Buying a home is a milestone but there’s a reason why not everybody tries or succeeds. It’s time-consuming, it can be messy, and it involves a lot of things that feel uncomfortable or unusual because they aren’t part of your everyday experience.
Before you buy a home in the Catskills, it’s helpful to understand exactly what it will entail, step by step. If you’ve never done it before, it’s a really good idea to familiarize yourself with all of the things you’ll need to accomplish to get there. So here goes.
Understand Your Financial Footprint
Most financial advisors suggest that a household spend no more than 30% of its gross (take-home) income on housing. That’s fairly easy when you know what your rent costs and it doesn’t change significantly from year to year, but it’s a bit more complicated when you’re securing a mortgage loan to buy a house.
Your mortgage payment will include principal plus interest, taxes, and homeowners’ insurance. If your down payment is less than 10%, you may end up paying insurance on the mortgage itself (aka PMI).
So take the time to understand you monthly income and expenditures and put away some cash for the down payment. With your financial house in order, you’ll feel a lot more comfortable purchasing a physical house.
Polish up your credit
You can make the biggest impact on your loan options by improving your credit score. A good credit score will get you a lower mortgage loan interest rate, which will lower your monthly payment (and possibly allow you to afford more house), so this is a step worth focusing on.
Here is a good article with helpful tips for improving your credit score.
Figure out financing
There are a ton of financing options for buyers. Whatever you do, don’t jump on the first mortgage loan you’re offered. A better strategy is to talk to local banks and mortgage brokers. You’re likely to get different rates/terms/products from these different sources. One lender might give you a different interest rate than another, or provide some incentives to entice you to select their loan over another, so do a little bit of shopping around to discover the deal that’s truly the best fit.
Find a mortgage broker or bank
A mortgage broker or banker can explain your loan options and help you figure out what’s right for you, so ask us or your friends for referrals. It’s never too early to approach a mortgage broker as they can help you clarify the price range for which you qualify so that you align your expectations with reality. And once contracts are signed, the bank can start moving forward with the somewhat lengthly process of securing a mortgage for you.
Understand your price range
Once your bank or mortgage broker helps you narrow down the price range for which you approved, keep in mind that, as a general rule, you should spend no more than one-third of take-home income on housing. And remember that this number will include insurance, interest, and taxes, and operating costs such as utilities (e.g. oil, gas, electric, cable/internet), repairs (e.g. structural or systems) and services (e.g. lawn mowing, snow-plowing, cleaning, etc.). A good agent is particularly useful in helping you understand monthly operating costs, a critical component in the total monthly cost of owning a home.
Houses move fairly quickly in the Catskills. Inventory is low and interest is at an all time high. Getting a pre-approval from a solid mortgage lender will give you an advantage over other buyers. With a pre-approval in hand, you can make an offer as soon as you know a place is right for you. And in this market, that can sometimes make the difference between getting an accepted offer from the seller and becoming that seller’s backup offer.
Find a real estate agent
When it’s time to start seriously shopping, a real estate agent can be a real asset to any first-time buyer (read more about why using a buyer’s broker is a no-brainer). Good agents know where to find the hidden gems, how to negotiate a sale, and whether the asking price really makes sense given the location and the market.
Decide on an area
The Catskills is an amorphous concept to many people and rightfully so, its a vast region. This is where we can be invaluable. We’ve spent the last six years exploring many of the towns/areas and we can help you decide whether you want to be north or south of the Ashokan Reservoir, east or west of of the Hudson, south of the Catskills or in the heart of the mountains. We can also help you determine which areas are a better fit for your sensibilities.
Assuming you’ve got a good idea of where you want to live, how much you can spend, and the size and type of place you’re looking for, it’s time to start searching in earnest.
One thing many agent’s won’t tell you; agents and buyers have access to the same pool of listings. Sites like Zillow, Trulia, and Realtor pull listings from the MLS that agents use. That said, a good agent will set up a detailed search for you and send alerts as soon as new properties pop up on the radar. A good agent will also curate properties so you don’t have to slog through the multitude of listings to find one that fits your criteria.
