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How Long Does It Take to Buy a House?

August 14, 2020

how long does it take to buy a house

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How long does it take to buy a house? While estimating a timeline for home buying will depend on many variables, real estate experts estimate that the average time required is around four months.

This timeline is important for buyers to keep in mind for a variety of reasons. Many buyers might hope to time their home purchase with when their rental lease is up. Other buyers might want to pace their house hunt so that they are settled in their new home before the start of school. Still other buyers might also be home sellers who first need to close on the sale of their old house before they can buy their next house.

In short, home buyers might need to fit their home search into any number of time-sensitive situations, so knowing how long the buying process typically takes can help them plan accordingly.  Plus, buyers should know that four months is how long it might take if everything goes smoothly. If problems crop up—with the home inspection, appraisal, mortgage, or other things—then the real estate buying process could take even longer.

Buying a house may take time, but there are good reasons why it’s no impulse purchase. To help illuminate what’s going on, here’s a rundown of the various stages you’ll encounter while home shopping to help you plan your buying timeline just right.

Step 1: Get pre-approved for a mortgage

Your first step shouldn’t be to check out homes; it should be to get mortgage pre-approval from a mortgage lender or broker. This is presuming you aren’t planning to make an all-cash offer to a seller, but rather need a loan to make your goal of home buying happen.

“Home buyers will want to speak to a mortgage lender or  broker to start the loan process early so there are no surprises,” says real estate agent Beverley Hourlier with Hilltop Chateau Realty, in San Diego.

There are a couple of reasons for this: One, unless you’re really organized, it will take you a while to gather all the documents you need to show your lender for your loan, including pay stubs and tax forms. Two, if the mortgage lender finds out that your finances are less than ideal for homeownership—because of, for instance, a poor credit score—it can take months to clean up your finances so you’re in better standing. Oh, and you’ll need to make sure you’ve got enough cash so you can afford to make a decent down payment on your mortgage, too.

If your finances are in good shape, you can get mortgage pre-approval, which is a contract that the lender will lend you a certain amount of money. Being pre-approved for a mortgage and having this paperwork in hand is a major asset, because it shows sellers that you can afford their house and mean business, and it’s a prime way to negotiate with a home seller. (Keep in mind that mortgage pre-approval is different than mortgage pre-qualification).

If your financial circumstances don’t change much by the time you close this real estate deal, you can ask a lender to extend that loan promise for an additional 90 to 120 days or longer; you can also lock in a great interest rate so it doesn’t rise by the time you’re actually buying a house.

Step 2: Find your dream home

While looking at real estate listings online is fun and easy, things slow down once you get to the point where you’re visiting houses in person. After all, buyers can’t just pop in whenever they want. Instead, you’ll have to schedule an appointment for a home tour that work for the home sellers, too.

So in the same way buyers have to kiss a lot of frogs before finding a prince, you’ll likely need to spend some time house hunting, and see a lot of homes before you find one you love. On average, buyers see 10 houses before they make an offer, but that number can be much higher.

But any good real estate agent will tell you that it’s time well spent. According to  agent Melanie Atkinson with Coldwell Banker Residential Real Estate, in Tampa, FL, when buying a house, “The last thing you want is to feel rushed or make a decision in haste that you will later regret.”

Step 3: Prepare for closing day

Once you’ve found a house you love, made an offer that’s been accepted, and are under contract to purchase the property (which can typically happen in a few days), the waiting game really begins.

On average, it takes around 50 days to close on a loan for buying a house, from the time lenders pre-approve your mortgage to underwriting the loan to the day you sign all the documents and move into your new home.

Can you see now why getting pre-approval early is so important for the buying process? In fact, securing a loan is the most common holdup in buying a house.

Even with a pre-approval, it can still take 30 days for the lender to do its due diligence by conducting a home appraisal to make sure it’s a good investment (since after all, the lender’s money is on the line) and underwriting your mortgage.

Meanwhile, if you’re under contract to buy a particular piece of real estate, it will also take time for you and your real estate agent to do your own due diligence to make sure the house isn’t hiding some glaring flaw you’ll regret inheriting. You can do this by checking the home sellers’  disclosure statements for any problems in the house that they’re aware of, and also hiring a home inspector to check out the house from top to bottom for any problems. All of this takes time. Closing is a not a time to rush; you and your agent will want to make sure to do everything right.

Bottom line: As much as people complain about how long it takes to buy a house, it’s all in the interests of making sure you’re happy once you’re a homeowner and this piece of real estate is finally yours. So when in doubt, there is no better time to start than now! If you’re worried you’ll find your dream house too soon, there are ways to negotiate with a seller and their agent so that it all works out.

The post How Long Does It Take to Buy a House? appeared first on Real Estate News & Insights | realtor.com®.

5 Surprising Financial Lessons I Learned About Paying for My First Home

October 3, 2019

aydinmutlu/iStock; realtor.com

I pride myself on being pretty financially savvy—after all, I’m a personal finance writer. I’m well versed in best practices for saving and spending, the ins and outs of HSAs and IRAs, and the basics of investing.

But when it came time to buy my first house, I had to put my ego aside: I was way out of my depth as I navigated the world of mortgages, closing costs, and escrow.

While all of the Budgeting 101 basics still apply to purchasing a home—top tip: Don’t buy anything you can’t afford!—some aspects of the process can come as a surprise to first-time buyers.

Gearing up to buy a house of your own? Get acquainted with these five lessons that I learned the hard way before you start shopping. Then, you’ll be ahead of the curve when it comes time to make an offer on your ideal home.

1. Don’t be fooled by your mortgage pre-approval amount

One of the first steps on the road to homeownership was requesting a mortgage pre-approval letter from a mortgage lender. I was shocked when my husband and I received a letter with a much higher number than we had ever considered spending.

The lender thought we could afford a house that cost how much?!

I quickly learned that a pre-approval letter is just assurance from a lender that the buyer is in good financial standing to take on a mortgage of a certain size. Lenders evaluate your financial history to come up with a pre-approval amount. Don’t confuse that number, though, with your actual budget for buying a house. In other words, just because you’re pre-approved for up to, say, $300,000, doesn’t mean a $300,000 mortgage will fit in your budget.

For us, we knew we didn’t want to stretch ourselves thin with a heftier mortgage, even if we were technically approved to take one out.

