Buying a home is a very important decision and there are many steps to engage in before taking the plunge. There are crucial factors to consider during this process. It can be so exciting, but it can also be a nail-biting journey.
Here are steps to follow when buying a home:
Begin With Your Credit History
Begin the process by checking the status of your credit score. Your credit score determines the amount of interest you will be paying on the mortgage. The higher the score, the better your chances of qualifying for a suitable mortgage with lower monthly payments. Building a credit score takes time. If you find out that you have a poor credit score, consider delaying the buying process until you build it up. However, errors often occur in credit reports. If you discover any error, contact the credit agency to correct it.
Determine What You Can Afford
Once you have evaluated your credit history, determine the amount you can afford. It is crucial to establish a relationship with a reputable and knowledgeable Mortgage Lender. Asking friends, family or your realtor for recommendations would be a wonderful idea. A knowledgeable Lender will be able to guide you through this process comfortably and easily.
Prepare a Down Payment
The down payment will determine the amount of your monthly mortgage payment. Most mortgage companies require a down payment and rarely do they require anything below 20 percent of the total value of a house. Some might take at least 10 percent of the amount depending on how you negotiate. Anything lower than that will attract other adjustments such as the Private Mortgage Insurance (PMI). PMI is a safety precaution designed by lending institutions in case someone fails to make his or her payments as agreed. Most PMI’s cost between 0.5 and 1.5 percent of the total mortgage to make sure you have enough cash to cover the closing cost after a down payment.
Be Aware of Additional Costs
There are also some additional costs you will need to incur for the purchase of your new home. If you are purchasing a home at a cost of $200,000, it is likely that you will pay more than that during the sales process. These additional costs will vary when buying a home and it would be wise to prepare for these. You should plan for appraisals, surveys, inspections, property taxes, and other charges such credit report, tax service, lender origination fees and any additional closing costs.
Seek Pre-approval for a Mortgage
A serious homebuyer will always consult with a Mortgage Lender and obtain a pre-approval letter. Loan pre-approval comes after a comprehensive audit of the credit reports and total budget. The pre-approval process is usually quick once you provide your lender with the documents and information needed. Pre-approvals are usually valid for about 90 days and final loan approval occurs after the bank has verified the documentations for the loan. Again, choosing a reputable, knowledgeable Lender is of utmost importance as you are seeking someone to assist you throughout this process and will make it easy for you to understand and guide you through.
Contact a Professional Real Estate Agent
You should partner with a Real Estate Agent who is knowledgeable and has expertise of the local market and can assist you through the real estate process from beginning to end. The agent should understand your needs and find a course of action that can benefit you. Interviewing several agents will allow you to select an agent that is a good fit for you.
Buying a home is one of the most important decisions you will ever make. It is of utmost importance to choose an agent that will assist you throughout this process and will make it easy for you to understand and guide you through.