Home ownership is a decision that has a profound impact on your life. The financial and emotional investments are enormous! Where do you start?
We’re writing an article about where home buyers should start when buying a house. It will include things to consider, what to look for in homes, and how to get pre-approved for a mortgage loan.
When Should You Start the Home Buying Process?
Once you’ve decided that you’re ready to buy a home of your own, you might wonder, “when should I start?”. Well, the answer to your question is to start as soon as you can!
The earlier that you begin the process, the better. In the long run, you will be able to improve your credit score and save enough money to put a down payment on your new home.
You never know when suddenly things might change in the real estate market, and you’ll be getting priced out of a home. It’s always best to start the process as soon as possible so that you have more time and opportunity to find your perfect place!
What Things Should I Consider When Buying a Home?
There are many factors to consider when buying your own home, including what kind of neighborhood you want to live in, how much money you can put down, and how much you want to spend.
You should also consider what kind of mortgage loan is best for your needs and whether a fixed-rate or an adjustable rate would be better suited. You may want to choose either conventional financing or FHA loans to see which one might work for you according to what you need.
Decide Whether You’re Ready to Buy A Home
Finding out if you’re ready to be a homeowner or not is a crucial step to take when starting the home buying process.
Many people start to worry about whether they’re ready to buy a home after considering the responsibilities that come with being a homeowner. You can ask yourself some questions before you become a homeowner if you’re unsure:
Are you financially stable?
Can you afford monthly mortgage payments?
Is there any evidence of financial stability, such as a steady income or stable employment, or cash reserves to prove that you can afford a monthly mortgage payment?
Are you ready to own a home?
For more information about the steps in buying a home, contact Shield My Deal. We’re here for you every step of the way. We’ll guide you on what you need to buy a house so that you’ll be prepared for the future.
Find Out if You Are Prepared to Buy a House.
You might have decided that you’re ready to buy a home, but are your living conditions prepared to bear a big responsibility, such as buying a house?
Take a look at this list, and see if you are financially prepared to buy your own home.
No pending debt
Have a steady income
A cash reserve to show that you are financially stable and can afford monthly mortgage payments
Savings for fees like down payment, closing costs, and other fees
Credit scores over 620
If you have these qualities, then it’s likely that you’re prepared to buy a home.
Find Out How Much House You Can Afford
You have a steady job to support your finances, and you’ve paid your remaining debt, so the question of what house you can afford comes in.
If you want to know how much house you can afford, then there are a few different factors that will play into this equation.
The first factor is your income and expenses. You need to take the time to figure out what percentage of your earnings goes towards paying living costs – including rent, mortgage, food, transportation, etc. You also need to figure out how much you can afford in terms of a monthly payment for your house.
You have to consider your debt to income ratio. It would help if you were sure that your gross monthly income would be able to cover your mortgage’s monthly payment while preserving money for other costs.
As a serious buyer, you should consider working with a real estate agent or using a mortgage calculator to assess how much you’ll be able to put out when you’re able to buy a home.
The next factor is the downpayment that will be needed for the home purchase, and closing costs are also something to consider. If you’re getting an FHA loan, there’s typically just a 3.5% minimum down payment required as well.
The final factor is the price of the home. You need to figure out how much you can afford and set your budget based on that income.
And just a warning – don’t go for an overpriced house! If it’s not in your financial means, there are others available that will be more fitting.
Put Away Money for Down Payments and Closing Costs
Knowing that you’ll be buying a house, you should have a portion of your savings separated to cover the costs of the house. That includes the closing costs, down payment, and other fees that will come up when you purchase your property.
You should try to save enough money for a 20% downpayment on most homes, but if you’re getting an FHA loan, then there’s typically just a minimum of only needing around a 3.5% down payment.
If you’re unsure of how much downpayment to save, then it’s recommended that you start by saving for the minimum or ask mortgage lenders when they recommend starting to save.
Down payments and closing costs can be overwhelming for a home buyer so save money for them in advance!
What to Expect in Closing Costs
The following list includes typical closing costs and their purposes, as well as the cost range. Fees may differ from case to case. Prices may vary based on your location.