2. Closing costs can add up—and be complicated

Closing costs include out-of-pocket expenses like title insurance, notary fees, and the cost of the deed—and they can add up quickly. So when we made an offer on our house, we decided to ask for a credit from the sellers toward our closing costs—a common practice in which, typically, the seller advances an amount in cash that’s then tacked on to the purchase price. But I was surprised when our Realtor® urged us not to ask for too much from the sellers at closing.

“Some loan programs only allow a certain percentage of the sale price to given to the buyer as a credit,” says Joe DiRosa, a real estate agent with RealtyTopia in Pennsylvania.

That means that if you’re offering $200,000 for a house and your lender only allows you to accept 2% in closing costs, you shouldn’t ask for $5,000—that would be $1,000 down the drain, since you can only accept up to $4,000 in credit. Before you make an offer, ask your lender if your loan institutes a limit on closing cost credits.

3. PMI isn’t actually the devil

Private mortgage insurance—PMI for short—is at once a blessing and a curse. Lenders typically require it of buyers who are putting down less than 20% on their mortgage. This puts homeownership within reach for more people, but it also means an additional monthly payment that doesn’t add to the new owner’s equity.

For that reason, PMI sometimes gets a bad rap—better to shell out the necessary down payment cash (if you can) than waste your money on insurance, right? But in some cases, it’s in your best interest to put less money down and pay the PMI.

That was the case for my husband and me. We decided to hold on to some of the cash we would have put toward a 20% down payment and use that money to renovate our home and pay off other debts with higher interest rates. Our PMI payment has been manageable—we pay about $75 a month—and it’s worth it to keep our money in our bank account, where we can use it for projects like replacing the roof, renovating bathrooms, and creating a master suite.

4. You might have to make escrow payments

“Escrow” was a foreign word to me before buying a house. (Confession: I still picture a crow every time I hear it.)

Because we took out a loan with PMI, we were required to pay into an escrow account for our property taxes and home insurance. Escrow simply refers to the separate account where that money is held; basically, our lender sets aside the money for taxes and insurance, which acts as a safety net to ensure that we sock away enough money for those expenses.

While it’s nice to know we’re saving enough for taxes and insurance by paying into escrow, it’s also frustrating for control freaks like my husband and me, who would rather manage our money ourselves—preferably by putting that cash into a high-yield savings account where it can accrue interest. We’re looking forward to canceling our escrow payments as soon as we’ve built up enough equity in our home to remove PMI.

5. You need to budget for surprises (and your own mistakes)

During our home inspection, the inspector ran the dishwasher to make sure it worked—all good. Then, the day after we moved in, we loaded the dishwasher, hit “Start”—and it was dead. After flicking the electrical circuits on and off to no avail, we finally accepted that we would need to replace the dishwasher sooner than we had bargained for.

Several hundred dollars later, we learned that dishwashers are required to have their own wall switch, per local code. It turned out the old dishwasher wasn’t broken after all—the switch was just turned off.

All we could do was laugh, too slap-happy and exhausted from renovating to beat ourselves up much about the mistake. At least we planned to replace the dishwasher sooner or later, and we had enough savings to endure the blow. But the incident was a reminder that costly surprises (and stupid mistakes) are inevitable when you’re new to homeownership—and even when you’re not.

The post 5 Surprising Financial Lessons I Learned About Paying for My First Home appeared first on Real Estate News & Insights | realtor.com®.

Need a Mortgage Fast? You’re in Luck: The Home Closing Process Is Speeding Up

August 20, 2019

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Once your offer on your dream home is accepted, it doesn’t mean you can just grab the keys and move in. If you need a mortgage, securing this home loan takes time. The good news is that it’s faster now than ever.

According to a recent three-year study by LendingTree, the length of time it takes to get a mortgage—aka closing—is an average of 40 days in 2019. That’s down from 51 days in 2018, and 74 days in 2017.

And here’s some good news for homeowners who’ve already moved in: The time it takes to refinance a mortgage is also dwindling. Refinancing takes an average of 38 days in 2019, down from 43 in 2018, and 55 days in 2017.

Home buyers should be thrilled to hear that the mortgage process is speeding up—who doesn’t want to move into their new home as quickly as possible? Earlier closing times can also save home buyers money, especially if they are paying high rent or having to find temporary housing while waiting to move into the new home.

Why it takes less time to get a mortgage today

The digitization of the mortgage process is the main reason for the shorter closing times, according to the LendingTree report. The mortgage industry has become increasingly digital since the 2008 financial crisis, when companies operating in the paper-centric system of the past lost or misrecorded some details from their clients, causing problems and legal issues during the foreclosures that often followed.

Since then, some lenders have created new mobile-friendly products to speed up the mortgage-approval process. For example, Quicken Loans launched the app Rocket Mortgage in 2015 to help borrowers close earlier than the industry standard, reportedly sometimes as quickly as eight days.

Another factor contributing to shorter closing times is that mortgage volumes have been decreasing, says Tendayi Kapfidze, chief economist at LendingTree. However, he says that given the recent drop in interest rates, “that’s kind of reversed itself a little bit, but we’re still seeing shorter times than in 2018.”

The LendingTree study also found that loans for smaller amounts took longer to close. Loans of under $150,000 averaged 47 days, versus 39 days for those above the conforming loan limit, which is $484,350 in 2019.

“You’d think something being more valuable or bigger risk for the lender, they might take a little bit more time with it, but it’s the exact opposite,” Kapfidze says. One possible reason is that lenders may require a more extensive appraisal for lower-priced homes, which might have some type of damage or other problem.

How to get a mortgage fast

So what can consumers do to reduce as much as possible the length of time it takes to get a mortgage? To speed up the closing process, Kapfidze urges home buyers to choose a lender with a more digital, less paper-driven process. Before signing on with any lender, ask if the company can digitally link to a borrower’s bank, the IRS, or other institution to get information to process the mortgage, since this is the key to a speedy approval.

Online lenders make it easier for borrowers to compare mortgages, and they often offer better rates and faster approvals, but they come with less customer service, so they may not work well for complex home loans. Mortgage industry experts suggest that borrowers look over the application process, check out online reviews of the company, and make sure it is registered with the Better Business Bureau before they sign up.

Here’s more on how to get a mortgage fast:

Work on your credit score

Before starting the home-buying process, make sure your credit score is in check. According to the LendingTree study, consumers with higher credit scores saw shorter closing times.

