10 Ways to Prepare to Buy a House for the First Time
The time to buy a house is now. Rent is quickly skyrocketing and the interest rate on loans is slowly creeping up. This means that home buyers should take advantage of the lower interest rates before they disappear.
When thinking about making a home purchase consider these factors that can make the steps to buy a house easier (or more difficult).
In the Neighborhood
A great jumping-off point for looking at houses is to see what homes are for sale in the neighborhood you are interested in. If looking to move away from a certain area look in the desired location. Notice what homes are being sold and which ones have recently sold. This can give you a good idea of what amount will be needed from a mortgage lender.
The Entire Cost
There are so many potential homeowners that do not look at the total cost of a mortgage. They only look at the projected mortgage payments. On top of this, there is often private mortgage insurance, taxes, home insurance, not to mention utilities. With all of these costs, it can quickly become overwhelming.
Pay to Close
Having the down payment prepared is a great start but it is going to cost to close as well. Closing costs can vary and they go towards paying the lender, paying for insurance, taxes, or homeowner association fees, plus the title fees.
Finances After Closing
A house is going to completely change the way one allocates their finances. A person must redo their entire budget before they start making their mortgage payments. A good rule of thumb is to pay no more than twenty-eight percent of your income into the house. Anything over this can put buyers in a bad financial situation.
Renting to Owning
Owning a house is an entirely different game compared to renting. All responsibility is on the owners to maintain the house. When something breaks, which something will, it is up to the owner to fix it. Having a decent savings account can help with these unexpected and expensive emergencies.
Be Ready to Buy
Many first-time home buyers get swept up in the excitement and fail to look at the big picture. If there is anything of concern either financially or with the market, it is time to stop looking. Although, if everything is going smoothly it is time to start looking to buy a house.
All About the Credit Report
A buyer’s credit report is an important factor in buying a home. A bad credit score can completely stop someone from buying a house. However, there are lenders that are willing to work with someone with a poor credit score.
It is best to start looking at how to fix the score before approaching a lender. Making sure all negative marks are correct, paying off all past due debts and keeping all current debts paid down is a good way to start.
Collect Everything and Anything
Being prepared to visit a lender will make the entire process much easier. All financial documents need to be found and put into order. Get together a few pay stubs and bank statements to prove income. Tax returns will be needed for up to the last three years. All debts that are currently owed will need to be printed and shown to the lender as well.
Finding a Lender
Shop around for the best lender. Look for one that is offering a lower interest rate and who will work with first-time home buyers to obtain grants.
Once a good lender is found go through the process to get pre-approved. This will help guarantee that the mortgage will be approved and will help get the trust of sellers.
Programs to Help
After all of this preparation, some first-time home buyers still find themselves unable to get a house. If a down payment and closing costs are too much there are programs to help – especially for first-time home buyers. Most lenders work with grants that help a people get into their first home.
First-time home buyers often feel lost when trying to make a house purchase. There are a number of steps to take before buying a house. Preparation is the number one way to make the process go well. Finding all financial information, talking to lenders and researching the local market are all part of the process.