REAL ESTATE AGENCY
Real Estate Resource Associates
Most home buyers are a bit discouraged by the fact that they’re about to agree to a hefty mortgage that they’ll be paying for the next few decades.
The best way to relieve that anxiety is to be confident you’re purchasing the best home at a price you can afford with the most favorable financing.
These seven steps will help you make smart decisions about your biggest purchase.
1. Decide How Much Home You Can Afford
Generally, you can afford a home priced two to three times your gross income. Remember these important costs when getting ready to buy...property taxes, insurance, maintenance, utilities, and community association fees, if applicable.
2. Develop Your Home Wish List
Be honest about wants and needs. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and a walk in closets are in the bonus category. Come up with your top five must-haves and top five wants to help you focus your search and make a logical/budget friendly choice.
3. Decide Where You Want to Live
Make a list of your top five community priorities, such as commute time, schools, and recreational facilities. Ask a us to help you identify three to four target neighborhoods based on your priorities.
4. Start Saving
Have you saved enough money to qualify for a mortgage and cover your down payment? Ideally, you should have 20% of the purchase price set aside for a down payment, but some lenders allow as little as 5% down. A small down payment preserves your savings for emergencies.
However, the lower your down payment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your down payment size can also influence your interest rate and the type of loan you can get.
Finally, if your down payment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and down payment assistance programs for first-time buyers.
5. Ask About All the Costs Before You Sign
A down payment is just one home buying cost. A REALTOR® can tell you what other costs buyers commonly pay in your area -- including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.
6. Get Your Credit in Order
A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home.
7. Get Prequalified
Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.