Do you feel like your money is going nowhere when you pay your rent? Have you decided to build a family and settle down? Do you wish to have “nest” of your own? Then, it is time for you to start buying your first house.
Owning a home has both long term and short term benefits for you financially. Investing in a home is an excellent way to acquire an asset. An asset that “appreciates” not “depreciates” is suitable for your long term financial standing. Your personal wealth also increases in the form of home equity. It’s market value increases over time compared to owning a car.
When you purchase a home, your monthly payments for rent will convert to the monthly payment for the mortgage. That means your money is sure to be put in something worthwhile. This is its short term financial benefit. Take careful notes on the steps that you need to hurdle on to succeed in buying a home that would not give you regrets in the future.
4 Questions You Should Ask Yourself Before Going through the Process
1. Is it really time to buy a home?
Never be wavered because of influences by other people or situations. You are the only person who can say if it is really time to buy a home. Common unsolicited advice from friends and family are: “You are wasting your money on rent” or “Buy a home; all your friends own one” – do these sound familiar? Do not buy a home just because mortgages are low at the moment. Buy a home because you need it and you intend to stay there for the next years of your life. Get a home because you are settling down. Buy a home for all of your honest reasons.
2. What kind of home do you prefer?
Do you prefer a residential home or a condominium unit? Take a look at the features that you would like your home to have. Think of the size, the location, the proximity to important places, furnished or not, and the like. Make a list and constantly check that list if you are still geared towards your dream home.
3. Can you afford what you have written in number 2?
If yes, then go on ahead. Do not be afraid of the big numbers that would inevitably pop out when you start computing. Ponder on securing down payment, mortgages loans, property taxes, or monthly expenses. Make a financial plan.
4. Do you need someone to help you or can you purchase alone?
Often, it is a better choice if you hire a real estate agent to do the work for you. They know the procedures and market better than we do. But, if you have time, you can do research and leg work on your own.
Steps in Buying a Home
Basing your answers from the four questions, are you ready to buy a home? Now that you have a better and clearer understanding, following this step by step procedure of buying a home will assure you that you will win in getting your abode.
STEP 1. Find the most suitable home for you and your family.
Now that you have a current list of the house and features that you prefer (go back to questions number 2), it is time for specifics. You have to specify the list and get some choices. Do you consider having 2 or 3 bedrooms? Is having a garage essential in the choosing of the home? Does neighborhood and your “would be” neighbors matter? Be overly specific if possible. Then, we will have to make some compromises. For obvious reasons, we cannot get all that we prefer. We have to let go of some preferences and focus on what is more important. Building a hierarchy of importance will help in this delineation.
STEP 2. Prepare your down payment.
If you are in this step, this would mean you have already started to save or prepare for the down payment as you have the intention to buy a house. Generally, all home sales require down payment upon purchase. The down payment will determine what kind of mortgage you will have and how much you can borrow to afford you a home. Usually, the ideal down payment is 20% of the price of the house. If you still do not have that much, you can check out lending agencies that offer down payment assistance. Moreover, some mortgages require lower down payments so worry not.
STEP 3. Calculate the numbers.
There are three things that you need to check, make sure and settle.
Your income. To get your housing loan, check that your monthly cost does not exceed a percentage of your income. The banks or lending institutions will appropriate this percentage. For example, if your monthly income is $5,000 and the bank sets the percentage at 25%, then your monthly costs should not exceed 1,250.
Your Credit Score. Credit scores play a vital role in mortgages. This is computed based on how you manage your other credits like paying on time, paying the amount due or credit utilization. In the range of 300 to 850. A good credit score is around 650 to 700.
Your current debts. If you have active debts, the banks will also compute your total debts plus the mortgage to get. They will then compare it with your income. They will not allow if the total exceeds more than the percentage they require.
At this point, you might want to compare mortgage lenders. Get options but not too many so as not to cloud your judgment.
STEP 4. Get Pre-Qualified and Pre-approved.
After choosing the mortgage lender, get pre-qualified. The lender will give you an estimation of how much loan will be granted after much scrutiny of your prepared financial documents. Once you have an idea, get Pre-approved also. This will entail more paperwork, but it guarantees you that you are about to buy a home because you are somewhat 85% approved of a mortgage loan.
STEP 5. Contact your assistance.
If in the fourth question above, you answered “no”, then proceed to step 6. If your answer is yes, contact or hire a real estate agent to do the work with you. You have your preferred home specifics, down payment, and pre-approved loan already – let the house hunting begin. Do not forget to settle the real estate’s commission too.
STEP 6. Look for that house and make an offer.
Go back to your specific dream house list. Remember the compromises? Workaround what is right for you. You cannot have it all, but you will surely be happy with the most you can get. Contact the seller and make an offer. Negotiate. Do not be afraid. This is part of the sales procedure.
STEP 7. Inspect the home and get it appraised.
Most sellers would have a certified home inspection report. Check and balance this report. If you have the capacity, get a second opinion from your end. You do not want to have faulty wiring, bad foundation, rodents, or blocked pipes trouble when you move in. Similarly, your lender will appraise the home to check if it is a worthy investment. This is a standard procedure.
STEP 8. Close the sale and move in.
There you have it. We have covered all the relevant areas in acquiring a home. It is a long process, but very rewarding.
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