If you come across listings that interest you, pass them along to your agent so that he/she can give you feedback. And be diligent in reviewing listings as you receive them. As I mentioned previously, good properties move fairly quickly in the Catskills.
Make a competitive offer
Let’s assume you’ve found a home you love. The next step is to craft an attractive offer within your budget and with the appropriate contingencies or ‘outs’ (e.g. mortgage, inspection, appraisal, etc.). Sometimes including a letter of personal interest can be effective. Other times, increasing the down-payment may be necessary if there is concern about the house appraising at the offer price. Ultimately, this is where an agent can be worth his/her weight in gold as navigating this part of the process can be critical in getting to an accepted offer.
Should you intend on submitting a lowball offer, you’ll want an agent that can suss out whether this is a wise approach. Your agent should speak to the seller’s agent to get a sense of whether an offer well below ask will be seriously considered and whether the seller is likely to be offended. Gathering information will help to prevent you from potentially burning a seller bridge.
Find an attorney
Should you get to an accepted offer, the seller will ask for details about your attorney. Contracts will go out soon after the offer is accepted so its a good idea to have someone lined up. Your agent should be able to recommend a few attorneys to which you can speak and from which you can choose the one that is the best fit for you. Your attorney is an essential part of the team as they will ensure that there are no legal issues with the purchase.
Get an inspection
Once the seller has accepted the offer, there area few more hoops to jump through. An inspection is done to ensure that there are no significant issues with the house (plumbing, structural, pests, etc.). You don’t want to unintentionally buy a fixer-upper when you thought the place was turnkey.
A good inspector is able to identify potential issues and red flags and will also provide you with a roadmap of potential future issues/repairs. It pays to do some research on your inspectors upfront to make sure they’re experienced, qualified, and familiar with most of the major home issues that are typical in the Catskills. A good agent will be able to recommend a few inspectors from which to choose.
One thing we always recommend to our buyers; accompany the inspector when he does his inspection. You’ll learn a tremendous amount about the house in a rather short period of time.
Get an appraisal
Mortgage lenders require appraisals to ensure that the home is worth what you (and by proxy, the lender) is paying. The appraiser will verify the square footage, examine the home, compare similar homes that have recently sold nearby, and then generate a dollar value of the property’s worth.
Oftentimes that value aligns with the offer, but sometimes it’s higher or lower than the offer. A higher appraisal typically isn’t a huge problem, but if the appraisal is too low, the lender may decide to lend only the amount of the appraiser’s value instead of your full offer price. If that’s the case, you may need to bring in another appraiser for a second opinion, or it could be time to sit down with the sellers again and talk about a price reduction.
There are a lot of reasons why you might need to hit the negotiation table again at this stage. Maybe the inspector found a problem, or maybe the appraisal was too low. Whatever the case, before the home changes ownership, you’ll need to hash out who is responsible for any repairs and how you will manage any appraisal snags.
This is another area where a good agent proves their worth, serving as your advocate and point person for negotiations, trying to get you the best possible deal.
Figure out the utilities
It’s almost the finish line — but before you get ready to pack up and move, you’ll want to deal with any and all utilities so that everything is ready when you get there. Don’t forget about “extras” like trash and mail, which you will definitely miss if they disappear; take this time to change your address with the postal service, figure out trash and recycling, get the electric and gas and water switched to your account, and make sure you have all your ducks in a row. It’ll make the move smoother if you don’t have to worry about these loose ends later.
This is the finish line! Usually, the buyers, sellers, both sets of lawyers and real estate agents, a bank representative and a title agent will attend the closing to help answer any questions or clear up any last-minute red tape.
Make sure you follow your agent’s instructions about how to deliver the down payment, and be ready to sit down for a few hours and sign your way through a pile of documents. It’s tedious, but necessary.
And then, you own a home. Milestone achieved.