Ready to buy a home? Perhaps, you like many home buyers want to begin the process but are not really sure what it entails. Follow our quick outline and write down any questions you have about the process. Take your questions to your Realtor and mortgage broker for a more in-depth understanding of the home buying process.
1. Contact a Realtor
A Realtor will have the advanced knowledge of your market. They will understand the trajectory of home values and will be able to help you make informed decisions regarding your home purchase.
2. Find lenders and get preapproved
One of the first and arguably the most important step to buying a home is getting preapproved for a mortgage. A preapproval helps you gain an understanding of your budget and gives you leverage during the negotiating process. Try applying to multiple lenders at the same time and compare rates.
3. Calculate your total monthly housing cost
Your monthly housing cost is not as simple as your simple mortgage payment. Each month you will owe taxes and home insurance for your property. To get an idea of what you will pay each month, estimate your taxes and insurance. First, call an insurance agent and gather an estimate for the area. Next, check out the property appraisers website for tax information. Keep in mind that your taxes may vary depending on what exemptions you are eligible for and other mitigating factors.
4. Check the prices that homes in your area have sold for
Your Realtor will be able to help with this. Do a search of homes that have sold in the area that you are interested in over the last six months. The selling price of these homes will help you understand the value of homes in your market and what you can expect to pay in a specific location.
5. Calculate your closing costs
Closing costs are often overlooked by new home buyers. However, these costs can add up and must be paid when you purchase your home. Generally, somewhere between 2-4 percent of the purchase price, closing costs include fees such as those charged by the lender, taxes, pre-paid insurance, title and settlement fees.
6. Determine your budget as a way to understand your ideal housing cost
Experts recommend that you spend no more than 28 percent of your total income on housing. Any more than 30 percent and you may become house-poor.
7. Consider the long-term
Buying a house can be a great investment in your future. However, maintaining a home can add up. Have a plan in place to deal with unexpected housing costs for new appliances, plumbing repairs, and roof repairs. Consider purchasing a home warranty or asking for one in the contract for your new home.
8. Create a list of must-haves
Decide what is important to you in a home. For instance, enough room for everyone in the family is a must-have. After determining your budget and the area you would like to live in, the most important factor of any home is that comfortably fits the needs of the entire family.