Purchasing a house is a vital milestone for everyone, but it can be daunting if you don’t’ know what to expect. It also requires a lot of effort and time. Let’s look at steps that will make the home buying process simple and manageable.
Know the Market
When you want to buy a house, first do your research to know and understand the market. Start by looking at real estate listings in magazines, newspapers, and websites.
Highlight specific properties that interest you and monitor how long they remain in the market. You should also keep tabs on asking price changes. This will enable you to know and understand real estate trends in your area.
Try to be as specific as possible when doing research, as things can differ dramatically between cities, zip codes, and even ZIP codes. Real estate in Arizona is different than California, and Old Town Scottsdale homes for sale feature different demand and home sale prices when compared to Phoenix real estate.
The more knowledgeable you are regarding the market you are interested in
Have a Good Credit Score
Before starting the house buying process, you have to ensure you are really in a position to embark on this crucial feat. Unless you are going to buy your house in cash, you will have to seek financing. Getting a loan is not always a straightforward process. Every mortgage lender will check your financial history and credit rating before approving your loan request.
Ensure you look at how your credit rating ranks presently and then begin working on improving it. Preferably, you should have a credit rating of 725 or higher. You can improve your credit rating by paying your debts on time. Your financial history and credit score will influence whether you get a mortgage, and the interest rate you will be charged. If you have a higher credit rating, you will get a mortgage at better interest rates. Ultimately, you can refinance your mortgage later on to secure more favorable rates.
How Big Should Your Down Payment Be?
Even though a mortgage loan spreads out the house buying expenses over a long period, you are still required to have the cash to cater for the down payment. Therefore, you should ensure you save money for a down payment.
You should note that a bigger down payment reduces the monthly mortgage payments and increases your equity. By paying a down payment, you will less likely be required to have mortgage insurance and save on interest. However, you can combine your car and home insurance for cheaper rates.
Determine Your Budget
Before approaching a mortgage provider, it’s vital you evaluate how much home you can afford. You should determine your budget and what you can actually afford to spend on monthly mortgage payments.
When determining your budget, you should not allocate more than 28 percent of your monthly gross income on housing costs and 36 percent on your combined monthly debt payments. Your monthly mortgage payments will include;
• Principal – The funds that you borrowed to buy the house.
• Interest – The amount that the mortgage provider charges you to borrow the money.
• Taxes – Property taxes that you have to pay to the government depending on your house’s value.
• Insurance – Homeowners insurance cover that protects your house against damages.
• Association fees- These are the fees you must pay if your house is part of a property owners’ association.
Get Pre-approved
Before you begin searching for a house, you have to determine how much you can spend. An effective way of doing that is getting pre-approved for a mortgage. To get prequalified for a mortgage, you have to provide your financial details to a mortgage provider including, your income, investments, and savings. When you get pre-approved for a mortgage, the mortgage lender guarantees that you can obtain the mortgage provided your financial status doesn’t change.
A mortgage preapproval will indicate exactly how much funds the mortgage provider is prepared to advance you and specify the expenses of obtaining the mortgage. Additionally, a mortgage preapproval will show home sellers that you are a serious home buyer who is willing and able to purchase their listed home.
Hire a Good Realtor
Real Estate agents are vital players in the home buying process. A realtor represents your interests throughout the house buying process to make sure you buy the most suitable house, ask the essential questions, make the right offer, and have the authority to receive and negotiate the necessary disclosures.
Realtors take the stress out of the house buying experience as their knowledge of the market, familiarity with the location you wish to live in, and negotiation skills have proved extremely valuable to home buyers.
Additionally, realtors’ skills and expertise are provided to you without charge – they receive compensation from the commission paid through the buying price of the home. Therefore, the home seller pays for your realtor representation.
You should work with the right real estate agent to enjoy the above benefits and more. To find the right realtor, as a prospective realtor, the following questions:
• What differentiates you from other realtors?
• How many years have you worked as a realtor?
• What expertise do you have in locating houses in my price bracket?
• How many clients are you presently working with?
• Are you willing to give me referrals?
• How conversant are you with my preferred location?
Realtors play an important role in a stress-free and successful home buying process; therefore, it’s vital you work with the right one.
Begin House Hunting
Once you have your priorities in mind, you should start shopping for your new home. However, do not be too choosy until you visit the listings because high chances are most listings will not perfectly match your dream house.
When you visit every listing, ensure you reflect on the community the house is situated in. Before every open house or tour, drive around the neighborhood. Examine how your commute would be. Find out the schools your children will attend and determine how much time it will take them to arrive. Research about where the nearest pharmacy or grocery store is located.
When touring each property, make notes, and take photos. Ensure every house meets your requirements. You should also consider the condition of the property by looking out for the following problems:
• Electrical and plumbing issues
• Poor insulation or HVAC system problems
• Foundation issues like big cracks on walls and slanted floors
• Noticeable water damage on walls or ceilings
• Gas furnaces or chimneys that require replacements or repairs
• Presence of asbestos, radon, carbon monoxide, or lead paint
While a property in poor condition may appear as a steal, remember you are the one who will incur repair expenses.
Make an Offer
After locating the right house, your real estate agent will perform a comparative market examination to determine a fair price derived from the recent sales of comparable houses in the area. The longer a property has been on the market and the less interest it has, the more negotiation power you will have.
Get Home Inspection
Once your offer has been approved, you should schedule a house inspection to be done. You should contract a professional home inspector to examine the property you want to purchase. A home inspection is vital since it identifies areas needing immediate major renovations or repairs.
If the house requires significant renovations, you should request the seller to do them before closing the sale. If the seller refuses to take care of the renovations, you should withdraw your bid.
However, if you include an inspection contingency on the sale agreement, you will have guarantee the renovations will be done, the expenses are deducted from the buying price, or the agreement is terminated, and you get a refund of your money.
Have the House Appraised
Before your mortgage provider agrees to release the funds, you have to appraise your house. The home appraisal will estimate your house’s value based on public records, market trends, comprehensive home inspection, and similar sales.
Home appraisals ensure the buying price of the house is in line with its true worth. Therefore, mortgage providers insist on a house to be appraised before releasing the money to ensure they do not give out more money than the property’s value.
Close the Sale
When closing the sale, you will sign all the legal documents needed to complete the buying, including the closing disclosure, certificate of occupancy, and deed of trust. You will also be required to pay the closing expenses, which may include mortgage application fees, title search fees, survey fees, and appraisal fees.
