Buying A House
Buying a house can be an exciting and confusing time and maybe even scary. You may be wondering where to start, or may have missed some important steps. We have some pointers that can help. Whether you are just considering buying a home or have begun the process, these steps may help you along your way.
If you are starting to consider buying a house, you need to take some steps first. First, you will need to figure out your finances. Track your spending. Decide on which expenses are necessary and which are extracurricular. Once you have done that, you can figure out what you can afford. There are mortgage calculators online to help you with this. You'll need to come up with a down payment, which is usually 20%, and closing costs, which vary but can range from 2% all the way up to 5% of the purchase price. Figure out what you can save and project how long it should take you to come up with the total amount you'll need. Banks like to see that you have saved for your down payment and closing costs. There are programs available that will allow you to come up with a smaller percentage down payment, but they will carry extra fees and additional stipulations.
You will also want to check your credit report and FICO score. You can get a free credit report every year from each of the three main reporting agencies. Check your credit report for mistakes so that you can have them fixed. Clear up any mistakes or overdue balances that may be on your report. Banks will usually look for a score over 620, with a score around 750 having the best rates provided by banks. There are programs that can help you monitor and clean up your credit report, but as always, make sure you research programs before you decide on one as many of these programs are not that good.
There are also some things you should NOT do. If you are planning to buy a new car, do not do so in the year before you apply for a mortgage. Hold out until after you have purchased your home, or make sure you wait a year before buying. Do not close any major credit card account. Believe it or not, this can have a negative impact on your credit account. Do not make any large purchases in the months before buying a house. Wait until you have closed on your new house before buying things such as appliances or furniture.
Organize your paperwork. Gather it and find a place to keep it, like a portable file folder, or a briefcase, so that it is together and easy to access. Before you start looking at houses, you'll want to get pre-approved, which is different from being pre-qualified. You'll get a better idea of what a bank will loan out to you, so you'll know what price range you will be able to look for and what you will need to pay out of pocket.
You will also want to have the house inspected before you buy. Home Inspectors can find problems not usually seen by the average person. Electrical issues, water damage, even termites are often discovered by the Home Inspector, and can save you thousands in the long run. You will need a real estate agent and a real estate attorney to protect you. Laws frequently change, and the closing paperwork can be confusing. There are also many steps that lead up to the closing, like the title search and fire inspection, and your agent and lawyer are there to help. The best way to find these are by word of mouth, but make sure you meet with them. It is advised that you meet with at least three different people. Most agents and lawyers are willing to give a half an hour free consultation to meet with you. You want to make sure that you are comfortable with them as buying a home can be a long and stressful process and you need to have a team that is in your corner.