Even though rates of homeownership are falling across the country, for many, owning a house is still an integral part of the American dream.
Since you’re reading this post, chances are you are a believer in homeownership and are curious to know how to take the first steps towards that end.
While we wish we could tell you that the home buying process was easy, in a lot of ways, it’s not. Making the process easier, though, is the purpose of this post on essential house buying tips.
Armed with our advice on home buying, we hope that your journey towards a new place is largely uneventful!
1. Get Your Current Financial House in Order
Before you run off and buy a new home, make sure that your current financial house is in good shape. By that we mean you’ll need to have your debt under control and some emergency savings that you can tap into.
The more debt you carry into a home purchase, the less flexible banks will be when lending to you. That’s because competing debt makes lenders worry you’ll prioritize others before them should cash get tight.
Regarding savings, home maintenance expenses can be unpredictable. To make sure you have what you need to cover necessary fixes, save as close to 1% of your prospective home’s value as possible.
2. Create a Budget and Stick to It
With your debt in check and your savings looking good, it’s time to figure out how much house you can afford. Several people in 2008 faced financial ruin because they overextended themselves on homes that they couldn’t afford.
Don’t replicate that mistake!
When sussing out a home’s price, consider how much money you can afford to drop on a down payment and after, how much your mortgage will be. Remember, your mortgage will cost a lot more than your house’s price minus your down payment divided over however many months are on your loan.
Banks charge interest on loans, which substantially raises monthly payments.
The best way to figure out how much per month you’d need to pay on a particular property is to use any one of the free mortgage calculators available online.
3. Explore Loan Options
Unless you’re rolling in cash, you’ll need some assistance from a bank to scoop up a house. That’s why learning house buying tips in relation to loans is integral to your purchase success!
A popular loan for first time home buyers is the FHA loan. This loan is subsidized by the government and requires in the vicinity of just 3% down when purchasing a house. Military veterans get an even better deal through the VA that enables them to purchase homes with no money down.
If you’re purchasing a multi-family housing unit, commercial loans might also be an option worth exploring.
4. Don’t Overlook Closing Costs
Some home buyers forget to factor closing costs into their buying budget, which can make for a very awkward transaction.
Any time you’re buying a house, bank fees, appraisal fees, title fees, and more will need to be paid. In most cases, these costs are paid by the buyer.
Closing costs vary based on how expensive your house is. You’ll want to talk to an experienced real estate professional to get a good sense of how much you’ll need to have ready to complete your transaction, as not being able to pay closing costs will stall your home’s sale.
5. Connect With a Great Agent
Whether you’re navigating closing costs or just want to understand what’s on the market, a real estate agent is a great resource. Agents are experts at buying and selling homes, so they’re always ready to share helpful information that can make your purchase process go smoother.
What’s better is that agents are paid on commission, and that commission is paid by sellers!
6. Shop Pre-Approved
When making offers on a home, sellers will take you more seriously if you have money ready to purchase their property. Again, unless you have cash on hand, you’ll need to get a bank’s support to make backed bids on properties.
That support usually comes in the way of a pre-approval letter.
Pre-approvals are awarded by banks after they look over your finances and give you the go-ahead to purchase a home up to a certain price. Pre-approvals, of course, are subject to due diligence by the financial institution that awards them as they need to make sure the house you make an offer on is sound enough to purchase.
7. Get Yourself Into a Long-Term Mindset
If you’re planning on being in a location for a long time, buying a house makes sense, as houses become cheaper the longer you hold onto them. If you’re planning on moving out of an area in under 5 years, you’re probably better off renting.
Keep in mind the long-term implications of owning a home before jumping into a purchase. The more stable you anticipate being, the happier you’ll be with your buying choice.
Our House Buying Tips Make Lives Easier
No matter how much you prepare, buying a home can turn out to be a stressful process. Armed with our house buying tips though, you’ll hopefully find that you can side-step a lot of low hanging issues. That’s a benefit worth enjoying!
Our team hopes you keep our tips in mind during your next house hunt. If you’d like more insight, dive deeper into our blog for additional guidance.