So You Want A New Home?
You’re tired of apartment living. You’ve been searching on websites and you think you’re ready to buy your own home. But the home buying process is complex and you don’t even know where to get started.
That’s why you’re reading this article. You need help. Fortunately, we here at Realfi can provide you with that help. So, without further ado, here’s how to buy a new home.
Assess Your Financial Standing
The most important thing to consider when buying a home is your financial standing. Not only do you need to have adequate income in order to purchase a home but you also need to prove that you’ll have that income consistently over the coming years.
As a rule of thumb, you can afford up to 3.5 times what your income is. So, if you make $50,000 a year, you’ll be able to afford a home of around $175,000. Note, however, that, in many cases, you’ll be lent even more than this.
If you have a full-time W2 job, you will only need to show 3 to 6 months of income statements. If you’re self-employed, you’ll need your last two years’ tax returns.
Put Aside a Reasonable Down payment
Generally speaking, it’s wise to put money down at the beginning of the home purchase. Though 20% of the home’s
price is ideal for a down payment, you can get away with as little as 3.5% on many conventional loans. Some mortgages don’t require a down payment at all
Think About Your Future Plans
If you’re going to buy a home, you should be ready to put your roots down for the foreseeable future. Otherwise, if you sell your home too quickly, and you only have small amounts of equity in the home, you’re bound to take a sizeable financial hit.
We recommend planning on living in the home for at least 5 years. If you can’t dedicate 5 years to the house, you would probably be better off renting.
Get Pre-approved for a Mortgage
Now, you can move on to the actual process of purchasing a home. Unless you have a great deal of money in your savings account, you’re going to want to take out a mortgage.
If you are planning on using a mortgage, you should get pre-approved prior to looking for homes. This way, sellers will take you more seriously.
Start Looking for Homes on Websites
Now that you’ve been pre-approved for a mortgage, you should start looking for homes in your area. You can do this on a variety of real estate websites, from Zillow to Redfin to Trulia and more.
Use the website’s filters to narrow down your search criteria. Set a budget, determine how many rooms you would like, decide on square footage, and other such attributes.
These websites should list the vast majority of available homes in your area. As such, they’ll enable you to focus on ones you like and write off the ones you have no interest in.
Find a Real Estate Agent
Though you do have the option to buy a home without the help of a real estate agent, you might find that it’s more complex than you realize. Not only will you have to search for homes on your own but negotiate with sellers and deal with paperwork as well. It can be a fairly stressful responsibility, especially if you’ve never encountered it before.
For this reason, we highly advise hiring a real estate agent. There are bound to be countless real estate agents in your area. Do your research and find one that suits you.
Note, you will have to pay your real estate agent. Note, though, that you don’t have to pay directly.
Generally speaking, both real estate agents (the seller’s agent and the buyer’s agent) get a cut of the final sale price. So, while you might have to pay a little more for your home, you won’t have to pay anything out of pocket initially.
View Your Favorite Homes
Once you have your agent, you should start viewing homes that you’re interested in. Either attend an open house or schedule an appointment with the seller or his or her agent.
While viewing the home, make sure to look past the superficial. Determine whether outlets are working, whether appliances are in good shape, and whether there’s any water damage that has taken place. You’ll also want to test the plumbing as well as things like windows and doors.
Make notes throughout the viewing so that you can compare homes after the fact. And most importantly, take your time. You might be living here for the foreseeable future, so you want to make sure that you’re getting a good investment. If you wish to avoid all that work and risk, hire a licensed home inspector.
You’ve found a home you like. Now, it’s time to make an offer on it. Speak to the seller along with your real estate
agent and try to come up with a price that you both can agree upon.
If there are slight problems with the home, you could talk the seller into fixing them before the purchase goes through. If the seller doesn’t want to fix them, you could try getting the price lowered.
Your real estate agent will be a huge help during this step, as negotiation can be challenging for those who have never participated in it before.
Have the Home Re Inspected
Once you and the seller have come to an agreement, the transaction will go into escrow. During this time, there are a number of issues that will be ironed out. It’s also the time during which you should schedule a second inspection.
Yes, an inspection will cost you extra money, but it’s worth it to ensure that the home is in decent shape and the seller has properly made any repairs identified in the first inspection. Find a home inspector near you by searching “home inspector” on Google. Your inspector will assess the home and determine what does and doesn’t need fixing.
If there are any severe remaining issues with the home, you could even back out on the transaction. So, in other words, having the home inspected is vitally important.
Find an Appropriate Mortgage
You’ve already been pre-approved for a certain amount of financing. Now, it’s time to find an appropriate mortgage for you. There are several different options to choose from, some of which might be better for you than others.
A mortgage broker can assist, helping you to choose from one of the following types of mortgages.
If you have good credit and a reasonable amount of money for a down payment, you are generally going to best off going with a conventional loan. These loans offer good interest rates and allow you to get out of private mortgage insurance after you have 20% equity on the home.
If you have a low credit score or a relatively small down payment, an FHA loan might be your best option. These loans are backed by the government and can help many low to moderate-income buyers.
Looking to buy a home outside of the city? If so, a USDA loan might be able to accommodate you. These loans are specifically designed for homes in rural areas and for those with low to moderate incomes.
USDA loans are beneficial in that they don’t require any down payment. So, if you have nothing to spend at the moment, you could still afford a house.
If you were in the military, you will be able to obtain a VA loan. These loans are designed specifically for military members as well as some military spouses. They require no down payment and come with exceptionally low interest rates.
You might decide to buy a fixer-upper, a house that still needs a little remodeling. If so, you can take out a renovation loan. These loans work in tandem with other loans as a means of purchasing live-in houses.
Close on the Purchase
Once you’ve selected a mortgage, and once the paperwork for it has gone through, you’ll close on the purchase. This will require both you and the seller to sign a variety of other paperwork.
The closing process usually takes a few days but once it’s finished, you are able to move into the house. The keys will be handed over to you and you can arrange to move your belongings.
Need Help Finding a Mortgage?
Have you looked on websites for real estate? Are you ready to begin the home buying process? In need of a mortgage? We here at RealFi can help you. To get started imply fill out the form on this page.
We help buyers find mortgages of all kinds. Regardless of the type of mortgage that you’re looking for, we can assist you in finding the best deal possible.