A well-prepared homebuyer in the Washington, D.C. region gets their finances in order before shopping, builds a team of trusted advisors and uses that groundwork to turn an emotional decision into a financially sound one. Buying a home will never be a purely rational exercise, and the most successful buyers do not try to make it one.
Daryl Judy, an Associate Broker with Washington Fine Properties, sees emotion and sound financial judgment as partners rather than opposites. “It’s not one or the other,” he says. “It’s both.”
Can you take the emotion out of buying a home?
You cannot take the emotion out of buying a home, and Judy does not think buyers should try. A home is where people raise families and build their lives, so attachment is natural and even healthy; if a buyer feels nothing for a property, he sees that as a sign it may not be the right home. What buyers can do is pair that feeling with data and expert guidance. “You can’t remove the emotion,” he says. “You can have someone that can help guide you to make wise financial decisions.”
Should you buy a home as an investment?
Judy advises buyers to purchase a home because they need a place to live, and to see its financial value as a form of forced savings rather than a quick profit. He offers an example: a household paying $5,000 a month in rent spends $300,000 over five years. If that household instead bought a condo for $800,000 and later sold it for the same price, Judy points out that it would still come out ahead of renting, even after taxes and fees.
Owning also offers potential tax advantages and the chance to build equity as the mortgage is paid down.
Thinking about resale before buying
Buyers benefit from thinking about the eventual sale before they purchase. Judy applies a simple filter: if this buyer calls him in five or seven years to sell, will the home be easy to sell? Factors such as the street, natural light and the quality of the surrounding units in a building all affect future value, so he raises them early, even when the home itself is a strong one.
Getting finances in order
A well-prepared homebuyer has their finances in order before they start looking. That begins with knowing their credit score, and Judy notes that many lenders can run a soft credit check and help identify issues a buyer may not know about, such as a forgotten store credit card. From there, prepared buyers work to reduce their debt, build savings for a down payment and then meet with a lender to understand which type of loan suits them, whether an adjustable-rate, conventional or jumbo mortgage.
Which advisors should buyers consult before buying a home?
Buyers should consult a strong real estate agent, an experienced lender or mortgage broker, an accountant and, where they have one, a wealth manager or banker. An attorney can also help with questions such as buying through a trust or receiving a family gift toward the purchase. Having recent tax returns filed before shopping matters too, because lenders rely on them to approve a loan. “The people who are the most successful are people who bring in experts in different fields,” Judy says.
Those advisors are especially valuable when comparing D.C., Maryland and Virginia. Judy notes that real estate taxes in D.C. are generally lower than in Maryland or Virginia, while income taxes in D.C. are higher, so the right choice depends on each household’s full financial picture.
When is a mortgage rate actually locked?
A mortgage rate is only locked once a buyer has a ratified contract, has chosen a lender and that lender has locked the rate. The rate quoted during preapproval is a useful guide for shopping, but Judy reminds buyers it is not guaranteed, and if rates rise before the contract is ratified and the rate is locked, the final rate will rise with them.
Ways to lower a mortgage rate
Buyers cannot change market rates, but they do have some room to improve their own. Paying points at closing reduces the interest rate in exchange for more cash upfront, and a larger down payment, such as 30 percent rather than 20 percent, can also help secure a lower rate. Judy has seen buyers use savings or a family gift to do exactly that.
Acting with confidence
Preparation lets buyers follow their hearts without second-guessing the decision. When a buyer falls for a home and their agent, lender and financial advisors have already confirmed it is priced fairly and fits their plans, the emotional choice is also a sound one. In Judy’s words, the groundwork “gives you the license then, when you become emotionally attached to the house, that you can act on it because you’ve done all the homework leading up to it.”
About Daryl Judy: Daryl Judy is an Associate Broker with Washington Fine Properties, specializing in luxury residential real estate across Washington, DC, McLean, Arlington, Alexandria, Chevy Chase, and Bethesda. He is consistently ranked among the top individual agents in the DC market by volume.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