People with a credit score of above 760 have an average 38-day closing time in 2019, while closings take an average of 45 days for those with scores of below 720.

Have your financial documentation in order

“A lot of the delay in closing times is just the back-and-forth between the lender and the borrower,” Kapfidze says. He suggests having all documentation well-organized and easy to access, so that it doesn’t take long to send it to the lender.

Also, make sure that all the information that you provide is accurate, he says. If a mortgage lender goes to verify something and finds a discrepancy in what a borrower provided, that can slow things down.

The exact documentation that borrowers need to provide depends on the type of loan they’re seeking, but generally, the required documents relate to a borrower’s income, assets, and employment, such as a W-2 form, pay stubs for the previous 30 days, and bank statements. Borrowers also need valid identification, a loan application, a contract for the home purchase, and homeowner insurance contact information.

Get pre-approved for a mortgage

Many loan experts urge home buyers to get pre-approved for a mortgage before they start shopping for a home, especially if their financial situation is complex. A pre-approval helps buyers better understand what type of home they can afford and can shorten closing times.

“You’re going to have to go through this process at some point anyway, so you might as well get it out of the way upfront as quickly as you can,” says Hayden Hodges, a Dallas-based mortgage loan officer at U.S. Bank. “I would want to know what my ceiling is, what my conditions are, as quickly as I can, as opposed to perhaps getting into unnecessary fire drills towards the end of a transaction.”

Lenders can work quickly to get borrowers pre-approved. Borrowers can speed up the process even more by providing all the documentation needed for pre-approval, Hodges says.

Make sure you have cash on hand

Having cash available to supply earnest money and to pay closing costs can help you close faster, Kapfidze says. Some closing costs need to be paid in cash, so make sure you can easily access the funds.

“You don’t want to get to closing, and it’s like, ‘Hey, you need to have a $12,000 check,’ and then realizing your money’s not liquid,” he says.

The post Need a Mortgage Fast? You’re in Luck: The Home Closing Process Is Speeding Up appeared first on Real Estate News & Insights | realtor.com®.

How to Get a Mortgage: A Step-by-Step Guide for Home Buyers

July 11, 2019

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If you want to buy a house but don’t have oodles of cash lying around, you’ll need to learn how to get a mortgage—that all-important home loan used to purchase property that you will then pay back for years or even decades to come.

The vast majority of home buyers need a mortgage to achieve their dream of homeownership, but that doesn’t mean lenders just hand out loans to everyone who asks. There’s a process, with requirements you’ll have to meet. So before you even set foot in a home, make sure you know the steps on how to get a mortgage so you can secure a loan without a hitch.

Step 1: Shop for a mortgage

Before you start shopping for homes, you should shop for a mortgage. Many first-time buyers wait until they’ve found the perfect home to start shopping for a mortgage and looking at mortgage rates—and that’s a mistake.

The reason: All lenders are a little bit different, so it pays to compare the loans they’re offering in terms of interest rates, closing costs, and more, says Richard Redmond, a mortgage broker and author of “Mortgages: The Insider’s Guide.”

This is a good time to decide whether you want to apply for a fixed-rate or adjustable-rate mortgage loan.

This step will also help you pinpoint any concerns lenders might have with your loan application, and give you time to fix these flaws so you’re in great shape to make an offer once your dream home does come along.

You’ll also want to check your credit report before you go much further. If your credit score is less than excellent, or even if you have bad credit, you have work to do before you can qualify for a loan with a favorable interest rate. You can take some steps (e.g., paying down loan amounts and possibly increasing credit card limits) to improve your credit score quickly. If your credit report shows more problems, however, you may need to spend several months to a year working on your credit score before you try again to get a mortgage.

Step 2: Get mortgage pre-approval

The goal of meeting with a mortgage lender is to get pre-approved for a mortgage. During this process, the lender will probe your financial past and check out your income, debts, and other factors that help it determine whether or not to give you a home loan—and how much house you can afford to buy.

Getting pre-approved is critical if you want your home-buying efforts to succeed. Why? Because a pre-approval letter from a lender shows home sellers that you have the financial backup necessary to buy their home. Without it, sellers have no guarantee you can afford their place and, in many cases, won’t take you seriously.

Don’t confuse pre-approval with getting pre-qualified. To pre-qualify, a borrower basically has a conversation with a lender about finances, but the borrower doesn’t need to provide any paperwork.

“A pre-qualification can be drafted on a piece of loose-leaf paper,” says Ray Rodriguez, regional mortgage sales manager at TD Bank. “It often holds no value.”

To apply for pre-approval, you’ll need to provide a lender with the following:

  • Pay stubs from the past 30 days showing your year-to-date and monthly income, or business profit and loss if you are self-employed
  • Two years of federal tax returns
  • Two years of W-2 forms from your employer
  • 60 days or a quarterly statement of all of your asset accounts, which include your checking and savings, as well as any investment accounts such as CDs, IRAs, and other stocks or bonds
  • Any other current real estate holdings
  • Residential history for the past two years, including landlord contact information if you rented
  • Proof of funds for the down payment, such as a bank account statement (If the down payment cash is a gift from your parents, “you need to provide a letter that clearly states that the money is a gift and not a loan,” says Rodriguez. Otherwise, the money for the down payment affects your debt-to-income ratio, and can prevent you from getting the mortgage loan.)
  • A mortgage application
  • Permission to check your credit report and pull your credit score (Your credit history shows your history of making mortgage and credit card payments, and borrowing other money and paying it back responsibly. Your report also shows open debt accounts you may have, including student loans, credit cards, and other debts. Even if you have a good credit score, if you have too many debts, your debt-to-income ratio may be too high to qualify for the monthly payments on your new loan.)

Step 3: Get a home appraisal

After you’ve made an offer on a home and signed a sales contract, most lenders will want to check out what you’re buying with their loan proceeds—and size it up for themselves with a home appraisal. This means a home appraiser will assess the market value of the house using comparable homes, or comps, much like you and your real estate agent did when coming up with how much to offer on the home.

Most times, the appraiser’s price will end up approximately the same as your own—in which case all is good, says Rick Phillips, an appraiser and real estate agent in Vienna, VA. And if the appraisal comes in higher than what you’re paying, you’re getting a good deal. For example, if you’re paying $700,000 for a home and the appraiser says it’s worth $710,000, you’ve instantly gained $10,000 in home equity.

