When someone decides to buy a home, the first question that pops into their head is, ‘How do I buy a home?’ You know there’s a mortgage involved, but the process doesn’t stop at that. Here is a brief guide to buying a home in the current market:
Calculate Your Monthly Expenditures
First of all, you need to have a good idea of your finances to determine what kind of a house you can afford. Therefore, create an expenses versus income chart. Consider how much money you have left after expenses to cover a mortgage, home insurance, repairs, and other expenses associated with owning a home. The price of the house you buy should be determined based on your budget.
Evaluate Your Needs
You must also evaluate your needs in the long run. Consider where you want to live, the number of bedrooms you want to have, and any special needs, like wheelchair access. Don’t make evaluations based on your current needs. You may now do well with a 2-bedroom condo, but what about 5 years from now on if you decide to have a family? Think of your future needs as well when choosing a house to buy.
Go to a Housing Counselor
Choosing a price for the house you want to own can be tricky without assistance. Therefore, it will greatly help to go to a housing counselor. Most work with local governments and do not charge exorbitant fees. A housing counselor can help you set realistic financial goals for buying a house and choosing a good mortgage lender.
Get Prequalified for a Mortgage
The best way to know how costly a house you can afford is to get prequalified for a mortgage. Do not be afraid that your application will be turned down. Even if it is, it is a good indicator that you should get your finances in order before applying for a real mortgage. You can get a realistic estimate of the size of the mortgage a bank will be willing to lend you with mortgage preapproval.
Find a Good Agent
Once you know how much you are willing and able to spend, it’s time to find a property that suits your needs and budget. You can shop around on your own, or find a good real estate agent to assist you in the process. If you do choose to hire an agent, make sure the individual is appropriately licensed and comes highly recommended by previous clients.
Research the Properties that Interest You
When you shop around for a house, it’s highly recommended to research the properties. Do not rely entirely on your agent’s intel. Conduct your own investigation into the property you want to buy. Most importantly, make sure they meet your needs. Do not buy a house based on the looks alone. Know the location well, and conduct an inspection on the properties you like. If possible, find previous occupants and ask what it was like living there.
Make an Offer
Once you have researched and inspected all the properties you like, choose the one you like best and make an offer. You can get your housing counselor’s and your agent’s advice on this regard.
Apply for a Mortgage
When you know how much you are going to pay for your dream house, apply for the mortgage. Like with the house, you might have to shop around for the mortgage that fits your needs best. For example, you might want to choose an adjustable rate mortgage if the property you chose is on the expensive side. Consult with your bank regarding the mortgage options they offer.
Find Funding for the Down Payment and Closing Costs
Your mortgage won’t cover down payments and closing costs. You will need additional sources of funding to cover those costs. You can use savings or money from liquidating valuables like jewelry or stocks to cover up the costs. If not, apply for a secured loan for the money you need.
Finalize the Deal
When you have all the finances in order, it’s time to finalize the deal. Hire a lawyer to make sure all the paperwork is also in order. Get documented proof of all transactions and deals, and don’t forget to thoroughly read the loan contract. Expect the processing of the documents to take a couple of days.
Once you have gone through all the steps above, you will finally be a homeowner.