Buying a home can be a very intimidating experience. This is especially true if this is your first time going through this process. Before you even start looking at homes, take a moment to decide if you’re really ready to buy a home at this time. It really depends on your circumstances, and only YOU can determine whether now is the right time for you and your family. Bear in mind that if you decide on homeownership you will not have just the price of the home to consider -- there are expenses associated with lawn care, upkeep, repairs, and perhaps even HOAs dues as well. Here are some tips to get you started: Step 1: Check your credit report and score Always check your credit report and score before you apply for ANY type of loan. This will allow you to get the best rate available. The law allows you to be able to get a free credit report once yearly; the scores range from 300 to 850. The higher the score that you have, the more likely that you will be able to get a lower rate. If you notice that it is less than ideal, you may want to hold off for a couple of months and get all of your bills in order before asking again. Step 2: Figure out your budget There are different online calculators that you can use to determine how much home you can afford. The standard advice is that your mortgage payment should not exceed 28 percent of your monthly income. Up front, there are several additional expenses, including the cost of movers, furniture, and your down payment. Although the down payment is usually substantial, you may not have to put 20 percent down as many generations did before. In some cases, you are able to get a home for little to no money down; however, for these loans, you will have to pay for PMI (private mortgage insurance). Talk to your realtor about what all of the different options when it comes to financing your home. Step 3: Find the Right Lender and Real Estate agent This a process that does take some time. Ask around and read reviews on the Better Business Bureau website. Talk to as many as lenders as you want, and make sure that they thoroughly answer the questions you ask. Pick someone with whom you get along easily. Once you find the right professional to work for you, then you will want to get pre-approved. This will help you be able to get into a house that you want and it will make the entire process go quicker. First, you need to be pre-approved. This will mean that the financial agency will look at your credit report. It should be noted that being pre-approved is not a guarantee, and that being approved fully is the only way to buy a home. Step 4: Look for the right home Write down the list of some things that you want in a potential home. Ask yourself how many bedrooms and bathrooms will be required in your new home. How much square footage you want? Do you want a big kitchen? After you have made a list of your desires, it is time to put this list into action and begin your search. Don’t forget to consider the commute for you to and from work and the distance to shopping as well as the schools, if you have children. Step 5: Make an offer on the home You have found the perfect home for you, and it is now time to make an offer. Sellers usually overprice a little bit, so you have room to negotiate the price down. Have your agent pull up a list of homes in the area that have sold in order to get an idea of fair market value for the home. Depending on the seller’s counter-offer, meet somewhere in the middle. You don’t want to go back and forth too much, but don’t think that just because you’ve made the offer that this is end. Once you’ve agreed on the price, you will have to give some money over to put the home in escrow. This act gives the seller some good faith that you will follow through with the sale. Step 6: Get the right mortgage for your situation Making sure that you are getting the right mortgage is another part of the home buying experience. There are three different mortgage options: adjustable rate, fixed rate and interest only. Your real estate agent can help determine which product is best for you. Adjustable rate mortgages or ARMs is a mortgage option that would be best for a buyer who is going to be a short-term homeowner. They typically are good for a one to seven years and then after that the payment will drop and fall with the market price of the home. This mortgage also has a lower interest rate than most. Fixed rate mortgages are the most traditional mortgage option. Because they are a fixed rate they also have a fixed payment. There are varying lengths of the loan, but 15 or 30 year payment options are most common. Since the interest rate does not change, you are able to plan ahead and have a good idea what the payment will be like. This is the best option for someone who is looking to have the home for a long time. Both a fixed and adjustable rate mortgage can have an interest only payment. All this means is that for a certain amount of time over the life of the loan you can pay just the amount that is needed to cover your interest of the loan. You can pay the principal if you want, but it is not needed if you don’t have that much money that month. These loans have the benefit that you able to have more freedom with your money. They are also good for someone who always doesn’t have the money for a fixed rate, but still wishes to own a home. Step 7: Close on your home Always get the home inspected! In some cases this is even a requirement in order for the home to close and it protects you in the event that the home is not structurally sound. Setting a date for the home to close that works well for the buyer and the seller but still allows for an inspection can be difficult sometimes, but it is doable. Always ask your mortgage banker about the process and how much it will all cost in total. This will leave no surprises. Step 8: Move in The hard part in now done! Now all you have to do is get ready to hire a mover or find a friend to help you move all of your stuff into your new home. If you have a friend help out, it’s courteous to invite them to have dinner or drinks at your new home. Start unpacking all of your stuff and enjoy your new home. Buying a home does not have to be something that is dreadful. With knowledge you can make it less of a headache than it needs to be. Contributor James Link
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