understand what you can comfortably afford. How? Review your assets and debt with a great mortgage lender like Ark, who will provide you with different loan scenarios to mesh with your other financial goals. Knowing your MAP allows your mortgage services advisor to help you effectively budget and will help ensure you only consider homes that fit within your means. Use Ark’s mortgage calculator to help you determine your MAP.

Step 2: Get Your Down Payment

The next step is to decide where and how to obtain your down payment. You can put as little as 3% down for a conforming loan or 3.5% for an FHA loan. In some situations, the source of your down payment funds can be a gift from immediate family members. Discuss this with your Personal Mortgage Advisor and start the process of gathering your down payment.

Step 3: Make a List of Priorities

Your MAP will help you decide on other aspects of the home purchase: what size of home you can afford in what neighborhood and with which amenities. Now is a great time to decide your priorities. A home choice consists of location, condition, and price. Naturally, everyone wants a home in the best neighborhood, in the best condition at the lowest price. Unfortunately, buyers typically get two out of the three. A home in great condition in the best neighborhood will likely not be available at a low price. Alternately, if you are willing to compromise on neighborhood or condition (a fixer-upper, foreclosure, or short sale, perhaps? A regentrifying neighborhood?), you can negotiate a better price.

Start home shopping online. You’ll quickly get a sense of prices for different styles and sizes of houses in various areas. Photos and virtual tours will educate you on the value you can expect at different price ranges. Then start touring several neighborhoods until you find one that meets your requirements.

Step 4: Assemble Your Purchase Team

Next, begin to assemble your Home Purchase Team. Aside from your lender, you’ll need a great Buyer’s Agent, an attorney, and a residential home inspector. Start with the Realtor (a real estate agent who belongs to the National Association of Realtors), and they may be able to refer you to the others.

Why use a Buyer’s Agent instead of the Selling/Listing Agent you might meet at an open house? A Selling or Listing Agent represents the seller, not you. Their job is to maximize the seller’s profit. The services of a Buyer’s Agent, on the other hand, are typically free of charge to the buyer (paid by the Selling Agent who shares their sales commission) and is required to act as your fiduciary, putting your interests above their own. They will help you determine an appropriate price to offer for a home; based on recent sales of comparable homes in the area. They will guide you through the entire purchase process, from the first home tour until handing you keys at the closing table.

The home inspector is the person who will examine the home you intend to buy before you enter into a contract (in some areas, you enter into the contract first and have a pre-determined amount of time to get an inspection before things progress further). To find names of licensed inspectors who have conducted 250+ inspections and who are required to adhere to a strict standard of ethics, contact ASHI, the American Society of Home Inspectors.

Most buyers invest in a structural inspection, but others add on a pest inspection, an inspection for radon (an odorless but dangerous gas) and other precautions depending on the house in question (pool inspection, mold inspection, well/water inspection, etc.). If issues arise concerning the home after an inspection, your agent will insist the Seller remedy these issues. They may also help you renegotiate your offer to offset the expenses of curing these problems yourself.

When selecting an attorney, it makes sense to utilize one with an established real estate law practice and significant experience with local real estate transactions. Lawyers’ fees vary, so shop around but remember, you often get what you pay for. A home might be the most significant purchase of a lifetime; don’t skimp on protecting yourself and your investment.

Step 5: Contact an Ark Mortgage Advisor

Only after you have determined your MAP, analyzed your budget, figured out the source of your down payment, established your priorities, and assembled your team should you start venturing out and exploring the local home inventory. Armed with the best possible professionals, you’ll be in the strongest position to move forward and find your dream home.

One of the main concerns homeowners have when upsizing (moving into a larger or more expensive home) or downsizing (moving into a smaller or less expensive home) is timing.

How can you be sure you’ll sell the first home in time to have the money in hand to purchase the next one? Alternatively, what happens if you move forward and buy the second home before selling the first? In terms of mortgage lending, how can you be certain you’ll qualify and won’t overextend yourself financially? And if you do sell one and buy the other but the closing dates don’t coincide, where will you live in the meantime?

Luckily, there are several ways to solve these issues.

Option #1

Many buyers’ mortgage services won’t approve them to own two homes at once. Be sure to use Ark’s mortgage calculators to estimate how much of a loan you can qualify for, based on your monthly income and debt. If you must use the proceeds of your current home to pay for your next one, make sure that when your Realtor lists your home on the Multiple Listing Service, they include an explanation that the sale is contingent on your finding your next property. This tells potential buyers that you are currently house hunting and may not be able to close right away.

Some buyers might not be in a rush to close and will love the house enough to be willing to work within your time frame. They may be willing to go into contract with a closing date to be determined. This might work especially well if you decide to sell your home in the winter because many relocating families may not want to pull their children out of school mid-term. The benefit for you in securing a buyer early is that when making an offer on your next home, the seller will be more likely to entertain your offer. They won’t be worried that you might not be able to close on your home and afford to buy theirs.

One consideration, however: some potential buyers might have a mortgage rate they want to lock in and may have to close by a certain date. You may have to be a little more flexible in your sales price to compensate them if their rate increases while they are waiting for you to find your next home. If they are working with Ark Mortgage for their mortgage services and have secured an Ark Certified Pre-Approval with Rate Protection, this might be less of an issue because their rate may be locked in for 90 days. Have them contact Ark for more information.

Option #2

Have your attorney insert a “sale contingency” in the contract for your next home. This means you only agree to buy the home if you can sell the one you currently own. Be forewarned: sellers won’t always accept this contingency because they run the run the risk of your current property not selling. Meanwhile, they could have lost other potential buyers because their home was “off the market” waiting for yours to close.

Option #3

Finally, your attorney can also arrange for a “use in occupancy” agreement as part of the contract for the sale of your current home. This would alert potential purchasers that you reserve the right to remain in the home and pay them per diem rent to cover their cost of ownership (which might be higher than what you used to pay for mortgage/tax/fees) until you find your next perfect property. Normally, you would be required to escrow a security payment as well, just as in a rental agreement.