When you begin to look for your first home, it is an overwhelming experience. The process easily becomes difficult if you have no idea where to start.
To have the most efficient and effortless home-buying experience, it is important to do a little homework first.
Keep in mind certain terms and procedures throughout your search to avoid making common inexperienced homebuyer mistakes. Additionally, research everything.
The more research you do on how to purchase a house, the better prepared you are to find a unit to fit your current and future needs without breaking your budget.
Buying a home does not have to be a monumental task. If you employ a little due diligence and keep organized, the experience is exciting. Below are some tips and tricks experienced house buyers have compiled. Take a look at the following topics to formulate the best plan for buying your first home.
How to Determine Your Mortgage Amount
Before you even begin looking at a housing unit, determine your mortgage. Get in touch with a mortgage lender to determine what your qualification ratio is. A qualification ratio determines the loan amount the lender is willing to offer you. Keep three rules in mind as you determine your mortgage.
First, do not take out a mortgage where the monthly payments are more than a third of your household income. If you are unsure of what a third of your monthly income is, use your gross monthly income as a base to help you calculate it.
Second, take the total property costs into account. Total property cost refers to homeowner’s insurance, the mortgage, property taxes, and associated fees. Ideally, all these costs are around a third of your monthly income or less.
Finally, figure in the debts you currently owe. Your future mortgage, student loans, and automobile payments belong in this category. Your debt should be no more than 40 percent of your monthly income.
Before You Buy a House
Preparation is key in the home buying process. Before you even think to start looking at homes, start saving money for it. One of the biggest mistakes inexperienced homebuyers make is to forget about saving money for the down payment.
A down payment is around 20 percent of the total value of the home you are interested in and must be paid upfront. It is never a good idea to offer a down payment under 20 percent of the home’s total value. In many cases, you end up with higher payments and a worse deal if a bank approves your down payment at all.
Once you have your price range, calculate what your lowest and highest down payment range is before taking the next step. This gives you time to begin saving.
As you begin to save, focus on improving your credit score as much as possible. Credit scores are crucial for obtaining a good mortgage. To improve your credit score, check it regularly while paying off balances as quick as possible and make a point of paying on time. Once you close on your home, do not apply for new lines of credit.
If you are looking at buying a home with another person, do not forget about his or her credit score. Mortgage lenders consider each buyer’s credit before deciding on the mortgage loan. Even if your credit score is high, buying a home is difficult if your partner’s score is not. Before applying for a mortgage loan, sit down and discuss all credit scores beforehand.
Organization cannot be stressed enough when you are buying a home. Depending on your housing market, you may be competing against several other bids on a home. To increase your chances of closing on the home of your dreams, you must be fast and efficient.
Try to gather all necessary documentation beforehand to make buying a home easier. Examples of documentation include the mortgage application and proof of income. Proof of income can be W-2 forms, pay stubs, or bank statements. For any freelancers, bring in documentation of income such as tax returns.
How to Compare Mortgages
When you are conducting research on homes, designate time to look at mortgage offers. A good mortgage is the key to finding a long-term home. When you begin looking, get pre-approved for a mortgage.
Pre-approval provides you the ability to make an offer quickly on your dream home. If you fail to obtain pre-approval, you must wait until you are approved to make an offer. In a competitive market, this could mean the difference between getting your home or having it swiped out from under you.
It is important to understand the different types of mortgages at your disposal. Different types of mortgages offer different rates and deals for your current situation. For example, a fixed-rate mortgage may be better for your situation than an adjustable rate mortgage.
Depending on certain circumstances, you may be able to utilize federal assistance for first-time homebuyers.
Consider the length of time for each mortgage. In most cases, the longer the loan term, the higher your interest rate is going be. If you find it difficult to compare the different mortgages, many online calculators exist to help you determine which option is best for you.
Decide What You Want
Knowing what you are looking for in a home and in the price, is half the battle. Your lifestyle now may require certain factors, but what about the future? When you consider a home, you are considering a place you want to grow into.
Planning a future family means considering future utilization of space and relative access to schools and family friendly neighborhoods. Designing a checklist of your requirements, current and future, is the best option. If you keep a physical reminder of what you are interested in, you streamline the search. Try not to be too detailed.
Determine what are the deal breakers for you in a home and stay flexible on the rest. A home is not likely to contain every one of your requirements, so only stay firm on your core factors. This helps you keep your expectations realistic and allows you to find the right home with less effort.