Owning a home is one of the biggest goals a person can have. Having a piece of property that you can call your own can be a great source of pride, not to mention the sense of security and stability home ownership brings. If you feel you are ready to buy a home in Chicago, we prepared a home buying checklist to help you make the most of your home buying journey.
- Determine how much you can afford
One of the most common mistakes first-time home buyers make is overestimating what they can afford. Early on, keep your expectations in check by keeping this rule of thumb in mind – housing costs should not exceed 28% of your monthly income.
If the average salary in Chicago is $62,899, which is slightly higher than the national average, homeowners must set aside at least $1,468 a month on mortgage payments, insurance, property taxes, and homeowners’ association (HOA) fees. On top of that amount, factor in your monthly credit card payments and student loans, which should not exceed 38% of your monthly gross income – or $1,967 in this example. Use this mortgage calculator to determine the home you can afford.
- Save on down payment
One of the better home buying tips anyone can tell you is to put a 20% down payment on a house. While a 5 to 10% down payment has become quite the norm recently, sticking to the tried-and-true 20% gives you better leverage for securing a house on the market, especially if competition is tight.
If you and another buyer make the same offer on a house, the amount you’re willing to shell out as down payment may prove to be the deciding factor. So go for a 20% down to increase your chances of sealing the deal on a piece of property you want.
Putting down 20% will also save you a lot of money and trouble in the long run. For starters, you won’t have to pay for Private Mortgage Insurance (PMI), which protects the lender in case you default on your payments and go into foreclosure.
- Build a working emergency fund
When you rent, all you have to worry about is paying your landlord the agreed-upon monthly rate and that’s it. Owning a house is different. For starters, you will be responsible for the costs of its maintenance and upkeep. If you’ve done your homework, maintenance costs should be built into your monthly budget.
However, it still pays to have a ready emergency fund of up to six months of your current monthly salary to cover unforeseen expenses or worse. So it’s important to build your savings. Resist impulse buys, rethink big-ticket spends, and stick to your budget. Always be mindful of the big picture so you can achieve your long-term goals.
- Take note of the quality of the neighborhood
Many first-time buyers in the Chicago real estate market make the mistake of purchasing a house based on the property alone without checking out the actual neighborhood. The house itself may look like a dream come true, but does the surrounding community answer your larger needs?
If you intend to start a family, are there schools, daycare centers, and playgrounds close by? How far away is the house to your place of work?
If you’re relocating and plan to start anew, are there enough employment opportunities in the area? Are the neighbors friendly or stand-offish? Depending on your temperament, you may want to consider that, too. Always keep in mind that you are not just buying a house, you are investing in a neighborhood, too.
- Get preapproved for a home loan
A pre-approval is the best indication that you are qualified to buy a home. The lender has checked your credit score and financial records and deemed them good enough to offer you a home loan. Since the preapproval contains an estimate of the amount you can borrow, it also sets your home buying budget. You can save time by focusing your search on properties priced within the amount set by your lender.
A pre-approval also tells the seller that you are a serious buyer. It puts you in a better position compared to other buyers who may be interested in the same property.
These tips for buying a house will put you at an advantage when you’re searching for homes for sale in Chicago this 2019. If you’d like to know more about the properties in the Chicago area, 606 Brokers can provide you with helpful information.
606 Brokers is centrally located in Chicago’s Logan Square neighborhood and services the entire Chicagoland area. We are a full-service brokerage assisting Buyers, Sellers, Renters and Investors with all of their Real Estate needs. Call 773.870.5101 today!