Are you ready to purchase a home? You’ve come to the right place. We’ll go over everything you need to know about the home buying process.
Buying a home is an exciting milestone. From securing a mortgage to narrowing down your wish list, this is your go-to home buying guide. Let’s get started finding your dream home.
See How Much Can You Afford
Knowing how to purchase a home starts with understanding how much you can afford. You’ll want to make sure you have enough for the earnest money deposit, closing costs, and down payment as well.
To start, contact a mortgage lender to see what you qualify for. During this process, you’ll also need to look at your savings and monthly income.
Your lender will verify your employment, your credit score, and your assets. You can download your own credit score for free from the Federal Trade Commission. The higher your score, the lower your interest rate will be.
Your lender will also be looking at your debt-to-income ratio. This ratio determines how much debt you have compared to how much income you have coming in. The less debt, the lower your debt-to-income ratio is.
This ratio also helps to determine your interest rate. If you have a low amount of debt, you could qualify for more. Getting the number, you pre-qualify for will help you determine your budget and how much how you can afford.
What Type of Home Would You Like?
When you first start looking at houses for sale, think about the type of home you’d like. Condos, townhouses, and single-family homes are available at all different price points.
Consider which type of home you’d like so you can narrow down your search. Deciding between one or two is better than looking at them all. Your search is more focused the clearer you are with the direction.
During this time, consider how much work you’d like to do as well. Do you want a finished home or one that is a fixer-upper? When you’re budgeting, you can plan for renovations.
What Features Does Your Home Need?
When you start home shopping, think about what features you’d like in your home. Consider the number of bedrooms, bathrooms, and what amenities you’re looking for.
Ask yourself if you need a garage, a two-car driveway, a large yard, and other features. If you’d like a fireplace or a pool, note these on a list. This will help you and your realtor determine what type of homes to look for.
Determining Your Budget
Your budget is one of the biggest considerations to make during the home buying process. To figure out your budget, you’ll need to evaluate your income and expenses. Write down all the income you have coming in.
Next, write out all your expenses. Your fixed expenses are things you have to pay. Examples include your car payment and student loans. Things such as your gym membership or music subscriptions aren’t fixed.
If you need to make cuts to save more money, look hard at your expenses. You’ll likely find some subscriptions or services you’re paying for and not using. Cut these and save some money.
How Much Is Too Much?
Once you have your expenses categorized you can see what you have left. The 30% rule states that housing expenses shouldn’t be more than 30% of your income.]’;
This is a good rule of thumb to determine how much home you can afford. If you need to make some sacrifices, it’s good to have this number handy. This will help you with your wish list.
Maybe you can’t afford a four-bedroom after all. Or you’ll find that an updated kitchen is more important than a third bathroom. Here, you should also think about your down payment. A large down payment will make your monthly payments lower.
Assess Your Savings
Before you start looking for homes, take a look at your savings account. If you have a large amount saved, you’ll have more favorable loan terms. A higher down payment will also lower your interest rate.
If you put 20% down, you also won’t need to pay private mortgage insurance or PMI. The 20% rule doesn’t work for everyone, however. If you’re renovating or planning to flip a home, it might not make sense to put 20% down.
Working With an Agent
Once you have some ballpark figures, you can enlist the help of a real estate agent. A local real estate agent understands your market and can help you narrow down all the homes for sale.
You’ll need an agent to help with showings and the paperwork needed during the offer and closing process. The seller of the home typically pays your real estate agent fees out of their profit from the home.
The Buying Process
Once you find a home you like, you’ll enter the offer phase of the home buying process. Here, you’ll update your lender with the specific house details. You’ll come up with a fair offer price and submit it to the sellers.
If your offer is accepted, you’ll officially be under contract on the home. From here, your lender works to finalize financing and you start the appraisal and inspection process. After 30 to 45 days, you close on your new house.
Everything You Need To Know To Purchase a Home
When it comes time to purchase a home, the most important thing you can do is to get your finances in order. The more money you have saved and the less debt you have, the better your loan terms are.
Buying a home is a big milestone. Take your time and you’ll find the perfect home for you and your family. For more great real estate resources, check out the blog section for more tips and guides.