There are a few basic pieces of information you should know before venturing out to buy a new home. This comprehensive article guarantees to give you a better understanding of what is needed to buy your dream home. This article also promises to answer any questions related to the home buying process in order to give you the tools and power to get the best deal possible.
Things You Will Need
The information you will learn from this article.
Step 1One of the first pieces of information you need to know is you do not have to pay cash for a house. There are many people, mainly first time home buyers who have the perception they must pay for a house in full when purchasing it. This is not true information. Instead you will obtain a loan or a mortgage for the cost of the home you chose. You will make monthly payments on the loan amount for either 15 or 30 years in most cases.
You will also need to think about the amount of money for the down payment on the house. Generally, the down payment is 3 to 20% of the purchase price. The higher the down payment, the lower the monthly payments will be. Your credit standing and credit score are taken into consideration when it comes to the amount of down payment required. The better your credit is and the higher the credit score, the less down payment you will have to come up with. When you have good credit and a high credit score, you will have more negotiating power and more room to bargain with the amount of down payment.
Generally the amount of home you can purchase is derived by three times your annual household income. In otherwords, if you have an annual household income of $50,000, you can look at homes in the price range of $140,000 to $160,000. When people have found they can not afford to buy a home, they decide to rent out a portion of the home so they can make the purchase. Many people do just this and it usually works out well if you put some thought into it and chose renters carefully. This also enables the buyer to purchase a larger size home. If the monthly mortgage payment is $1,200 and one bedroom is rented out, the payment would then be $800.00 the buyer would need to have in order to make the mortgage payment.
Step 4Having no debt, a large down payment, and decent credit increases your buying power. Having poor credit and large debt as well as a small down payment, decreases your buying power. To qualify to purchase a home you will need to have the money for the down payment, an income three times higher than the monthly mortgage payment, 2 years of solid employment with the same job or the same line of work, and decent credit. Having poor credit should not deter you from trying to purchase a home since this is an area that can be discussed and remedies found to enable you to make that purchase.
Step 5If the purchase price of the home is $150,000, you will need $4,500 - $30,000 for a down payment. You will need 0 - $12,000 for closing costs. Closing costs are fees charged by companies and government offices that process your loan and over-see the sale of the home. Miscellaneuos fees could run anywhere from $250.00 to $800.00. These fees include inspection of the home and other items which take place prior to making the final agreement for purchase.
Before venturing out to look at houses, you hould first pull your credit report and score from the three major credit reporting bureaus. These are Experian, Equifax, and Transunion. Take a good look at the reports and correct any possible errors you notice. Pay off any bills that were not paid and placed on your credit history. Then find a good and qualified realtor. The realtor will assist you with looking at houses you desire to see and with the entire process of purchasing the home. When you find a house you are interested in putting in an offer for, you will want to make sure you receive a disclosure from the seller. This will tell you things that may be wrong or need to be repaired in the home. If you are still interested in proceeding, then you will want to make an offer. Your real estate agent will assist you with this process.
In the meantime, have an inspection done on the house which will tell you anything the home needs in regards to repairs. At the same time, have the home appraised to make sure the asking price is fair. Obtain a few quotes from insurance companies for homeowners insurance. Look for the best competitive rates. Once these items are checked off of your list, you will then be waiting on your closing date.
Be sure to read as much information as possible and learn the basics of home buying. You will feel more confident and empowered if you are well informed.