For many people, a house is the single largest purchase they’ll ever make. It should come as no surprise that purchasing one is a more complex process than buying a vehicle or major household appliance. For one thing, the average house or condo is significantly more expensive than most automobiles or appliances. Many home buyers must finance their purchase with a mortgage, which introduces several other factors in the process. Here are some things you should know.
Counting the True Costs
You may be tempted to locate an online mortgage calculator to figure out your monthly damage. Your monthly payment won’t be based solely on the house’s price tag. It will also factor in the interest of a mortgage, property taxes and homeowner’s insurance. You should also remember that there are other costs associated with owning a property, such as maintenance costs, homeowner’s association fees and other miscellaneous expenses. Don’t forget to include your utility bills which may be higher for a house as opposed to those of an apartment or other rental.
Saving for a Down Payment and Other Costs
If you’re financing a home purchase, you’ll need to have money for a down payment. A typical down payment is 20% of the price. That means you would need $40,000 to put money down on a property worth $200,000. While this is standard, many people are able to buy a first home with a smaller down payment for certain types of mortgage loans. You may also be eligible for local or state programs that provide grants to cover all or part of a down payment. You’ll also be expected to pay earnest money, which is like a security deposit that shows a seller you’re serious about their property. Then there are also closing costs for the various services associated with finalizing your purchase.
Securing Mortgage Preapproval
When you’re trying to determine how much house you can afford, you also need to have an idea of what a mortgage lender is willing to offer you. It doesn’t make much financial sense to shop for a house in a certain price range if you’re only pre-approved for an amount that doesn’t cover the price tag. Before talking to a loan officer, say to yourself, “I need to check my credit score.” This three-digit number indicates your creditworthiness and gives lenders insight into your history as a borrower.
Hiring a Realtor
It is strongly recommended that you hire a real estate agent to help you find your castle. This professional is certified and experienced to guide you through every step of the purchasing process. Your realtor represents your best interests in negotiating with a seller. He or she can also analyze the market to make sure you’re getting a house at the best price. You may know a realtor already who can assist you. If not, solicit referrals from people that you know and trust.
Hunting for Your House
Perhaps one of the most fun parts of buying a home is the hunt. Your real estate agent should help you identify and prioritize the features that are most important to you. Once you’ve put together a list of your must-haves, the basics and the luxuries, you can start looking at properties that match your most important criteria. Visiting open houses in the neighborhoods you like is a great way to get up close and personal with a potential abode.
Purchasing a home is a multi-step, complex process. There are a lot of moving parts that you need to prepare yourself for before you start shopping around. Careful planning with the assistance of a real estate agent is strongly recommended.