Appraisal fees vary from lender to lender but typically include the appraisal and credit report fee. Charges usually range from $300 to $500.
Typically, when you purchase or refinance a home, the mortgage lender charges an independent appraiser. The appraisal fee usually ranges from $300 to $500, depending on the real estate market in your area and the property.
A title company typically conducts a search to determine whether the property has liens against it. In order to ensure a clear title, it is necessary. Costs for a search typically range from $200 to $300.
This policy covers any liens not disclosed in the title search. Lenders will require you a lender’s title insurance for their protection against undiscovered liens. Just as a lender’s title insurance, you also need to have an owner’s title insurance to protect you in case liens are discovered.
Owners can refinance or sell your home without worrying about a prior lien if the owner’s title is in place. The cost of title insurance policies varies according to the value of the home, and they typically range between several hundred dollars.
The owner’s title is usually around $200
Many states have title companies running the closing process. But in others, they’re customarily handled by attorneys. Prices can range from $400 to $1,000, depending on the transaction’s complexity and your geographical location.
A home appraiser estimates the market value, but any deficiencies are not addressed unless they become immediately evident. You are recommended to have a home inspection performed before you purchase a home, but it is not a legal requirement. The cost will generally be between $200 and $400. But it can be money well-spent if it identifies costly problems that you can have repaired by the seller prior to closing.
Real Estate Transfer and Mortgage Taxes
Taxes on property transfers or mortgages are levied by many states, and with some states, taxes are based on both. The total amount will vary from state to state and from county to county, as well as from municipality to municipality.
Get Pre-approved for a Mortgage
Mortgage pre-approval is an important step in the home buying process because it lets you know what size loan you qualify for.
Mortgage pre-approval includes: contacting a mortgage broker to discuss rates and terms, gathering documentation to show your income, assets, expenses – which can be done ahead of time or as needed throughout the mortgage approval process.
If you’re thinking about a purchase, wait to apply for a mortgage until you’ve completed your search.
Mortgage lenders will check your credit score, your income, assets, and the amount of money you owe on other loans in the preapproval process.
Once approved for pre-qualification, you’ll be told what to expect for closing costs and what monthly payments will be.
The mortgage pre-approval process can take around two weeks, but it’s worth the wait to know if you have enough cash in hand – both literally and figuratively.
See how a uniform mortgage application looks. Each mortgage application consists of eight major sections.
Terms of the Mortgage and Type of Loan
Loan Product Application
Details of the Property and Loan Purpose
Legal Description of the Property
Year of construction
Loan type (new construction or refinance loan)
Primary, secondary, or investment residence.
Information About the Borrower
This section includes the borrower’s identifying information:
Date of Birth
Social Security Number
Years of School Attended
Number of Dependents
Information about the Borrower’s Employment
Current and Former Employer Information
Dates of Employment
Housing Costs (Monthly Expenses) & Monthly Income
Base Monthly Income
Net Rental Income
Dividends or Interest
Income From Other Sources (Child Support or Alimony)
Amounts of Assets and Liabilities
Checking and Savings Account Balances for All Banks and Credit Unions
Mutual Fund Account Values.
Bank Statements and Investments
Other Outstanding Debts
Information About the Transaction
Key Transaction Details
Value of Improvements/repairs
Estimated Closing Costs
Inventory of Judgments
Past Bankruptcies or Foreclosures
The Status of Your Citizenship or Permanent Residency, and Whether the Home Will Be Your Principal Residence
Choosing the Right Real Estate Agent
The right real estate agent can make the entire home-buying process easier.
Choosing a real estate agent to help you with your search can be tough, especially if this is your first time buying property.
The best way to choose an agent for you is to chat with them on the phone or in-person about what you’re looking for and see how they match up with your needs.
A good agent will be invested in you and not only interested in making a sale – they’ll help you find the perfect place for your family to grow.
Go for a real estate agent that you feel comfortable with and who’s knowledgeable about what you’re looking for.
In order to find the right property, a real estate agent should spend time getting to know your needs and finding properties that will meet those needs.
