8 STEPS TO BUYING A HOUSE TO HELP YOU THROUGH THE HOME BUYING PROCESS If you’re in the market for a new home. You should follow these expert tips to buying a house. Many people a new home but don’t know where to start. There are many things to consider before buying a home. The worst thing you can do is rush things, ending up in a home you don’t love. We’ve put together a a step-by-step Guide showing you what needs to be done before buying a house. This list is great for first-time homebuyers and those buying their second or third home that want to avoid common mortgage mistakes.
Step 1. Before you buy you should check your free credit scores There are several sites that allow you to get your credit scores for free. The websites below allow you to view and monitor your credit report and scores for free, they even have phone apps. Credit Karma Wallet Hub Credit Sesame Once you have an idea of your FICO score you can see if you’re in a position to get approved for a mortgage. The credit score requirements for a home loan depend on the type of loan you get. The two most popular types of loans are, FHA and Conventional loans.
Step 2. Check if you have enough for a down payment on a home You’re going to need money out of pocket for the down payment on your home. The down payment is a percentage of the home purchase price you need to bring to the table. FHA and 203k loans require a 3.5% downpayment. Conventional loans will require between 5%-20% as a downpayment. If you live in a rural area then you should check to see if your area is approved for a USDA loan. USDA loans require no down payment but are only available for properties in rural areas in the country. Veteran’s may be eligible for VA loans, which also does not require a down payment. Make sure you have enough money in your savings account, 401k, or any other investment account for all the mortgage costs.
Step 3. How much house can you afford? Knowing what you can afford is an extremely import step in the home buying process. Your income compared to your debt obligations is called your debt-to-income ratio. Your front-end Debt to income (DTI) ratio should not exceed 31%. This is your monthly income compared to your monthly debt obligations minus the housing payment. DTI is the amount of your monthly mortgage payment compared to your monthly income after figuring in the mortgage payment..
Step 4. Find a house you like within your price range After you know how much house you can afford. Look on Trulia to find homes in the area you want to buy in. Make sure you’re interested in homes within your budget. Some people may find that they don’t like any of the properties in the price range they can afford. If this is the case you should work on paying off your monthly debts in order to get approved for a larger loan. Remember just because you can technically afford a home doesn’t mean you really can in reality. If your debt-to-income ratio is under 40% thats great, however, it doesn’t take into account many expenses especially if you have kids. Go over your budget to see how much of a mortgage payment you really can afford.
5. Get the right type of mortgage There are many types of home loan programs available, you should speak to multiple mortgage companies and loan officers to determine which one is right for you. FHA loans are the most popular mortgage option for first-time homebuyers because of their low down payment and credit score requirements. If you’re a Veteran then a VA home loan will save you tens of thousands of dollars. They come with no money down and no monthly mortgage insurance premium. USDA loans are another type of Government mortgage program to help develop rural areas of the county.
Step 6. Make a list of features you want Okay. You just got your pre-approval letter. Before going out house hunting you should make a list of features you want. How many bedrooms and bathrooms do you need? Do you need a home office? Media Room? Do you want an open layout? These are important questions you need to know the answer to. Really think about the things that you want, and things that are deal breakers. Open layouts are great, but if you have kids and the game room is right above the living room with no walls separating the two, the noise could be unbearable. What is the view? If the view is a sore sight, or right behind a fire station that’s something you have to think about. This is not temporary, you will be seeing the same view as long as you’re in the home. Make sure you think of all the possibilities and don’t settle.
Step 7. Hire a great real estate agent Real estate agents are vital to the home buying process. Some people believe they don’t need a realtor because they can do it themselves, or they don’t want to pay a realtor. Sure. You can do it yourself, but I can almost guarantee, if you don’t have real estate contract experience you will do more harm than good. Realtors know what to look out for, what the seller should pay for, they are really on your side throughout the entire process. This is so important if you want the home buying process to go as smoothly as possible. You do not pay the realtor’s fee. Realtor commissions are built into the price of the home. The seller always assumes they will be paying 3% of the sales price to the buyer’s agent. We can refer you to a local agent if you aren’t currently working with one.
Step 8. Get a home inspection Some first-time buyers believe they can save a few hundred bucks by pre-going the inspection on the property. While lenders do not require you have the home inspected before completing the mortgage loan process, it is an absolute necessity. A home inspection will reveal any potential issues that may need to be repaired prior to the final walk-through. You can use the inspection to help you negotiate these repairs on the home be made at the sellers expense. The home will be apprised by the lender, and this is an expense the homebuyer is reasonable for. A home appraisal protects the homebuyer and the lender from offering a loan for more than the fair market value of the property.
Sources: http://www.thelendersnetwork.com https://artesiantitle.com/