Buying a house for most people is a dream come true. While the excitement can overtake you, you need to be very careful in the steps you are about to take. In the first place, you need to analyze if you can afford your dream house. But affordability involves a lot of factors other than the usual finances.
The entire buying a house process can be daunting when you begin to get deeper in analyzing the down payments, credit scores and mortgages. However, with the right information, you will succeed in owning your dream house. Are you ready to buy a home?
Read on.
When Should You Buy A House?
Owning a house is more like a blessing; however, timing is critical. As an individual, consider the factors below to determine if you are ready.
Assess your financial strength: Do you have a consistent income? You need to raise a reasonable amount for a down payment. If you buy a house and your financial status is low, you will only hit a block of financial disaster. The entire journey will be chaotic and stressful.
Examine the housing market: It would be better to look for a house that will add more value as it may be necessary to sell the house in the future. So you will need to make a profit rather than a loss. You should look for a real estate agent to help you analyze such homes while making your decision.
Stage in life: Ensure you are buying a house if you will be in that area for a long time, preferable over seven years. Besides, the process is quite expensive, so it will be a loss to buy then move the following year. Therefore, if you move to a place permanently, wait a maximum of a year before starting the process of buying a house.
Let’s get started on the process of owning your dream house.
Down Payment
The financial talk is never fun and easy compared to browsing different house pictures online. It is crucial to get your funds in place to ensure your beautiful moments in your house will never meet any financial stress.
Buying a house is among the vital resolutions you will ever make in your life. Therefore, a solid financial foundation is critical.
To begin with, even if you have a stable income that can confidently raise a down payment; you need to have emergency funds as well. Usually, after buying a house, your expenditure starts straining, and that’s when the emergency kitty comes in handy. Besides, you need to be able to handle any repairs and necessities from your pocket. It would help if you saved enough for about 3-6 months after the purchase. Read on.
Down payment of a new home is usually 20 % which is better to inhibit the PMI (Private Mortgage Insurance). Remember that this is usually an additional monthly cost to your mortgage payment and it doesn’t offset any balance. Remarkably, there are ways to get down payment assistance that will ease your load.
Still, it would be best if you afforded the closing costs and prepaid. Hence you will need to save an extra of about 3 % of the total cost. This will depend on the variation in taxes of different areas. Also, you need to factor in moving and extra expenses. Moving costs will depend on how far and how much you are moving. It would help to call moving companies to get different quotations before making a decision. Extra costs include repainting or any remodeling of your new house before you move in.
So, saving for a down payment needs a plan and commitment; get started!
Mortgage
As crazy as this may sound, the best way to buy a house is with cash. Yes, it is possible! Besides, people do it every day regardless of the cost.
But if you opt for the mortgage route, you need to first pre-qualify for one. Depending on your lender, the preapproval process will take time since the lender will need to verify your financial statement before submitting your initial funding loan. The long process does pay off since it shows your seriousness when you use the preapproval letter.
So how do you decide on the right mortgage plan for you?
Getting the right mortgage helps you set the correct boundaries to get your dream house in your budget and comfortable repayment journey as well. For instance;
Fixed-rate loan ensures a secure interest rate as long as you have the loan and safe from the rising rates.
A 15-year term means that you will have a higher mortgage payment in this term, but you can offset your mortgage within the duration to save on the interest rates.
A maximum of 25 % monthly payments from your salary is also ideal. With this, you have extra cash to plan for other investments like a retiring plan or an education fund for your kids.
Always adhere to what you can afford and ensure you agree with your spouse on the terms.
Real-Estate Agent
Even though online searches are manageable, you need to get an expert to help you get the best deal for your house.
There are several benefits of having a real-estate agent on-board. For example, they will help you get a house before it is put on the market, and they will also help you bargain and ensure you don’t pay an extra penny from your budget.
Also, bear in mind that a house agent does not work for free. However, the house seller will settle the costs; hence, you will get free services. Also, ensure you work with a reputable or a real estate agent company with correct credentials to avoid mouse-chase.
House Hunting
Finding your house after your mortgage is preapproved is the most exciting part of the process. Also, with a real estate agent by your side and ready financing, the chances of getting a perfect house are high. But, not too fast just yet!
Before you hit the road to view various houses, you need to have a list of the features you and your spouse wish to have in your home. Then, share the list with the agent to ensure you are on the same page before the search. With the agent viewing your list, they will help you settle on realistic expectations and the areas you can afford.
Present an Offer
After finding the perfect house, you need to submit your offer and sign a contract with the seller. At this stage, your agent will help you present a definite proposal. Most likely, you may have other buyers bidding for the same property but do not worry. This is where the preapproved letter will come in handy to convince the seller to look your way.
Be ready for either a tough negotiation or a quick and easy process. At times, you may need to compromise on little details to save you more headaches, and at times you may need to walk away. Again, your agent will be in a better position to advise an appropriate move.
Ensure you have a well-drafted purchase agreement that includes all the necessary details.
Home Inspection and Appraisal
Congratulations on this far, you are almost there! At this level, you are under contract with your new home; hence the time-consuming stages are over.
Now, you will need to meet the contract conditions for the final purchase to take place. The contingencies you will be working on will ensure your deposit’s safety just if you wish to back out of the agreement. Even with all the excitement, never skip working through the contingencies for the sake of your purchase protection.
You need to do a home inspection. In case of significant changes you would want, you can ask the seller to do or reduce the cost so you can take care of them. Still, it would help if you got experts for termite, mold inspection subject to your new house’s condition and age.
During an appraisal, your lender will require an evaluation of the new home. The assessment will protect you from paying more than the actual value of the house. Always seek your agent’s advice in case of a lower or higher appraisal outcome.
Finally, it’s time to get that mortgage approval. This time the lender will finalize your financial statement to approve your mortgage. All in all, avoid getting into more debt, changing jobs when you are under mortgage if you want stress-free repayment duration.
Closing the House Purchase
This is the final stage of getting the keys to your new house. Before that, you need to get down on the paperwork. It would help if you received the documents before time to get a review on all the details.
Ensure you know what you are paying for, so don’t feel shy to ask what you don’t understand. Besides, this is a significant purchase, so be very keen on all the details before putting in your final signature.
Buying a home is not easy, but the results are worthwhile with the correct procedure. Nothing beats the feeling of being the owner of a beautiful house.
