Buying a home is one of the biggest financial decisions you can make, which makes it seem overwhelming at times. However, it doesn't have to be. If you take your time and do your research, you can make sure you get the property of your dreams. Whether you're currently in the market for a new house or just preparing for when you're ready to buy, a beginner's guide to buying a house can help you navigate the process.
There's no such thing as a perfect house, and searching for one can waste your time and money. Instead, it's better to begin the process by identifying what you truly need and what you're a little more flexible about. A large family might need a particular number of bedrooms, for example, while that great yard or beautiful view might not be so necessary. Getting a firm idea of what you need can help you avoid getting too caught up in the excitement of a pretty house that doesn't meet your needs.
Everyone has a unique financial situation, so there's no one-size-fits-all answer, here. However, making sure your home fits your budget is critically important. In general, it is best to avoid a monthly mortgage amount that is over 28 percent of your monthly income. It's also a good idea to only look at houses that are at most two to three times your annual income. If you're not sure what you can afford, consider a trial run where you save up all the money you'd spend on homeownership.
The topic of how much to put down on a house is a complicated one, but you'll definitely have to spend something. Some lenders offer loans for people with as little as 3.5 percent to put down. However, the more you put down, the better, generally. Most mortgages require six to ten percent of the home's total price as a down payment. Twenty percent is even better, but beyond that, you may see diminishing returns.
One of the most common -- and harmful -- mistakes first-time homebuyers make is not shopping around for the best mortgage. Even if you like and trust your bank, they may not have the best deals available. Talk to at least three or four lenders to get an idea of what is available and what you qualify for. If you live in a big or competitive market, you may even want to hire a mortgage broker to do the research and comparisons for you.
When buying a home, most people focus on the mortgage and down payment. However, it is important to prepare for smaller fees that inevitably crop up along the way. You will likely have to pay for inspections, homeowners insurance, closing fees, and urgent repairs. Make sure you set aside at least a few thousand dollars for these. Having some extra available credit, such as a credit card or personal line of credit, is also a good idea in case of emergency.
Some people navigate the entire home-buying process alone, but a real estate agent can make the process much easier if you're inexperienced. He or she can help you find listings you might not have access to otherwise and generally walk you through the process of purchasing a home. To find a realtor, consider asking friends and family for recommendations. Don't be afraid to meet with several prospective agents before making a final decision. Once you do choose one, look up their license with your state's licensing board to make sure it is valid and in good standing.
There are a lot of factors to consider when choosing a mortgage, so it's important to consider your circumstances. For example, if you only plan to live in a home for five or ten years, then an adjustable rate mortgage with a low initial fixed rate could be a good choice. However, if you plan to live there for longer, the adjustable rate could cause your payments to rise significantly, so a more standard fixed-rate mortgage may be better. You also need to consider how long you want to take to pay it off. Fifteen years is a good goal, but 30-year mortgages can save you money in the long run if you invest the difference wisely.
Getting pre-approval for your mortgage isn't essential, but it's a good idea. It lets you know for sure whether you qualify for the loan you want, and it reassures the seller you can back up your offer with actual payment. It also speeds up the final qualifying and closing processes so you can move into your new home with minimal hassle. The downside is that it does generally lock you into a particular mortgage lender, but that shouldn't be a problem if you've shopped around.
While a big part of your real estate agent's job is to monitor the listings and find homes to show you, it is possible for some homes to come up for sale without making the official lists. Supplement your realtor's knowledge by keeping your eye out for homes that interest you. Websites are a great tool for searching out local listings, but even just looking around for "For Sale" signs can help you find your dream home.
Once you've found the perfect house, it's time to make an offer. Don't try to lowball the seller, as that can cause them to reject your offer immediately. However, don't be afraid to offer a reasonable amount that is lower than their asking price. Take the condition of the home into consideration, too. You may want to include repair and replacement prices in the final contract. The sellers may not accept your offer immediately, but it opens the door for negotiations to help you get the most bang for your buck.
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