However, if the loan appraisal comes in lower than what you’ve agreed to pay for the home, that can be trouble, because lenders will loan you only as much money as the assessment says it’s worth, or up to a percentage of the assessment. That means you’ll have to pay the difference between the maximum loan amount and the purchase price plus closing costs—or persuade the seller to lower the sales price to what the lender thinks is fair. Another option is to challenge the loan appraisal by either filing an appeal or ordering a second loan appraisal. In most cases this all works out—and if it doesn’t, keep in mind your lender is essentially keeping you from overpaying for a dud.

Step 4: Clear the property title and close the deal

When you buy a home, you “take title” of the property—meaning you become the rightful owner. And your lender wants proof! As such, it’ll ask for a title search, which involves paying a title company to search public records for any heirs insisting the property is theirs, liens (from contractors who worked on the home but were never paid), or other problems. Hopefully all goes well, but in case not, this extra step could save you from a seriously scary situation where you’re fighting for ownership, or responsible for paying back old liens yourself.

Once the title is cleared, you can close the deal. That’s where buyer, seller, lender representative, and any others involved in this process meet to sign all of the paperwork, transfer all money owed, pass along the keys, and move on with their lives!

Sure, the whole mortgage process may sound time-consuming and complicated, but rest assured its purpose is to protect all parties, including you, from making costly mistakes.

The post How to Get a Mortgage: A Step-by-Step Guide for Home Buyers appeared first on Real Estate News & Insights | realtor.com®.

‘I Got a Home Loan in 24 Hours’: How to Get a Mortgage Fast, Revealed

March 12, 2019

CatLane/iStock

Want to know the secret of how to get a mortgage fast? Speed sometimes becomes essential in the home-buying game. I know, because I’m a real estate agent who’s seen clients in this position—and in addition, I know from personal experience.

Four years ago, I wasn’t even house shopping when I stumbled across my dream home, out of the blue. The way it happened was that I’d offered to hold an open house for a work colleague’s real estate listing: a two-story, two-bedroom condo that had just been remodeled from top to bottom.

When I walked through the front door, I was smitten with the gleaming new hardwood floors and open floor plan. I wanted the place for myself, and knew I had to make an offer quickly. The problem, though, was that I had to get pre-approved for a mortgage first.

Here’s the short version of what happened next: I called a mortgage lender I’d worked with closely on a number of real estate transactions in the past. I informed him that I was in a major rush, and begged him to push through my applications as soon as possible.

The next day, it was done: I had my mortgage—and my house—in 24 hours.

how to get a mortgage fast
I bought my first condo by getting a mortgage in 24 hours.

Courtesy of Daniel Bortz

How to get a mortgage fast: Rocket isn’t your only option

Assume my speedy pre-approval was a fluke? Hardly. Quicken Loan’s Rocket Mortgage, for instance, has claimed for years that it can approve a loan in as little as eight minutes.

And a growing number of mortgage lenders are stepping up the pace, offering rapid pre-approval to home buyers—some within 24 hours of a borrower submitting an application, says Keith Gumbinger, vice president at HSH.com, a mortgage information website.

“Online-only lenders like Rocket showed this could be done, and now we’re seeing many mortgage lenders taking steps to keep up,” he says.

Example: In simple cases, Bank of America’s electronic system can give an applicant pre-approval within 72 hours or less, says John Schleck, senior vice president of sales at the lender.

Nonetheless, “Just because you can get a mortgage more quickly doesn’t necessarily mean it’s the best mortgage for you,” Gumbinger points out. “Speed and convenience can be valuable, but you still have to research the mortgage market and shop around.”

Looking to get a mortgage fast? Here are four things you need to know.

1. Understand the difference between pre-approval and pre-qualification

“Home sellers want a solid pre-approval from a buyer when they’re considering an offer,” says Rick Bechtel, head of U.S. Mortgage Banking at TD Bank. “They don’t want a buyer who has only been pre-qualified by a mortgage lender.” This begs the question: What’s the difference between mortgage pre-approval and pre-qualification?

In a nutshell, mortgage pre-approval is a commitment from a lender to provide you with home financing up to a certain loan amount. In order for a lender to issue pre-approval, an underwriter must do a full review of your income, assets, and credit. That’s a significantly more intensive process than mortgage pre-qualification, where a lender basically takes your word that your finances and credit score are what you say they are, without verifying any information.

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Watch: What Your Mortgage Broker Wishes You Knew (That No One Else Will Tell You)

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Although both pre-qualification and pre-approval are intended to give a seller confidence that you’ll be able to obtain a mortgage, a pre-approval carries more weight, because it’s based on actual proof, Bechtel says.

Indeed, when you get pre-approved, you’ll receive a pre-approval letter on your lender’s letterhead that specifies the loan amount you’re qualified for. (Note: The letter will usually state that the loan is subject to the property you choose, verification of your financials at the time of purchase, and any other lender requirements.) Submitting this letter to a home seller when you make an offer will strengthen your bid.

Still, Bechtel offers a stern warning to home buyers: “If you get ‘pre-approved’ within minutes of submitting a mortgage application, make sure you’ve actually been pre-approved and not pre-qualified.”

2. Have your paperwork ready

Gathering your loan application documents and having them ready to upload electronically is the “most important thing borrowers can do to speed up the mortgage pre-approval process,” says PNC Bank mortgage executive Pete Boomer.

In general, the paperwork you’ll need to assemble for your lender includes the following:

  • Pay stubs from the past 30 days showing your year-to-date income
  • Two years of federal tax returns
  • Two years of W-2 forms from your employer
  • 60 days or a quarterly statement of all of your asset accounts, which include your checking and savings, as well as any investment accounts such as CDs, IRAs, and other stocks or bonds
  • Any other current real estate holdings
  • Residential history for the past two years, including landlord contact information if you rented

 

3. Be prepared to answer questions from an underwriter

“Pre-approval can still be a rigorous, time-consuming process for many home buyers, especially if their financial situation has some complexity to it,” Bechtel says. Read: If Mom and Dad are helping with your down payment, or you recently changed jobs, or you just got divorced, you may not be able to get pre-approved in a rapid fashion.

Boomer agrees: “I’ve seen pre-approval offered in as little as 24 hours, but I’ve also seen it take as long as two weeks.”

