Are you planning to buy a new home? You can save yourself a significant amount of stress by preparing for the process ahead of time. So what things should you consider before purchasing a new home?
Let’s break it down into five simple steps for you.
1. Do the math and figure out your financial position.
Getting your finances in order is the first step you should take. This involves checking your credit history, your savings for the down payment, and determining whether or not you will be able to make regular mortgage payments.
Your credit score is one of the most important financial metrics to consider. It will tell you how much money mortgage lenders will be willing to loan you, which helps determine the kind of mortgage you can get.
Find out your credit score and take these steps to make it better. Once you are done, figure out the total estimated cost of your house and set aside a suitable budget.
You will typically need to put down 20%-30% as a down payment when buying a house.
But keep in mind that the down payment is not the only cost to consider when buying a home. Inspection fees, earnest money deposits, legal fees, broker’s commission, and house insurance can all add up to a significant amount, so make sure to budget for these as well.
2. Explore mortgage options and get pre-approved.
It’s important to know about your mortgage options. The best way is to find mortgage lenders on Joust and discuss your financial situation with them. They will analyze your finances and inform you about the different types of mortgages avalible.
Common types of mortgage include:
- Fixed-rate mortgage: A home loan with a fixed interest rate throughout the loan term, which is usually 15 or 30 years.
- Adjustable-rate mortgage: A loan with an initial fixed interest rate, which then changes every year as per the balance amount.
- Government-insured loans: These are backed by the government in case you default on your mortgage payment. Federal Housing Administration (FHA) loan is one example.
- Conventional loans: Not backed by the government, these are offered by credit unions, banks, and other financial institutions. Since there’s no repayment guarantee for the lender, conventional loans have strict policies and guidelines.
While exploring your mortgage options, try to get pre-approved from a mortgage lender. But what is pre-approval?
A pre-approval is a guarantee document from a lender that states you are qualified to receive a specific loan amount. The lender checks your credit score and reviews financial documents like bank statements and tax returns before issuing a pre-approval.
Buyers with pre-approvals tend to be offered better deals because sellers know they are dealing with someone serious.
3. Find a competent real estate agent.
Finding a real estate agent is an important step when buying a home. But since there are so many out there, choosing the right one can be a bit of a hassle.
Ideally, you should choose an experienced professional who knows about different neighborhoods, local amenities, schools, crime rates, etc. A good agent understands current home prices and how they’ll change in the future.
Unfortunately, there’s no sure-fire way of finding the best real estate agent out there. Make sure you meet with several agents and ask for their credentials and references before choosing one.
4. Choose your home wisely.
Once you are financially ready, have been pre-approved, and have a real estate agent by your side, it’s time to check out properties.
When surveying properties, you should focus on factors like distance from your workplace, the size of the house, nearby facilities, the overall atmosphere of the neighborhood, noise levels, and the number of rooms you’re getting.
Remember, you don’t want to end up paying for something that doesn’t suit you in the long run, so take your time and make an informed decision. You don’t have to rush just because you’re getting a good offer.
5. Send an offer and close the deal.
If you like a house, discuss it with your agent and lender and write up a suitable offer. If the seller agrees, arrange a home inspection to ensure there are no hidden damages or problems.
If the inspection goes well, let your lender and real estate agent know so they can commence the necessary paperwork for the mortgage, selling contract, and other legal matters.
Then it’s finally time for you to pay the big deposit (up to 20 percent of the home’s cost) and other expenses such as house insurance, transfer fee, and broker’s commission.
We wish we could tell you that you can relax after this. Unfortunately, moving homes is as much of a hassle as buying one, especially if you’re moving long distances. So it’s a good idea to think about how you can make your home move as smooth as possible while you’re closing the deal.