You didn't get a diploma without doing homework. You didn't get a driver's license without studying for the test. Lifetime milestones require preparation.Get a Home Loan Quote
The milestone of homeownership may be more attainable than you think. Because of the misinformation, or sheer extent of available information, the whole process can seem daunting. With help from these seven tips, you can feel better prepared when it comes to buying a house.
1. Take Your Time … Then Act Fast
Let us explain. The idea of owning a home causes many people to jump into the game long before they are ready. They are already in debt, haven't done research when it comes to the market, and have not saved for a down payment. Don't let the allure of being a homeowner force you to make a move before you are ready. Here's where your grandma's saying, "Get your ducks in a row," is very applicable. Thanks, Grandma!
Once you have determined that it is the right time to purchase a home, don't drag your feet. As soon as you have settled on a specific area you would like to live in, make every effort to see new listings within a few days. If you wait too long to look at a house, chances are it has already been sold.
2. Determine How Much House You Can Afford
And we don't mean in an "if I get a raise" or "if this new job hires me" kind of way. How much house can you realistically afford right now? Sometimes the answer is not much, and that's OK. Just look at it as more time to save for your down payment.
If a house is financially feasible for you, stick to your budget. One of the biggest mistakes first-time homebuyers make is falling in love with a house that is way out of their price range. Don't tempt yourself by looking at options that are not within your budget "just to see what it's like." Chances are, you will love what you see and will then compare all other homes to the one that will stretch you financially.
Don't let this get you down, though! In 2018, the average duration of homeownership in the U.S. was 13 years. So even if your first house isn't the dream home you had envisioned or could afford, that doesn't mean you will never get the chance to move up.
The Five-Year Rule says you should stay that long in a home before selling it.
3. Don't Forget About Homeowners Insurance
Don't forget to factor homeowners insurance into your calculations and money-saving endeavors! There are many different options when it comes to homeowners insurance, as well as various coverage options, so be sure to check out a variety of plans.
Until you build 20% equity in a home (which happens instantly if you pay 20% down), you will also need to afford private mortgage insurance (PMI).
Insurance doesn't just protect you; it protects your lender as well. That's why it's required that those who do not own their home have homeowners insurance. Generally speaking, you would need to obtain a plan before closing on your new home, and definitely before moving in.
In theory, if you purchased your home in cash up front and thus don't have a mortgage, you wouldn't be required to obtain insurance. It's probably a good idea that you do, though, as it can significantly help should something happen to your home.
4. Save, Save, Save
Save for a down payment. Save for closing costs. Save for the unexpected expenses that come with the homeowner territory, like the need for new furniture, a washer and dryer, or unexpected repairs. A lot of first-time homebuyers don't realize that closing costs are separate from their down payment, which already leaves them in a financial pinch.
Closing costs may even end up being 5% of the loan amount! Your lender will let you know the exact price. Don't hesitate to get a line breakdown so that you can see just what your money is going to. Rate Simple's costs are transparent and competitive with any lender around.
5. Go With Rate Simple
When it comes to finding the right mortgage lender, you want friendly professionals who will evaluate you fairly and guide you every step of the way. That's the Rate Simple way! Please don't take the first recommendation you get from a friend or a family member without letting us prove we can do better. Ready to get started? Find your best rate for a home purchase here!
Will shopping for a mortgage hurt your credit, no matter where you look? Sure, it will have a slight impact, but if you shop around in a short timespan (a week or two), multiple credit checks from lenders will be recorded as a single inquiry. With Rate Simple, you can be assured that you're dealing with the best.
6. Get Preapproved
With a preapproval letter in hand, you show that you are a serious buyer. Because preapproval requires a lender to verify your information, it's a good indication that if you were to proceed with the loan, you would likely be approved for it.
You wouldn't want to lose out on the perfect house because someone else had a preapproval letter and you didn't! Keep in mind that preapproval is different from prequalification. Many people prequalify for a loan; not as many are preapproved for one.
7. Make Sure All the Pieces Fit
If your dream home is in a part of town you don't like or that would greatly extend your commute, perhaps it isn't your dream home after all. Before settling on a house, make sure you will be happy overall, not just while inside.
To ensure a good quality of life, check out different areas, consider commuting times, and look at schools in the area if you have children or plan on having them. All of these things should factor into your decision.
And Don't Forget to Have Fun
Yes, this all might seem like an overwhelming amount of information. To help make the entire process more enjoyable (as it should be—this is your very first house!), take it step by step. By tackling one thing at a time, your house buying endeavor becomes more manageable. You can take your time doing research and go at a pace you are comfortable with. Sitting down in one weekend and trying to answer every home purchasing question that comes along will leave you burned out.
Take your time and do your homework. When the time comes, all of the prep work you have put into this over the last few weeks or even months will make it easier not only to secure a competitive mortgage but also to find a home you will be happy in.Get a Home Loan Quote