4. Don’t let your mortgage pre-approval expire

Reality check: After getting pre-approved, it may still take you a while to find a home and go under contract—especially if you’re shopping in a hot market where you’re fighting multiple offers on properties. However, mortgage pre-approval is typically good for only up to 90 days.

The reason pre-approval letters “expire” is because banks need the most up-to-date information about your salary, assets, and debts. Three or four months is long enough for you to have left a job, taken on new debts, or spent what was previously in your bank account.

In the event that you aren’t able to close on a home purchase by the time your pre-approval expires, your lender may offer you an extension of your pre-approval; however, the lender will have an underwriter perform another evaluation of your income, credit score, and other key information to ensure there are no changes to your financial situation.

The drawbacks of getting a mortgage fast

Although speedy mortgages are becoming more common, getting one may mean that you forfeit the right to shop around to find the lowest interest rate and best mortgage terms for you. So, if you’re not in a rush, don’t. You might benefit from taking your time to meet with at least three lenders and compare and contrast what they have to offer.

Need to get pre-approved for a loan? Shop around and learn more at realtor.com’s Mortgage Center

how to get a mortgage fast
My fiancée and I celebrating our anniversary in our kitchen.

Courtesy of Daniel Bortz

The post ‘I Got a Home Loan in 24 Hours’: How to Get a Mortgage Fast, Revealed appeared first on Real Estate News & Insights | realtor.com®.

That’s So 2018! Outdated Mortgage Advice You Should Ignore Right Now

February 5, 2019

Buying a house is one of the most exciting things you’ll ever do in your life — and signing the mortgage for that house will probably be one of the most terrifying.

Since navigating the home loan process can be scary to do alone, many people might be tempted to seek out guidance from someone who’s been there, done that. But you should probably ignore everything your Uncle Bob says. (Sorry, Bob!) And Aunt Sue, while we’re at it. They may mean well, but let’s face it, they haven’t taken out a mortgage in 20 years. In fact, even a friend or family member who got a mortgage last year might lead you far astray (in a well-meaning way, of course), since the rules of home financing really do change on a dime.

Our two cents? For starters, beware these dusty pearls of wisdom below. They might have worked wonders back in 2018, but they don’t necessarily work for everyone right now. Here’s why, as well as some fresher, tastier alternatives.

Get a mortgage with a fixed interest rate

You’ve probably always assumed you’d get a 30-year mortgage with a fixed interest rate. Your parents had one … and isn’t that the only way to get payments you can afford? These days, you have many more choices, and reasons to try them out.

“People aren’t buying their forever home right out of the gate anymore, so the benefits of a 30-year mortgage aren’t necessarily there,” says real estate agent Heather Carbone with the Heather Carbone Team at Big River Properties in Boston. She explains that many first-time home buyers are buying starter homes, and that they plan to move on to something bigger and better after a few years. “Going with a five- or seven-year adjustable rate mortgage [ARM] could potentially save them a couple of hundred dollars off their monthly payment and ease the monthly payment burden a little bit, as they will most likely sell their home before the rates adjust,” she says. Here’s more on the pros and cons of ARMs vs. fixed-rate mortgages.

Make a 20% down payment

When you’re trying to come up with a down payment on a house, 20% sounds like a huge amount. So how do people come up with that kind of cash? Most of the time, they don’t. At least not anymore.

“I meet with lots of young buyers who have been instilled by their parents and others that the only way to buy a house is with a large, 20% down payment,” says Carbone. “In today’s market, that couldn’t be any further from the truth. Provided the buyer has a solid credit score, down payments as low as 3.5% are very much a reality today.”

Real estate agent Melissa Rubenstein, with KW Village Square Realty in Ridgewood, NJ, agrees. “While 20% has traditionally been a benchmark for what is acceptable, this no longer holds true in the market, she says. “With FHA loans requiring around 3%, and other traditional loans offering 10% down options or lower, it makes sense to explore different products with your lender. Don’t miss out on historically low interest rates while trying to stash away cash.”

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Watch: How to Get the Best Mortgage Interest Rate You Possibly Can

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Wait for interest rates to drop

It seems like interest rates could always be better, but according to Bruce Ailion, real estate agent with Re/Max Town and Country in Atlanta, that might not be true at the moment.

“For 2019, we are likely at the end of the low interest cycle, and interest rates are at their lowest,” he explains. “Today is the time to buy, if interest rates are the determining factor.”

You can always wait for them to go lower, but you might be sorry if you do.

Meet with your lender in person

In the past, the only way to talk with a lender was to walk into a bank, which often meant taking time off work and rearranging your whole day. In 2019, things are getting easier.

“Times are changing, and visiting a bank branch to meet with a lending officer is not the only route to getting a mortgage. Now, you can apply for a mortgage online,” says Kathy Cummings, senior vice president of Homeownership Solutions and Affordable Housing Programs at Bank of America in Charlotte, NC. “Research shows that 32% of Americans are comfortable applying for a mortgage digitally.”

This doesn’t mean human contact is obsolete. “When you have questions that you want to speak to an expert about—in person or by telephone—you have the option,” Cummings says. Consider it the best of both worlds.

Pay off your mortgage as fast as you can

If you have a 30-year mortgage, chances are you have a dream to pay it off in at least 20. Not only will it give you an extra 10 years without a monthly payment, but it’ll save you tons of money in interest. Right?

Not really. Jeff Chervenak, president of Guaranty Federal in Bloomfield, CT, says that’s not necessary anymore—and it probably won’t save you much money.

“Paying off your mortgage as a goal is as much emotional as financial. Because interest rates are, even now, so low, consider saving and investing with the money you would use to pay down your loan separately,” he explains. “Liquidity has a lot of value, and you could always use the lump sum accumulated to pay it down or off any time you wish.”

In case you haven’t figured it out yet, mortgages today are very different from they were just a few years ago. Do your homework before you make any decisions, and check with an expert you trust before you sign on the dotted line.

The post That’s So 2018! Outdated Mortgage Advice You Should Ignore Right Now appeared first on Real Estate News & Insights | realtor.com®.

Hey, Big Spender! 6 Reasons Why Your Higher Offer Won’t Win the House

January 16, 2019

Peter Dazeley/Getty Images; alexsl/iStock; realtor.com

You’ve finally found your dream home, and it’s actually in your budget. You can swing it—with cash to spare—but with competition fierce, why not go all in and offer way above asking? The seller will be in no position to refuse, right?

