Everything You Need to Know About Buying a House You’ll Love
If you’re thinking about buying a house then you’ll need all the help and advice you can get to make sure you make the right decision. Check out this blog post for a few handy hints and tips on this subject!
Despite fluctuations in the housing market over the past decade, economists still agree that home ownership is key to building wealth. Homeowners enjoy the unique benefit of building equity, which can help them increase creditworthiness and save for other big purchases.
But while there are many benefits associated with homeownership, there are also significant responsibilities. When you own a home, it up to you to maintain the property. This means you’re on the hook for expenses like a leaky faucet or a broken refrigerator, which can add up quickly.
So, before you start on the adventure of buying a house, it’s important to do your research. Check out this house buying guide to learn everything you need to know to get the perfect place for you.
Know What You Can Afford
It’s important to determine what your budget is before you start looking at properties. There’s no sense in touring a gorgeous house and falling in love with the remodeled kitchen only to find out you can’t afford it.
If you’re buying a house for the first time, it can be confusing to figure out what you can afford. Here are a few steps you should take.
Types of Loans
Before you start looking at your bank account, you should understand the types of loans available to home buyers. Most home buyers use one of three types of loans: conventional, FHA, or VA.
Conventional loans typically offer the best interest rates but are harder to qualify for. A buyer will typically need a credit score of at least 680 to qualify for a conventional loan. By contrast, government-backed FHA loans are available to buyers with credit scores as low as 580.
If you choose an FHA loan, you will have to pay mortgage insurance, which protects the lender against defaults. You will also have to purchase mortgage insurance for a conventional loan if you put down less than 20% for a down payment.
VA loans are only available to those who have served in the military. These loans offer full-financing, meaning you won’t need to make a down payment.
In short, conventional loans are best if you have a high credit score and/or a significant amount of money for a down payment. If you are unsure whether you can meet the requirements, you might be better served by an FHA loan.
Your Debt to Income Ratio
In addition to looking at your credit score and your down payment, underwriters will also want to calculate your debt to income ratio before offering you a loan. For both conventional and FHA loans, you will typically need a debt to income ratio of 43%.
To calculate your debt to income ratio, the underwriter will consider all current monthly debts, such as student loans, credit card debt, and car payments, plus the debt you would take on with the mortgage payment.
If you’ve ever taken out a car loan, you probably had to provide paystubs showing two month’s worth of income. When you purchase a home, however, you will need to show two year’s worth of income.
Monitor the Market
Like anything else in the economy, the housing market fluctuates. As a homebuyer, the key is to monitor the market so you know what homes in your target area typically go for.
Do Your Own Research
Before you start working with a real estate agent or looking at homes, it is a good idea to do some online research on your own first. This will help you develop an understanding of the current housing market.
Try using a resource like the one found on this page to monitor prices in your area. Once you start getting a feel of which neighborhoods have the most to offer in your price range, you can start looking at homes in person.
Find a Real Estate Agent
No matter how much time you spend looking at homes, you likely don’t have time to make it a full-time job. By contrast, a real estate agent has a deep understanding of the market. Not to mention, the agent does not get paid unless you find a home you love.
Make an Offer
Once you find a home that you can afford, that checks off your priority boxes, and is at the right price, it’s time to make your move. Once you get into the offer stage, there are a few things to keep in mind to make sure you get a good deal.
Get an Inspection
Before buying a home, it’s important to know what you’re getting yourself into. Make sure that any offer you agree to is dependent on an inspection.
There are some issues that will come up in an inspection that are not necessarily a big deal, like a leaky faucet or a sticky window. If there are issues with the roof or wiring, however, these are issues that may be cause for concern.
Understand All the Costs
When you make an offer on a home, you want to consider the full cost, not just the listing price. There will also be closing costs and a home inspection.
Also, most loans require a home to meet certain requirements. For instance, the roof or electric wiring might need to be up to certain standards. If the house does not meet these requirements, the repairs will need to be made before the underwriter will issue a loan.
Get Started on Buying a House
With these tips in hand, you will be ready to get started on buying a house. Before you know it, you’ll be decorating your dream home.
What tips do you recommend to first-time homebuyers? Let us know in the comments!