What you need to know as you pick out your first home
The time has come to hang up your renter’s card and buy a home! You know it’s a lot of work, money, and sweat to pick the home, find your funding, and close on the place. It’s a lot to consider and wonder about. Here are a few things that you need to remember as you make the decision to start the home buying process. Especially since it’s your first time!
Interest Rates
Knowing the time to buy to get the best value for your dollar. For example, in early 2021, interest rates were as low as 2.75%. Today, in February 2023, they are at a whopping 6.3%. If you have the ability to wait for a lower interest rate, the market could be saturated with other buyers, risking your chances to get the home you want for the price you want.
However, if you need to buy immediately in a high interest rate market, you are stuck with that high APR until you can refinance. This is also all considering you are eligible for the lowest interest rate.
Other factors that determine your rate can be your amount down, credit score, the property location, loan amount, closing costs, loan type, debt-to-income, and the price of the property. So, make sure to do your real estate homework, save up, pay off unnecessary bills, and beef up your credit score before starting to apply with lenders. This will ensure you get the best rate!
The Home Buying Process
There are 3 steps to home buying- Passive, Active, and the Closing Process. Passive home-buying is a lot like doing your homework. You will iron out your home criteria, save your money for a down payment, improve your credit, and make sure your budget allows homeownership.
Once you have that ironed out, you graduate to active home buying. In this stage, you will pick a lender, get pre-approved for your mortgage, hire a High Fidelity real estate agent. From there, you can finally start having fun touring homes and fine tuning what you need versus what you want. Then, when you find the perfect home- you put in your offer!
Now you find yourself in the closing process. Your loan will be processed, the property will be appraised, inspected, attorneys will review your paperwork and closing day comes! With a lot of broker expertise, you will have a new home by the end of the day! In all, this process can take 6 to 3 months. So stay patient, calm, and know that at the end of the journey, you will have your own home!
Understanding Your Monthly and Unexpected Costs
Remember when we said make sure to get your budget in order? Homeownershitp is full of monthly costs and the ones you would never anticipate. Even at the time of closing, fees can be up to 2.5% in addition to the purchase price and includes professional fees, title insurance, and property transfer taxes. Another unexpected cost can be private mortgage insurance which is required for buyers who put less than 20% down. This cost can be .3% – 1.5% of the mortgage value, depending on credit score.
Expected monthly costs are a bit easier to navigate, but can still come as a surprise when you get the bill. Home insurance for example is a necessity, but since the cost is dependent on type of property, what kind of area the house is in, and if your location is prone to natural disasters, sticker shock is a distinct possibility. Another is the dreaded property tax. Cook County’s average property tax is 2.19% of the assessed value. That means a $500,000 home would have $10,950 due in property taxes each year. This adds on a $912.50 bill to your monthly budget.
Don’t forget your other anticipated costs. If you are purchasing a condo or living in a semi-private community, your HOA fees are always a factor to consider. Utilities are another expected bill, but can be costly depending on the size of your home or how many people will reside there. Finally, there is maintenance. While expected costs can include cleaning, curb appeal, gutter cleaning, and more, the real surprises are when you have roof leaks, broken furnaces, faulty masonry. Make sure to have a nest egg so you can address these issues and keep your home in good order!
Commute Times
One important thing to consider when purchasing your home is the commute time- even if you are working from home. If your commute is literally from the bed to the bath to the office, it’s important to visualize your workspace and whether or not it’s conducive to work- quiet, away from the kids, comfortable. In short, make sure that it works for you and your ability to Zoom!
If you are still hitting the expressway to work everyday, it is also important to consider the ease and time of your commute. It has been proven that people with shooter travel times between work and home are much happier. While you might be able to find a more affordable home in a far-away suburb, make sure to consider if sitting on the Edens or Stevenson listening to talk radio for over 2 hours a day is really worth the price.
Chicagoland is obviously a very green-friendly metropolis. We have an impeccable public transit system, dedicated bike lanes, and miles of lakefront trails. Buying a home in proximity to these transportation options is very important, especially if you don’t have other means of getting around. Are you close to a train line that goes to your employment? Are there plenty of Divvy stations that are fully stocked with bikes all the time? Even if you do have a car, it’s important to be able to get around in case of car troubles, or it’s buried under a bunch of snow!
Area Amenities
Picking a neighborhood that is in line with your personality and goals is one of the most important factors to take into account when buying your first home. If you have children, making sure you are in the best school district might trump everything else. If this is a priority, it is best to do your research on the local schools. Check out the Illinois Report Card to see which schools rank the best in your area.
Other things to take into account are nightlife, lifestyle activities and outdoor activities. If you are still a child of the night, it might be important to be around the hustle and bustle of a central business district- near all the flashing lights and crowds. But if you are a bit more subdued, it would be best to find a little residential neighborhood on the outskirts of all that activity. Another important factor might be the availability of “extracurriculars”- the gym, art studios, theatres, museums, and other cultural enrichments. The great outdoors might be important as a necessary amenity. If trees, kayaking, and light hiking is an important daily activity, make sure the home you are considering is close to county forest preserves or along the North Branch Trail.
It’s important to consider all these points when choosing a home- affordability, comfort, and all the in-betweens. If you are ready to explore the adventure of your first home, give us a call at High Fidelity Realty. Not only will we walk you through the process with professional accountability, but we know the city so well, we will be able to recommend the best neighborhood for you!