Well, hang on for a second. While cash—and lots of it—is certainly king, there are other factors that play into a seller’s decision to accept an offer.

In fact, sometimes there are things in your purchase contract that can outweigh even your supersized offer. Sounds crazy, doesn’t it? But often—especially in today’s red-hot market—a successful sale goes beyond money. Here are a few scenarios in which your highest offer might not land you the keys to the front door.

1. You’re not flexible on the timeline

First and foremost among possible deal breakers is timing.

“Sellers look at the terms to their specific situation,” says Francine Brown, broker/owner and Realtor® at Brown Estate Realty in Norwalk, CT. “Maybe they need more than 30 days to move out, so if someone is pressuring them to move out sooner, that can sometimes be a turnoff if they haven’t found a new home to move into.”

On the other hand, the sellers might have already vacated the property, and are eager to unload it pronto.

That’s why customizing the length of the closing period to meet the sellers’ needs can be more important than the bottom line. Have your real estate agent find out what they need, and let them know you can accommodate them.

2. You don’t have your paperwork squared away

Yes, we’ve preached and prattled on about the importance of being pre-approved for a mortgage before you start your home search. And here’s just one of many reasons why: You can blow up the deal if you haven’t been pre-approved, says Sharon Paxson, a Realtor with Arbor Real Estate in Newport Beach, CA.

Why? If you don’t have the financing in place to make your initial down payment and closing costs, it doesn’t matter how many dollars you promise the sellers.

“Buyers must have that in place as opposed to tying up a house when they’re not really qualified to do so,” Paxson says. “When you’re ready to put in an offer, make sure your pre-approval is within 30 days or less. [If sellers] see that the pre-approval was done more than 60 days ago, that could make them wonder if you’re still credit-worthy to get a loan.”

Speaking of being credit-worthy, here’s another no-no: Making a large purchase (such as a car) during the escrow period—even if you have the money to do so. It might affect your ability to obtain financing, and that’ll be another major red flag to the seller.

3. You’re asking for too many contingencies and concessions

If you’re in a bidding war for your must-have home, you’ll want to go in not only with the highest offer, but also with the cleanest one.

“You want the deal to be as sweet and competitive as possible, so that if the seller takes it, there’s a very good chance that the sale will go through,” Paxson says.

For example, a contingency stipulating that your home must sell before you purchase the seller’s house is usually a deal breaker, Brown says.

“The seller may not consider your offer as favorable because you’re still shaky until your house actually sells,” she says.

Another potential turnoff: Negotiating for a large concession, like for the seller to pay all of the closing costs.

Instead, ask for the bare minimum closing costs—or none at all—and make sure the concession doesn’t dip into the seller’s price tag, Paxson advises.

“So if a house is listed for $300,000, and you can go up to $310,00, then put in $310,000 with a $10,000 seller’s concession,” she says.

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Watch: 5 Secrets of Making the Perfect Offer

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4. You’re requesting too many things be included with the home

On a related note: If you ask for the custom drapes, the Smeg appliances, and the Scandinavian hot tub to all be thrown in with the house, sellers might wave you off, Brown says.

“If the sellers had put in the listing that the chandelier wasn’t included, then don’t ask for it to be thrown in,” Brown says.

You might think you’re paying for all that stuff with your higher offer, but if you really want the house, tread lightly here. You risk offending the sellers if it looks like you’re trying to squeeze as much out of them as possible.

5. You haven’t expressed your love—for the house

You might not be the only one bidding high. And when similar offers are on the table, sometimes the sellers look for other factors to break the tie—that another happy family will live in their cherished home, for example. Or that the buyers won’t be gutting it and turning it into something totally different.

So how can you sway sellers who love their home? Put some heart into your offer by giving them some idea of who you are and why you want their home.

“I’ve seen buyers take a picture of themselves and their family. If that’s what works to make it more emotional, then do it,” Paxson says. “It just depends on who your target is. If your seller is an investor, they’re probably not going to care—they just want the money. But if they raised their family there and want to sell it to another nice family, an emotional appeal might work.”

Writing a love letter to the sellers can sometimes seal the deal, Brown adds.

“A buyer may outline why they feel this house would suit their family needs and how they can keep on the tradition of what the previous owner has,” she says.

6. You gave up after your offer was initially refused

If, for whatever reason, the sellers reject your bid, hang in there, Brown says. Contracts that come in way over asking price tend to have a high cancellation rate, perhaps because the buyers didn’t have pre-approval and their financing falls through.

“I make sure things always end nicely with the listing agent, and tell them that we want to be kept in the loop should there be any problems with the accepted offer,” she says.

Ask your agent to check in every two or three weeks. Because then, instead of putting it back on the market and creating a whole new bidding war, the listing agent may just go to the next most attractive offer: yours.

The post Hey, Big Spender! 6 Reasons Why Your Higher Offer Won’t Win the House appeared first on Real Estate News & Insights | realtor.com®.

Is a Mortgage Pre-Approval Letter Necessary To Make An Offer on a House?

January 10, 2019

Do you need a mortgage pre-approval letter to make an offer on a house? You know you need to get your ducks in a row before looking at homes, but does that include securing a pre-approval letter from the bank?

The truth is, getting pre-approved can actually improve your chances of falling into the sellers’ good graces, so you want to get it done as soon as possible in the home-buying process.

So how organized do your financials need to be before you start looking? Let’s take a look, starting with clarifying what a pre-approval letter actually is.

What is a pre-approval letter?

Mortgage pre-approval is assurance from a lender to provide you with financing to buy a home up to a certain loan amount.

“It’s a letter from your lender, written on the lender’s letterhead, stating that you are approved for a loan of a specific dollar amount,” says Denise Shur, a Realtor® with 1:1 Realty in San Jose, CA.

To get approved, your lender will collect a stack of paperwork from you that will include pay stubs, federal tax returns, W2s, investment accounts, and residential history. Once your complete financial portfolio is analyzed, the lender will decide whether or not to issue you a pre-approval letter.

Do you need a pre-approval letter to see a house?

Real estate agents prefer showing homes to buyers with a pre-approval letter, because it shows the buyer is financially capable of purchasing.

Agents “need to know if you can really buy a home,” Shur says. That said, a pre-approval letter isn’t mandatory to tour a home.

