In the present scenario, home prices have come down in most markets and so have the interest rates. These are enough motivating factors for you to consider buying your first home. If you’re making plans to embark on the exciting adventure of shifting out of rented accommodation and being among the proud first time home buyers, you need to make preparations well in advance.
Following are some helpful guidelines for you to get started with the home buying process:
Consider your credit rating
Whether or not you qualify for a home loan is based on various factors such as your job stability, savings, assets, and income as well as your income-to-debt ratio. Your credit score is an important factor to be considered in today’s tight credit world. The interest rate is linked to your credit score and borrowers with scores of 720 and above are the ones likely to get the best mortgage rates.
Plan your housing budget
Your lender will fix your loan amount, but as a potential homeowner, you need to create a budget for yourself considering income and expenses to ascertain how much you can use for housing payments. Experts advise a maximum spending of 30 percent of monthly income on principal, taxes, interest, and homeowners insurance. An additional budget of about 1 percent of the home value should be made for maintenance costs and homeowner association fees.
When you have an approximate idea about your mortgage installment, you need to put aside the difference between the installment and your present rent amount each month. This will not only build your savings, but also allow you to be comfortable if the payment due is slightly higher.
Meet the lenders
Speak to the lenders before you actually start house hunting. This will help you avoid picking a home which is unaffordable. You may be pleasantly surprised to find you can get something pricier than you planned since rates are quite low at present. Get a fair idea of all the loan options available and how much you would be required to pay upfront for closing costs and down payment.
Use the services of a realtor
It’s always better to involve a knowledgeable realtor to represent your interests during primary negotiations. He’s an expert and can help you evaluate different neighborhoods and homes.
Select a suitable neighborhood
When there’s a housing downturn, some neighborhoods retain their value much more as compared to others. Talk to an experienced realtor to find a suitable neighborhood that fits your requirements.
Inspect the house
Make sure you do not sign on the dotted line without getting a proper inspection of the house done. This will help you ascertain serious flaws in the house as well as give you in-depth knowledge about home maintenance. You’ll get a fair idea of what you can expect with regards to replacing or repairing appliances and systems when you’re the owner.
Finalize details properly
After you’ve signed the contract, ensure that you’re in regular touch with both your lender and realtor to ascertain that all financial and insurance issues have been taken care of. Knowledgeable realtors use checklists to make sure all issues are settled in good time.
Before you buy, be sure to consider the advantages of knowing the true value of a particular home. You can obtain a free home valuation report from Neighborhood IQ to find out how much a property is worth before you sign on the dotted line. Also, the Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm, and match you with potential lenders.