A home is likely the largest single investment you’ll make in your lifetime, so it stands to reason that it isn’t going to be a fast and simple process. And would you really want it to be? A transaction this large and important requires careful research and consideration, and caution every step of the way. Buying a home is not a decision you want to take lightly.
The very first step of making a well-informed decision is, well, to become well-informed. With that in mind, here’s our comprehensive guide to buying a house in Connecticut.
Evaluate Your Current Financial Situation
Before you begin your home search, you’ll want to make an objective assessment of your financial situation. To state the obvious, buying a home is expensive, especially in a high value market like Connecticut.
First off is the down payment. For conventional loans, the standard amount for a down payment is 20% of the purchase price. In Connecticut, where the median home value is $244,500, that would come to approximately $49,000. This isn’t a small amount of money, so you’ll want to start saving as early as possible.
Next is to look at your credit score. If it’s in the sub-optimal range, you may not even qualify for financing, and even if it’s merely acceptable, you may end up paying tens or hundreds of thousands more over the long run than if you qualified for the most favorable rates. Try to get your credit score as high as possible by paying off debts, including student loans, before you apply for a mortgage.
And finally, don’t forget that there are a lot of expenses associated with homeownership above and beyond just buying the house. Insurance, repairs, taxes, and utilities are just some of the charges you’ll be responsible for. Make sure you’re prepared to take on this financial burden before you take the plunge.
Learn More: 7 Requirements You Need to Meet Before You Can Buy a House
Find a Great Connecticut Real Estate Agent
Working with an agent can make your buying experience shorter, smoother, and ultimately cost you less money. That’s because an agent can assess your budget and desires, and match you quickly with an appropriate property. Once you settle on a home, they can take the lead with offers, and negotiate the price down as far as it can go, assuring you of the best possible deal. And if anything comes up during the inspection or closing, they’ll know exactly how best to handle it.
Keep in mind that, as a buyer, your buyer’s agent commission will be paid by the seller, so your agent’s services are essentially free.
If you work with a Clever Partner Agent, you’ll not only receive the benefit of their long experience and expertise, you could qualify for a $1,000 Home Buyer Rebate to help cover closing costs.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Read Up on Local Real Estate Market Trends
The Connecticut market is hot right now, with a median home value of $244,500. Home values in the state have increased by 2.6% over the past year, and are predicted to go up a further 1.1% in the next twelve months.
Interestingly, the median price of homes that are listed in Connecticut right now is $325,000, while the median price of all homes that actually sold is a much lower $235,000. This disparity tells us something about the expectations of home sellers in Connecticut, and should inform your offers and negotiating tactics.
Of course, prices can fluctuate wildly throughout the year, and whether you get a good deal or not is largely dependent on when you buy. Looking at the Hartford market, it looks like homes sold for 10.4% less than the yearlong average in the month of March, so it could be worth it to wait until the tail end of winter to start your home search.
By the same token, homes in Hartford took 13 days longer than the yearlong average to sell in January. This is probably due to the national post-holidays hangover, and also to the harsh Connecticut winters. But if you’re trying to get a deal on a home, you should strongly consider buying in the January to March window.
Of course, if you’re serious about timing the market, no one is better at knowing exactly when to buy, almost down to the day, than an experienced local agent.
Learn More: Will it Be a Buyer’s or Seller’s Market in 2019?
Get Pre-Approved for a Mortgage
To put it simply, pre-approval gives you a huge edge when it comes time to submit your offer. If you’re competing for a house with a buy who doesn’t have pre-approved financing, you’ll get the house ten out of ten times. But it’s important to understand what pre-approval is, exactly, and how it differs from pre-qualification.
Pre-approval is what it sounds like: a lender has scrutinized your finances, including your income, your debts, and your credit history, and approved you for financing. It removes a huge amount of uncertainty from the equation.
Pre-qualification isn’t nearly as reassuring. To be pre-qualified, all you have to do is self-report your information and you don’t have to undergo the scrutiny of your personal finances like the pre-approved candidate. It’s more like a conditional vote of confidence, pending more information, whereas the pre-approval tells the seller that you’re absolutely serious about the deal, and that you can see it through to the end.
Learn More: Pre-Approval vs Pre-Qualification: What’s the Difference?
Start House Hunting
Now it’s time to actually get out there and find your dream home. You’re going to see amazing open houses and charming homes, and it’ll be all too easy to be dazzled if you go in without a firm idea of what you’re looking for.
So before you even start your home search, sit down and list exactly what you want in a house. Include everything from the neighborhood to the architectural style. Also jot down a few dealbreakers; features like bad light, or a location on a busily trafficked road. With this blueprint in hand, your home search will be much easier.
Consider using online resources like Zillow to survey market trends, price fluctuations, and nearby amenities.
For example, the Zillow page for Connecticut home values shows that Stamford home values, at $287,900, are much higher than New Haven’s $175,100 median home value. And yet, digging a little deeper, we discover that while Stamford’s home values actually declined last year, New Haven’s shot up nearly 7%.
It’s this kind of hard data that informs every savvy home buying decision.
Learn More: Free House Hunting Checklist
Make an Offer
Once you’ve found that dream home, you’ll want to make an offer. Work with your agent to come up with a realistic number and have it delivered to the seller. If they reject your bid, you can either increase your offer to try to enter active negotiations or walk away.
If you do achieve an agreement, you’ll then have to write an “earnest money” check that will essentially hold the house for you. Then the offer letter is filled out, listing details like closing date, the type of deed, inspection conditions, and various other contingencies.
If your offer isn’t accepted, make sure you don’t let your competitiveness take over, and let yourself outbid the budget you’ve put together.
Learn More: How to Make an Offer on a House
Inspections and Negotiations
The inspection is for your protection. The state licensed inspector will examine the home for serious problems like foundation cracks, leaky roofs, and outdated heating/cooling systems, and deliver a confidential report to you.
If problems are discovered, don’t despair. If they’re minor, your agent will likely be able to use them to get the price reduced; if they’re major, then you dodged a bullet.
If you’re not sure if the problems are large or small, consult your agent. A great agent has seen inspections go awry many times, and will be able to advise you to either engage in negotiations or walk away.
Learn More: 3 Ways Inspections Help Home Buyers Get Better Deals
It’s Closing Time!
Closing generally takes place across a table, where all parties, including agents, attorneys, and lenders, siit down to finalize the deal. Closing costs are actually a bundle of smaller state charges like the transfer taxes, property taxes, mortgage fees, document preparation fees, postage, and the appraisal. And as the buyer, you’re going to be expected to pay the lion’s share of the closing costs.
Closing costs are typically 2% to 5% of the final sale price, so for a $200,000 home, you’d be looking at a payment of $4,000 to $10,000.
With so many fees, and such a wide spectrum of possible charges, it’s always a great idea to consult an experienced real estate agent to make sure everything’s in order, and you aren’t paying something you shouldn’t be responsible for.
Clever Partner Agents are top performers in their respective markets, and can advise you on everything from offers to closing costs. Best of all, since buyer’s agents commissions are paid by the seller, their services are essentially free to you. Contact us today for a free no-obligation consultation!
Learn More: 4 Things Buyers Need to Know Before Closing on a House