From SDAR and SDCCU
Prior to buying a home, you should always consider several factors such as; Do I have stable income? Will I have the patience, time and resources to maintain a home? What is my monthly debt payments compared to my income? Do I have a reasonable down payment that also leaves me with savings? How is my credit history? This guide will provide general information on the costs involved and the steps you will take to home ownership. Here are 5 things to do before buying a house:
1. Do your research. Start compiling your information early on. A mortgage application is going to ask you personal and employment information, your assets and your debt in the process. Be able to answer all the questions listed above, along with the ones you think a lender may ask. Use a home loan calculator to help you answer additional questions like; How much home can I afford? Should I pay discount points? How much of a down payment should I make?
2. Shop around. Find a mortgage option that is right for you. Whether it be a fixed rate, adjustable rate or low down payment. Look at interest rates as well as competitive closing costs. A home is a large purchase and even the smallest percentage can make a big difference. If you decide to put less than 20% down, typically mortgage insurance is added to your monthly payment. Be aware of what this could cost you over time. Knowing all the details before you make the big move to purchase a home is key. There are many factors when it comes to paying for a home such as insurance and property tax. It is ever fluctuating with the market and you need to be prepared to adjust to it.
3. Make a list. Knowing what you need is the first step to finding it. Write down your top three must-haves for your home. Chances are you won’t get everything you want so be flexible, but know what is non-negotiable. This list will save you time in your search if you know you only want to look at homes with certain features. Once you determine what is important to you, your real estate agent will have a better idea of what properties to show you.
4. Leverage resources. Get pre-qualified so you know how much you can spend and what homes you should target. Have a real estate agent help guide you and show you houses in your area. This is usually free until you decide to purchase, the agent will take a percentage of the purchase price and is typically paid by the seller. This amount should be discussed before starting the process.
5. Your offer and home ownership. Once you have found a lender and put in an offer on a property, including your earnest money deposit, then the loan process begins. This is when all income and assets documents must be collected, inspections are done, loan documents are signed and the wait for escrow to close. Once the closing process is complete, sit back and enjoy home ownership! There are bound to be costly surprises along the way so make sure you are putting away an emergency fund.
While 40% of Americans make this big ticket purchase it is important to prepare yourself for the journey. Home ownership is a big step and it is important to take the time to do your research before jumping in. Most financial institutions will be there to guide you, but it is your responsibility to know what is right for you.
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