Many people dream of home ownership but it mandates homework, legwork and considerable effort on your part to ensure that the process goes as smoothly as possible, and you don’t bite off more than you can chew. Here’s how to make your dream become a reality. This article assumes you will be using a lender.
Here are the main 6 steps to buying a house:
Step 1: Strengthen your credit.
The higher your FICO score, which ranges from 300 to 850, the better rate you’ll qualify for. Get a free copy of your credit report so you can see what the lenders see on your credit history. Pay off credit cards and resolve any credit disputes or delinquencies.
Step 2: Determine how much house you can afford, and how much you’ll likely be able to borrow.
- You will be expected to put down 10-20% of the appraised value of a home. (Note that the appraised value may be higher or lower than the selling price of the house.) If you have $30,000 saved for a down payment, for example, you can use it as a down payment for a home between $300k (10% down payment) or $150k (20% down payment). Putting down less than 20% often, but not always, requires you to pay private mortgage insurance (PMI), which increases your monthly housing cost but is tax deductible.
- Find out what ratios lenders are using to determine if you qualify for a loan. “28 and 36″ is a commonly used ratio. It means that 28% of your gross income (before you pay taxes) must cover your intended housing expenses (including principal and interest on the mortgage, as well as real estate taxes and insurance). Monthly payments on your outstanding debts, when combined with your housing expenses, must not exceed 36% of your gross income. Find each percentage for your monthly gross income (28% and 36% of $3750 = $1050 and $1350, respectively).
- Calculate your expected housing expenses. Estimate the annual real estate taxes and insurance costs in your area and add that to the average price of the home you’d like to buy. Also add how much you can expect to pay in closing costs. Put the total into a mortgage calculator. If the figure is above 28% of your gross income then you will have a hard time getting a mortgage.
- Determine whether you need to sell your current home in order to afford a new one. If so, any offer to buy that you make will be contingent on that sale. Contingent offers are more risky and less desirable for the seller, since the sale can’t be completed until the buyer’s house is sold. You may want to put your current house on the market first.
Step 3:Get pre-approved (not pre-qualified) to get the actual amount you can pay.
Apply to several lenders within a two week period so that the inquiries do not damage your credit report. Do this before contacting a real estate agent so you have a firm idea of what you can afford, and you don’t accidentally fall in love with a house that you cannot afford.
- If you qualify, check out first-time buyers’ programs, which often have much lower down payment requirements. These are offered by various states and local governments. You may also be able to access up to $10,000 from your 401(k) or Roth IRA without penalty.
- If you can’t afford a 10%-20% down payment on your home, but have good credit and steady income, a mortgage broker may assist you with a combination mortgage. In that, you’re taking out a first mortgage up to 80% of the value of the home, and a second mortgage for the remaining amount. While the rate on the second mortgage will be slightly higher, the interest on it is tax-deductible and combined payments should still be lower than a first mortgage with PMI.
Step 4: Go house shopping.
Unless you’re under the gun time-wise, look at as many homes as possible to get a sense of what’s available. Don’t rush into buying if you don’t have to.
- Sign up for an MLS (Multiple Listing Service) alert service to search on properties in your area so you can get a feeling for what is on the market in your price range.
- Find a good real estate agent to represent you in the search and negotiation process. The real estate agent should be: amiable, open, interested, relaxed, confident, and qualified. Go into exhaustive detail when describing what you want in a home: number of bathrooms and bedrooms, attached garage, land and anything else that may be important, like good light or a big enough yard for the kids.
- Define the area you’d like to live in. Scout out what’s available in the vicinity. Look at prices, home design, proximity to shopping, schools and other amenities. Read the town paper, if there is one, and chat with the locals. Look beyond the home to the neighborhood and the condition of nearby homes to make sure you aren’t buying the only gem in sight. The area in which your home is located is sometimes a bigger consideration than the home itself, since it has a major impact on your home’s resale value. buying a fixer upper in the right neighborhood can be a great investment.
- Visit a few open houses to gauge what’s on the market and see firsthand what you want, such as overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage. Visit properties you’re seriously interested in at various times of the day to check traffic and congestion, available parking, noise levels and general activities.
- If you are unsure about the price, have the home appraised by a local appraiser. Never buy the most expensive house in the neighborhood! When appraising a home, appraisers will look for “comparables” or “comps”, homes in the area which have similar features, size, etc. If your home is more expensive than the comps, or the appraiser has to find comps in a different subdivision or more than 1/2 mile away, beware! Your bank may balk at financing the home, and you probably won’t see your home appreciate in value very much. If you can, buy the least expensive home in a neighborhood — as homes around you sell for more money than you paid, your home’s value increases.