If you feel something is off, ask questions or walk away. An honest, reputable agent should never pressure a buyer into buying something they don’t want.
Avoid an agent that’s more interested in making a sale than finding you the perfect place.
If you’re looking to find a perfect real estate agent that can help you with your needs, you can contact us at Shield My Deal. We have helped many home buyers find their perfect place.
Start House Hunting
The house hunting part of the home buying process is the most exciting part, but it can be challenging to know where to start.
There are a number of stages in the house-hunting process, and each one is important for finding your dream home that’ll fit with your needs:
Finding an agent, you trust who meets your specific qualifications
Researching neighborhoods based on what’s most important to you and caters to what you need
Seeing over homes that match your criteria
Getting prequalified and seeing if you can get financing for the home.
You can start looking for homes in your own neighborhood, in a popular neighborhood you know of, or in the area, you are considering for your next home.
There are also many online resources to help with house-hunting. Online house listings offer a wide variety of homes, and you can find the ones close to your desired neighborhood.
There are also many home buyer tools online that help with the pre-qualification process and finding financing options for potential properties.
In addition to online resources, there are also many real estate magazines available that can help make your house-hunting ways more efficient and effective.
Once you’ve found the perfect home, it is important to do a background check on your potential property, either by hiring an inspector or checking out the reports online yourself.
The information your real estate agent has will always be the most accurate, but if you wish to get a better perspective on homes, there are tools and apps available for house-hunting. You might want to check out these:
It includes the house-hunting features you expect from an app, in addition to a unique “Zestimate” tool that provides home values for each listing. This is not an appraisal, but it allows you to figure out whether the asking price is too high for you.
If you love maps and statistics, you’ll find Trulia helpful. You can view interactive maps of nearby schools and shopping centers, as well as heat maps with data on crime rates, commute times, and demographics, which give you a sense of the area’s vibe.
This website updates its listings every 15 minutes on average. Then you won’t waste time doting on a home that is already sold.
Redfin Real Estate
This app was developed by a real estate brokerage. The listings come with a question box so that you can find out more information about them. Clicking on the date will also provide the next showing date. Decide on when to schedule your tour, and then select a date.
After seeing what’s available, schedule a meeting with your real estate agent to narrow down your searches to the ideal home.
Making a House Offer
When you’ve decided on what kind of home you’ll be getting, it’s time to make an offer to the home seller.
This is where you’ll get to decide how much money you want to spend on the house and what kind of monthly payments will work for your budget.
The more motivated a seller is to sell their home, the better chance they’re going to accept your offer. If it looks like negotiations might not go well, try offering less than what you can afford to spend on a house, and be prepared to leave the offer if negotiations go south.
Following your pre-approval letter, agent, and finding your dream home, you’ll need to make an offer. If you’re serious about buying a house, here’s what you’ll need to do:
Think Strategically: The seller will need to know how much you’re willing to offer and what conditions you desire. How much money you’ll be willing to deposit is also a factor you need to consider before you approach the seller.
Making the offer: A letter containing your offer is prepared with the help of your realtor.
Negotiations: Once a seller receives your offer, he may accept it, reject it, or request changes to it. You can use your agent to negotiate with them if they make a counteroffer.
Get a Home Inspection
Getting a home inspection can be beneficial to a home buyer, especially if you’re not the most knowledgeable about construction.
Home inspectors will give you a detailed report on any problems with the house, from cracks in the foundation to bad wiring and plumbing.
You can either hire an independent contractor or request for your mortgage lender to appoint someone for this job; it’s important that they are licensed so they know what they’re looking for.
It’s important to read the report thoroughly and ask questions as you go through it so that there are no surprises after closing down on a house purchase.
Home buyers can get leverage in their negotiations if they have a home inspection report in hand. This is because the seller will need to address any issues with the house before it can be sold as-is.
Contact Shield My Deal if You Are Ready to Buy Your Own Home
We’re here for you every step of the way. We’ll guide you on what to do and what to avoid.
The process of finding a home can be overwhelming, but the good news is that it doesn’t take long to find your perfect place! Let Shield My Deal help you start looking for your dream home today!