Whether you are a first-time or experienced home buyer, buying a home is an exciting accomplishment. So, please know that it’s a process that often comes with pre-purchase jitters. You are not alone. Overall, the idea of home ownership is a bit terrifying. To many who are renting it just seems easier, but this is definitely debatable. Consider this – when you pay rent, it disappears into someone else’s pocket. When you make a mortgage payment, you’re building equity and are one step closer to payoff. If you in doubt, use this rent vs. buy calculator to see which could be right for you.
Don’t let fear or anxiety over buying a home discourage you. Buying a home is an exciting time and something that should be carefully researched and celebrated. By conquering the home buying and mortgage fears, you’ll enjoy your accomplishment for many years to come.
“Twenty years from now, you will be more disappointed by the things you didn’t do than by the ones you did do. So, throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” — Mark Twain
So, now that you’ve decided to make the leap to purchase your home, where do you begin and what are the most common issues to consider beforehand? To name a few, 10 key points to consider are:
Have a Down Payment Saved
The very first step in buying a home is to examine your finances. Buying a new home (particularly for the first time) requires a mortgage. The lender fronts you the money and you pay it back over time. However, in order to get a mortgage, you’ll need some sort of down payment. So how much do you need? Ideally a down payment on a mortgage should be 20% of the home’s price to avoid added fees. But if you don’t have that much of a down payment, you have options. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages (e.g., VA Loans)
Check Your Credit and Stop Any New Activity
When buying a home and applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved. This factor will help determine your interest rate and possibly the loan terms. So check your credit before you begin the home buying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as, making a dent in any outstanding debts. To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.
Hire a Professional Realtor / Agent
Hands down, the biggest mistake of a home buyer makes is when they are doing so without the aid of a professional agent. Having a professional readily available to look out for your best interests is crucial. A buyer’s agent will help ensure that you get the best possible results and guide you through the entire buying process. You deserve the outcome you are looking to achieve, so hire a professional!
Compare Mortgage Rates
Many home buyers get a rate quote from only one lender, but this often leaves money on the table. Comparing rates from at least three lenders can save you money over the first five years over the loan. Your agent can assist you in getting at least three quotes so you can compare both rates and fees. As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points This means you’d prepay interest up front to secure a lower interest rate on your loan. How long you plan to stay in the home and whether you have money on-hand to purchase the points are key factors in determining whether buying points makes sense.
Obtain a Preapproval Letter
It’s extremely important that you get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. However, as you get closer to buying a home, it pertinent to get a preapproval, whereas the lender thoroughly assesses your finances and confirms in writing how much they are willing you lend you and under what terms. In most cases, without the preapproval letter in hand, the seller will likely dismiss your offer.
Budget for Closing & Moving Costs
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. In some cases, you can also defray costs by asking the seller to pay for a portion of your closing costs. Once you’ve saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.
Hesitating When Buying a Home
In a strong market, you need to understand whatever homes you see, others are seeing as well. If you find a home that meets your needs and has the elements you desire, go for it. Just know that someone else, may be ready to make an offer. There are too many wonderful properties that slip through a buyer’s hands due to indecision and fear of buying a home.
Underestimating the Market and Other Buyers
Like you, they want to place low offers on properties that are clearly excellent, and in demand. The process of failure and disappointment is a played out before they get serious about the market.
Buying a Home for Today’s Needs vs. Tomorrow
It’s easy to look at properties that meet your current needs. Consider this, if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home your are buying will suit them.
Think Twice Before Hiring the Listing Agent to Represent You When Buying a Home
Unfortunately, some uneducated buyers think by going directly to the listing agent it will give them a leg up on a purchase. This is contradictory since the listing agent has a contractual obligation to look out for the seller! Their allegiance is to the seller with their goal to get the seller the most money possible. Consequently, it’s in your best interest that you have your own professional agent represent you when buying a home.
KEY TAKE AWAY: As your trusted professional, I will be your strong advocate! I understand the information and emotional support that buyers need throughout the process of finding and buying a home. With local market knowledge, I am well prepared to guide you through all the practical details and potential obstacles that may occur during the purchase process. As with all my clients, my goal is to make this process as seamless as possible so please let me provide you with results that move you!
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