Step 5: Make an offer.
- Include earnest money with your offer.–usually $1,000 to $5,000. Once you sign an offer, you are officially in escrow, which means you are committed to buy the house or lose your deposit, unless you do not get final mortgage approval. During escrow (typically 30 to 90 days), your lender arranges for purchase financing and finalizes your mortgage.
- Make sure final acceptance is predicated on a suitable home inspection. Request the following surveys and reports: inspection, pests, dry rot, radon, hazardous materials, landslides, flood plains, earthquake faults and crime statistics. (You will generally have 7-10 days to complete inspections–be sure that your agent explains this fully to you when signing the purchase and sales contract.) A home inspection costs between $150 and $500, depending on the area, but it can prevent a $100,000 mistake. This is especially true with older homes, as you want to avoid financial landmines such as lead-paint, asbestos insulation and mold.
Step 6: Close escrow.
This is usually conducted in a title office and involves signing documents related to the property and your mortgage arrangements. The packet of papers includes the deed, proving you now own the house, and the title, which shows that no one else has any claim to it or lien against it. If any issues remain, money may be set aside in escrow until they are resolved, which acts as an incentive for the seller to quickly remedy any problem areas in order to receive all that is owed.
|
|
How to Buy a House in California NEW by Ralph Warner $29.67 |
|
|
No Credit Required: How to Buy a House When You Don’t Qua , Ray Mungo; Robert H. $1.50 |
|
|
Cuisinart DCC-RWF1 Replacement Coffeemaker Water Filters, Set of 2 $4.45 Cuisinart DCC-RWF Coffee Water Filter Replacement… |
|
|
Whirlpool PUR Side by Side Refrigerator Push Button Cyst Reducing Water Filter … |
|
|
Cuisinart DCC-RWF-6PK Charcoal Water Filters, 2 Year Supply, Includes 6 DCC-RWF packages. 2 Filters $30.76 The Cuisinart DCC-RWF-6PK Charcoal Water Filters, 2 Year Supply, Includes 6 DCC-RWF packages. 2 Filters Per Package a Total of Twelve [12] Filters. fits models BC-00PC2 CBC-00 CBC-002 CBC-00BJ2 CBC-00BWBJ CBC-00BWPC CBC-00PC2 CBC-00PC4 CBC-00PC5 CBC-00SA CBC-00SA2 CBC-00SA3 CBC-00WPC CBC-4400 COD-400PC DCC-100 DCC-1000 DCC-1100 DCC-1200 DCC-1400 DCC-15BKBJ1 DCC-15WBJ DCC-200 DCC-2000 DCC-2200 DCC-… |
|
|
A Little Princess $4.61 Story of a little girl who is mistreated by the strict headmistress of a boarding school when it is learned that her father, a British officer, has been killed in India.Genre: Feature Film FamilyRating: GRelease Date: 14-FEB-2006Media Type: DVD… |
|
|
Christina Aguilera $3.00 Like fellow former Mickey Mouse clubber Britney Spears, Christina Aguilera kicks off her debut album with a teen-lust nugget–in this case, the No. 1 single “Genie in a Bottle”–that the rest of the disc can’t possibly live up to. Aguilera has a strong voice, but patterns herself after iffy role models such as Whitney Houston and Mariah Carey. Aside from “Genie,” most of this music is straight fro… |
|
|
Thoughts of a Predicate Felon $1.83 Thoughts of a Predicate Felon Music CD… |
|
|
Bear in the Big Blue House – Potty Time with Bear [VHS] $4.17 This video for teaching little ones about the potty is one of the most successful because kids can easily relate to the characters from the popular series Bear in the Big Blue House. Even though each character has a specific problem (asking for permission, fear of the unknown, bathroom etiquette), the video scores points for the gentleness and calm it communicates to kids. Bear is always upbeat an… |
|
|
Inspecting a House Before You Buy [VHS] $19.85 … |
|
|
How to Buy a House Or Condo [VHS] $19.99 … |
|
|
Belkin Pivot-Plug Surge Protectors Belkin Pivot Plug Surge Protectors provide premium power protection for your professional workstations and connected devices. It’s rotating outlet design gives you much more convenience and flexibility in placing your plugged-in devices than traditional products. We have used advanced design elements, top-quality construction, and superior circuitry and components to provide the most complete prot… |
Tags: buy home · buy house · home · how to buy home · howto · purchase homeNo Comments
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.