Buying a home—whether an apartment, townhouse or single-family home—is one of the biggest financial and personal commitments you’ll ever make. If you have always rented, you may find the process to be mysterious—and even a little intimidating. Start by asking yourself why you want to take the leap now.
“When you say, ‘It’s the right time to buy,’ what does that mean?” says William Bolls, an associate broker in Corcoran’s office on Manhattan’s West Side. “Are you facing a life change? Is your family growing? Have you come into some money? You could have five or 10 different reasons, but you’ve got to define them.”
Here’s a checklist to help you navigate the process:
Create a Timeline
This will help clarify your reasons and resources and set benchmarks for decision-making. “Having a timeline gives you deadlines and helps you make decisions, yes or no,” Bolls says, “so you’re not spending time chasing some ideal apartment that doesn’t jibe with your budget anyway.”
Get Your Finances in Order
One of the biggest issues is having sufficient liquid funds to complete a purchase. “First-time buyers should save at least 20 percent of the purchase price for the down payment, and then have some additional non-retirement liquid assets as a post-closing cushion,” Bolls says. “This post-closing liquidity is most often required by co-ops that want to see savings that could cover up to 24 months of monthly mortgage payments sitting in your account after closing.”
Check Off the Big 3
The three most important financial factors first-time buyers must keep in mind are annual gross income/debt-to-income radio, credit score and post-closing liquidity. Your debt-to-income ratio is based on your liabilities and annual gross income. A co-op board typically looks for a maximum ratio of 25 percent, while a lender may accept a ratio upwards of upwards of 35 percent, according to Bolls. Credit scores should generally be above 700.
“Renters looking to purchase a co-op should pay off any credit card debt prior to the search, as that debt will be counted as a liability during financial review,” Bolls says. “If you haven’t checked your credit score lately, do that now because scores fluctuate often and large purchases can negatively affect a score in the short term.”
Find the Right Agent
Look for an agent who will be your “ally” during what could be an arduous—and emotionally draining—process. “A key part of my job is to make sure that people aren’t completely reacting emotionally,” Bolls says. ” I don’t want to get a call three months after they bought saying they made the biggest mistake of their lives.”
Prepare for the Hunt
To get ready for the actual search, would-be buyers should try to keep an open mind and be willing to tour up to seven properties in a day in the early going. “Actually visiting the location gives you the opportunity to get the feel for a neighborhood,” Bolls says. “Just keep in mind that a neighborhood will probably feel different on a Sunday afternoon than it will on a weekday or weeknight.”