“All agents are allowed to show you homes, even if you do not have a pre-approval letter,” she adds. It just might not be in their best interest, so don’t be surprised if you get some pushback if you say you don’t have pre-approval.

How a pre-approval letter benefits you

If you don’t take the time to get pre-approval, it’s not just the real estate agent’s time you’re wasting—it’s possibly yours as well.

“There is no sense in wasting your own time and that of an agent to see homes until you are ready to purchase,” says Rosanne Nitti, a Realtor with RMN Investments & Realty Services in Laguna Beach, CA.

Getting a pre-approval letter should be one of your first steps in the home-buying process, she says. “Then when you see something you like, you can act on it.”

As a buyer, that ability to act quickly gives you an edge over people who don’t have certification from a mortgage lender.

How to get a pre-approval letter

Serious about getting serious? Here’s how to get started. You can work with either a loan broker, who can connect you with the right lender, or directly with a bank, if you like the loan program they offer.

“Some banks, like Wells Fargo for example, may even give you a ‘priority buyer’ letter, which puts you on a fast track to get your loan closed quickly once you find a home,” says Shur.

Shur describes the process as follows:

  • Fill out an application. This can be done in person, online, or over the phone.
  • The lender runs a credit check to get your FICO score.
  • It also determines your expenses and income by looking at your financial portfolio.
  • The bank then determines if you qualify for a loan, and if so, what kind and for how much.
  • Finally, the lender puts this in writing as the pre-approval letter.

The post Is a Mortgage Pre-Approval Letter Necessary To Make An Offer on a House? appeared first on Real Estate News & Insights | realtor.com®.

7 Things House Hunters Should Do Before Even Setting Foot in a Home

January 3, 2019

iStock; realtor.com

Once you decide to buy a home, the first thing you (understandably) want to do is pop into open houses and fantasize about your new life in your new digs.

It is a crucial part of the process. But jumping straight into the deep end could land you in trouble—both financially and emotionally.

Take it from me: When my husband and I bought our first house, we launched into the search without prepping properly. We fell in love with a two-bedroom bungalow far too quickly (it was one of the first homes we saw), and spent the entire closing process playing catch-up. We rushed to get a loan approved; we scrambled to understand our contingency options; and in the end, the home turned out not to be exactly what we needed.

I’ve made a promise to myself: Next time, I’ll think things through and prevent buyer’s remorse. And I urge you to, too. I talked with real estate pros to find out the things you should do before you ever set foot in a home.

1. Get your credit in order

Good credit is essential when buying a home. A poor credit score can lead to a higher interest rate and, by extension, a higher monthly payment. Dings on your credit—e.g., an old debt that’s been turned over to a collection agency, or a high credit card balance—can even prevent you from buying a home.

“You would think that, having heard so much about credit, people would know exactly what their credit is, but often they don’t,” says Marie Bromberg, a real estate agent with Corcoran in Brooklyn, NY. “Not knowing sets you back—a difference of 10 points can make a significant difference in your loan product.”

Before you start house hunting, pull your credit report (AnnualCreditReport.com is a reputable and free service) and address any problems dragging down your score.

2. Get pre-approved

Before setting foot in a home, find a reputable lender and get pre-approved. Let us be clear: This is not a simple pre-qualification; a pre-approval uncovers exactly how much house you can afford and is an essential component of a successful offer letter.

“Your offer means nothing without showing a pre-approval letter,” says California real estate agent Shelton Wilder.

Don’t have a lender yet? Don’t worry. Your agent can recommend local lenders, or you can seek out recommendations from other homeowners. Once you’ve settled on a lender you like, have the lender review your finances thoroughly to point out any concerns.

3. Make a list of your must-haves

Finally, the fun part! Now you get to start browsing home listings. In fact, feel free to start obsessively refreshing realtor.com for listings in your desired area months before you start seriously looking.

Just make sure to take extensive notes of everything you love: Do you want to be in a specific school district? Are you eager for an en suite master bathroom? Is a basement a must-have?

“Then, pick your absolute top three and hold firm on those,” says Dolly Hertz, a broker with Engel and Völkers in New York City. “If you get the rest of your longer list, or even a few of them, you’re ahead of the game.”

If you have this list prepared and in hand when you visit your first home with your agent, you won’t be prone to making impulsive decisions based on your gut, or getting starry-eyed over gorgeous architectural details that don’t actually meet your needs.

4. Review a residential purchase agreement

It might feel like you’re jumping the gun to think about the contract to buy a home before you even start looking for one. But home buying involves a flurry of paperwork, and you should understand what you’ll sign before you’re under pressure. Review a sample residential purchase agreement with your agent beforehand so you can head into this nerve-wracking process with open eyes.

“Sometimes in the home-buying process, especially in a seller’s market, the process can go so quickly that buyers don’t know what they are signing and what the contingencies mean,” Wilder says.

For instance, if you’re selling and buying simultaneously, you might want to include a “home sale contingency,” which makes the purchase dependent on successfully selling your own home. Or you might include an inspection contingency, so that you’ll have the option to back out if serious flaws are uncovered.

5. Prepare to be flexible

The home-buying process is filled with highs and lows. You might find a home that fits most of your criteria—but misses the mark in one big way. You might be forced to compromise, or move to an area you didn’t expect.

Before you dive in, “take a deep breath and promise yourself to be as flexible as possible,” Hertz says. “You may fall in love with the kind of place you never thought you would consider.”

As an example, she recalls the search for her current home. Early on, she was “set on living in a particular town and only that town.” She and her husband spent 10 months looking at homes that didn’t fit the bill.

Then, “quite by accident, my husband found a listing ad that looked intriguing, in a neighboring town we had never even heard of,” she explains. “You can guess the rest: Not only was it love at first sight, but 28 years later, it still is.”

6. Explore all of your loan options

“Often, first-time home buyers automatically sign up for the 30-year fixed,” Bromberg says. “But often there are alternatives that will work for them, but are not explored.”

If you’re buying a small home or studio, you likely won’t stay for 30 years. Perhaps a shorter mortgage term could be useful. Or, if you have big pockets but can’t quite afford an all-cash offer and find yourself repeatedly losing in bidding wars, Bromberg recommends the delayed financing option, which lets you pay cash upfront for the house—and then get a mortgage for the home after closing.

