Hello World! Welcome Friends! Buying a home is daunting and draining. It’s the most emotionally and financially charged purchase of your life. However, with determination and in-depth research, buying a house will be a seamless process.
Even during a pandemic, adhering to certain factors will get you your dream home. Before plunging into the buyer’s pool, first, consider whether property ownership is right for you.
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Buy or Rent?
Do you think you’re ready to be a homeowner? Should you buy or rent? Buying a home seems quite appealing since you won’t struggle with the escalating rent. But the cost of home routine maintenance can quickly drain your bank account.
And some neighborhoods have monthly charges for estate maintenance and security. In the end, you might find paying an amount close to what you could pay in a rented apartment.
But whether buying or renting is ideal for you depends on specific circumstances. If you expect to relocate after a few years, then renting can be a better option. More so, if your finances are not sufficient to buy a big home for your family, you can rent and keep on saving.
Furthermore, if you are considering buying a house out of state then there are other considerations that you will need to take into account. Ultimately, purchasing a property takes a lot of work and therefore it is incredibly important that you do as much research as possible.
If you have decided to buy a home, below are crucial considerations before making that substantial transaction.
5 Effective Steps of Buying a Home
How Much Can You Afford?
Buying a home large enough to fit your family is a huge financial decision. You need to know how much money you have. Analyze your budget and review the bank statements.
The Consumer Financial Protection Bureau provides a spending tracker to help you figure your expenditures. You may also track your spending habits for a couple of months. This will help you make necessary adjustments and help you save more for your dream house.
Due to the pandemic, owning a home has become more affordable than ever. The mortgage loans are going for a 3% interest rate, which is significant savings in the course of your loan period, say 20 years. Once you figure out the spending habits, you’ll determine how much to allocate to the monthly loan repayment amount.
The figure includes tax, principal amount, insurance payment, and interest. Ideally, your housing repayment should not exceed 31% of your monthly income. But if you don’t have other debts, you may increase the amount to around 40%.
You should also remember other costs associated with buying a home, such as legal fees, house inspection, and closing costs. You’ll also incur renovation expenses like door and window replacement, trimming lawns, among others.
Organize Your Finances
Before you dive into the world of vetting real estate agents or attending open houses, ensure your finances are in order. This helps you, especially when applying for a mortgage. Check your credit score because more lenders use it to assess the potential risk of lending you money.
The best credit score ranges between 300 to 850. The mid 700s is the best range to get a mortgage effortlessly. Improve your credit score by paying up financial mistakes or paying down a high credit card debt.
However, it takes time for these changes to reflect on your credit scorecard. But clearing up the credit makes a huge difference in the mortgage rate.
Digital lending platforms are growing exponentially and for a good reason. These platforms are quite lenient and fast. But working with an analog human lender may provide a smoother experience.
Once your finances are in order, get a mortgage pre approval. This is a written estimate given by a lender to show how much you can borrow. The letter helps you determine the amount you can get.
If you can pay upfront cash for your new home, it means you’ll borrow less. A substantial down payment means fewer monthly payments and less interest rate. However, don’t use all of your savings to make a hefty down payment.
Your potential lenders need you to have some reserves in your bank account. You’ll also need cash on hand for relocating, storage, and home improvements.
Search Your Home
After having a better sense of your finances, the next move is to search for your home. You should consider the neighborhood. You can narrow the choice of the neighborhood by knowing where you can afford a home.
More so, what’s the distance to your working place or kids’ school. Talk to colleagues and friends about their living areas. Spend time checking the nearby amenities, such as restaurants, shopping centers, hospitals, and public places.
Browse different realtors’ websites to see the available homes. You can eliminate houses from cities or towns you don’t like or don’t suit your lifestyle. Then set alerts on these websites to automate your search work.
Ensure you tour open houses to get a sense of the area. Virtual tours can somehow hide flaws like cracked walls or floors. But some realtors offer 3D videos accompanied by online listings and send an agent to tour the houses for you.
It’s, therefore, recommended to take a closer look at the property to reveal what a video cannot. During the showing, pull back the curtains to have a glimpse of the view. Determine the closet space to know if it has enough room for your belongings.
Ask yourself these questions:
- How much will utilities cost?
- What’s the daytime noise level, especially if you’re working from home?
- Will the new house need improvements?
- How far from public transportation stations?
Finally, find a real estate broker to help you make a sound decision. A reliable broker enables you to get access to homes immediately after they hit the market. Look for a broker with an excellent track record of working with buyers.
But keep in mind that the broker’s commission will come out of the sale proceeds.
Make an Offer
Don’t delay making an offer once you find a home that accentuates your lifestyle. The most indispensable guide in making an offer is by analyzing your market. You should look for comparable houses of a similar statue sold recently to determine the fair offer.
A realtor can pull such comparisons for you and talk you through market dynamics and pricing. If you choose a home listed with your realtor, they might offer to represent both parties and cut the commission. However, such dual arrangements work if there’s no conflict of interest.
For instance, if your real agent represents a seller, there will be a conflict of interest. In such circumstances, it’s advisable to choose a different agent.
Making an offer is more of a psychological game. Negotiation is a give-and-take situation, and you’d like to buy a home within your budget. On the other hand, the seller wants to sell the house at the highest selling price without scaring the client away.
Conventional wisdom dictates that you should begin your offer at 5% below the asking price. However, the marketing price will determine your negotiating price. With a competitive market, you’re likely to face multiple bidders.
You’ll have more negotiating power in a listing that has been sitting unsold. But in whatever situation, ensure you keep the budget in mind when making an offer.
If you’re facing a highly competitive market, be ready for a bidding war. But you can win a seller by:
- Being flexible about the closing date
- Waiving contingencies
- Raising the down payment
Once you agree on the selling price, the agent will draft a formal offer for your review. If the seller accepts the offer, you’ll make a cash deposit to show good faith. Typically, the cash gets deposited in the escrow account until closing.
Although legal requirements and processes vary, the formal offer explains terms and conditions, including your payment plans. At this point, you’ll need to hire a reputable real estate lawyer to negotiate any issues that come up during the purchase process.
And as you hire a lawyer, ensure you check the track record of working with buyers. A good lawyer offers prompt communication and can alert you upon any red flag.
Closing
Purchasing a home is a long process that requires organization and patience. While you might be eager to move to your new home, it’s in your best interest to ensure you get a house in good shape and condition.
Apply for a mortgage by approaching bank lenders, or get a mortgage broker to handle the work for you. Alternatively, shop online through a multitude of online lenders.
You can schedule a home inspection, which can help you learn issues that might prevent you from buying the house. The inspector’s report covers the home condition from plumbing, roofing to the foundation and gives you a chance to renegotiate or reconsider your decision.
Secure title insurance to protect your investment. The ALTA has a searchable database of reliable title insurance companies in each state. Do the final walk-through and flip light switches, run appliances, flush toilets, and turn on water taps to ensure no issues have cropped up.
Finally, close the deal and celebrate acquiring a dream home!
The Bottom Line
Buying a home might be a long process, but it doesn’t have to be stressful. Once you follow these steps and do your due diligence, then acquiring a home becomes seamless.
Click the links below for any posts you have missed:
5 Tips for Creating a Beautiful Backyard
How to Use Home Equity To Buy Another House
Drinking Water on your Next Camping Trip
Professionals You Should Hire When Renovating Your Home
Lawn Cleaning and Weed Extermination
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