7. Fill your cash reserves

Don’t just save up for a down payment. Make sure you’ve stuffed your emergency fund, too.

In addition to having the down payment in your bank account, Wilder says, you should have an emergency fund that amounts to several months of what the mortgage payments would be.

Having this money before you start the home search will help the loan process—it proves you’re fiscally sound. And, of course, it also buffers against any potential surprises once you get the house, like a brand-new water heater going kaput.

Don’t set foot in a home without preparing yourself emotionally and financially. Laying the proper groundwork guarantees good decisions—and a home you’ll adore.

The post 7 Things House Hunters Should Do Before Even Setting Foot in a Home appeared first on Real Estate News & Insights | realtor.com®.

How to Buy a Home Fast—Even Before the Holidays!

November 2, 2018

Need to know how to buy a home fast since you’re hoping to be settled in before the holidays? Then the pressure’s definitely on at this point! If you have any hope to host your Thanksgiving feast (or at least Christmas dinner) in your new digs, you’ve got to get the ball rolling on a home purchase, pronto.

Yet anyone who’s ever purchased real estate will tell you the home-buying process can be drawn out, complicated, and rife with endless paperwork—and the potential for problems to arise at a moment’s notice. While all that may be true in some cases, there are certain strategies that can speed up the home-buying process.

Follow the advice of these experts, and you’ll be putting out your new welcome mat in no time. Honest.

Home in on the right kind of house

If you’re hoping to move in a hurry, here’s a word from the wise: Avoid homes that may entail an interview with their boards—namely co-ops.

“Co-ops can take six to eight weeks to get a board interview scheduled, finalized, and approved,” notes Phillip Salem, an agent with Triplemint Real Estate. And since many folks may be traveling over the holidays, there could be further delays.

Also avoid bank-owned homes or foreclosures, which generally take much longer to close.

A far faster bet is to focus on condos or new developments.

“Closings in condos and houses in new developments, even with financing, can happen in as little as three to four weeks,” says Salem. “Most new developments have preferred lenders who are already approved for the building and ready to go.”

Get pre-approved for a mortgage

You may be tempted to check out as many open houses as possible, but it’s more important to be strategic. Don’t waste precious time touring homes that are well beyond your budget. With that in mind, your first step should be finding out exactly what you can afford.

“Get pre-approved for a mortgage by a local lender—rather than big banks or internet lenders—who has a track record of closing on time,” advises Aaron Hendon, a real estate agent with Keller Williams. “Most can swing a 21-day close, and that’s critical.”

Ray Duran, regional sales manager at Quontic Bank in Miami, says this step allows buyers to determine their budget based on what the lender will extend.

“Unless you are so wealthy that you’re going to buy your own [home] with a big pile of cash, you’re going to need a home loan,” Duran says. “Whether you decide to go to a bank or credit union, your lender will need to qualify you to see how much you can afford to buy.”

Cara Ameer, an agent with Coldwell Banker, adds that this step also sets you apart from other buyers.

“Being pre-approved puts a buyer in a position of strength, as it will put the seller and their agent at ease, knowing that the buyer has done the heavy lifting upfront,” she says.

Get your documents in order

“To speed up buying a home for the holidays, buyers should start putting together all of the documents and paperwork that are usually required during a home loan review,” says Duran.

Generally, a home buyer will need the following:

  • Federal tax returns for the past two years
  • Supporting information (e.g., W-2, 1099, or other tax forms) for the past two years
  • Two months’ worth of statements from any checking and savings, 401(k), retirement, and other accounts
  • Pay stubs for the past month

 

“The more legwork a buyer can get out of the way before starting their home search, the easier it will be to go under contract and close on a home in time for the holidays,” says Ameer. “There will always be one more thing that is needed with the loan application process, but it is much easier and faster to track down one document here or there versus having to provide stacks of documents within a few-week period.”

Work with the right real estate agent

Working with a proactive real estate agent who knows the area, as well as how to leverage technology and social networks to make things happen, is key.

“Having the right agent can make all the difference in sealing the deal, particularly in a time-critical situation,” Ameer notes. “They will know how to connect the buyer to the right inspectors, contractors, and other professionals involved in bringing the transaction to closing.”

Once you have the right agent in your corner, don’t be afraid to let the pro know what you want.

“Send your agent listings you find on the internet so that he/she can get an idea of exactly what you like,” says Jeannette Burke, an agent with Realty Executives in Sparta, NJ. “He can also evaluate each property and check the taxes, underground oil tanks, whether the house is bank-owned, pretty much everything.”

Consider shortening contingency deadlines

While buyers should almost never consider waiving any home inspection or financing contingencies, they can offer to shorten the time frame on those contingencies to effect a faster closing.

“This will also be appealing to the seller,” Ameer says. “The buyer should work with their agent to propose a realistic time frame that can be met considering the entire scenario. For example, if it’s normal to provide 10 days for all due diligence in a purchase situation, offering to complete it in five to seven days may be looked at more favorably by the seller and more realistic. In order to close within 30 days, loan approval may be needed in 20, which is why having all loan documents in place with the lender before writing an offer is key.”

Depending on the nature of the issues found during home inspections, buyers could negotiate a credit toward their closing costs in lieu of repairs being done by the seller, saving valuable time.

Stay on top of everyone

“Once under contract, you want to press all appropriate vendors—inspectors, appraisers, lenders—to stay on track,” says Hendon.

Suzy Minken, an agent with Berkshire Hathaway, agrees. “From the initial offer stage all the way through closing, there is a considerable amount of ‘elapsed time,’” she says. “If you consider how many people are often a party to the home purchase transaction—seller, buyer, two attorneys, two real estate agents, mortgage lender, home inspector—then it’s easy to understand that there is a lot of time when someone is waiting to get an answer to a question or a document. And when there is a tight window of time, it’s critical that communication between all the parties moves smoothly and swiftly.”

Do some groundwork on moving, too

You may be focused on your new home, but don’t forget about your current space, where your belongings will need to be packed up.

“Interview movers and make sure they are available for a move before the holidays,” suggests agent Maria Daou of Warburg Realty. “If you plan on painting or any kind of cosmetic work, get quotes and make sure the person doing the work will be available.”

Selling a home as well? Tune in tomorrow to learn how to sell a home before the holidays!

The post How to Buy a Home Fast—Even Before the Holidays! appeared first on Real Estate News & Insights | realtor.com®.