House Buying Tips and Tutorial
This article presents house buying tips which are among the best strategies to save money. Most industry experts agree that owning a home is an asset, and if you are well prepared, then there are few risks associated with buying. With proper research and a trustworthy real estate agent by your side, you can avoid many of the traps involved in the process of buying a house.
Here is your list of six house buying tips that I recommend you writing down and using as your house buying checklist!
Prepare for Pre-Approval
The interest rate determines the size of loan you qualify for. A one percent increase on a $200,000 loan roughly costs an additional $120 more per month. Three to six months before you begin house hunting, request your complimentary credit score at MyFico.com, and obtain a copy of your credit report at AnnualCreditReport.com, which is available at no cost once each year.
Settle up any collections debt, and send a dispute letter to the credit bureaus to report inaccurate facts. If you cannot get an item removed from the report, you can submit a 100-word explanation of the situation, which is attached to your permanent file.
Plan to spend a well-invested three to six months resolving issues. MyFICO.com reports that a 100-point difference on your credit score can save more than $40,000 in interest payments on a $300,000, 30-year mortgage.
Obtain a Pre-Approval Letter
Next on the list of house buying tips is a letter of loan approval. Once your credit reports prove that you are a sound lending risk, it is time to seek pre-approval for a mortgage loan. This preliminary step enables you to set price boundaries, and it allows you to instantly make an offer the moment you find your dream home.
A letter of approval can also be used to obtain a better rate with a competing lender. Unlike revolving credit, multiple inquiries into your credit history for a mortgage loan do not damage your credit score. In fact, shopping around for the best interest rate proves that you are a smart consumer.
Experts advise multiplying your gross annual salary two and half times to determine how much you can afford. Additionally, monthly payments should be less than 36 percent of your gross monthly income. For the foreseeable future, your current savings and income stream will be tied to the home, so make sure you have a stable job and an emergency savings account.
The lender also verifies that you have enough upfront savings, which are immediately accessible, to cover the down payment, good faith deposit, appraisals, fees and closing costs. A 20 percent down payment is standard, although many mortgage programs require less.
If you borrow more than 80 percent of the home’s value, you are required to pay private mortgage insurance (PMI), which actually protects the bank’s investment if you default on payments. PMI is dropped after you make enough mortgage payments to reach the 20 percent threshold.
Find a Real Estate Agent
Now the process of buying a house heats up. Most homebuyers need the expertise of a real estate agent to guide them through the mountain of paperwork and numerous legal issues involved in acquiring a home.
A licensed real estate agent is also professionally bound to disclose any known issues with the house, which protects you from investing in a money pit. This alone makes implementing these house buying tips well worth the effort.
Search for agents who specialize in your desired neighborhood. Not only are they well aware of the recent selling trends, but they are also the first to know about new homes on the market. Although a single agent can represent both the buyer and seller, your best interests are not the sole focus.
And while a discount on the standard six percent fee is typically offered, the final selling price may be more than the commission savings. An exclusive buyer agent works for you only to get the best price on the house.
The process of buying a house can be daunting. To help the learning curve, attend a first-time homebuyer workshop full of house buying tips that provides an incredible wealth of information and access to community resources.
House Hunting
Before embarking on your search, create your house buying checklist of everything you would like your dream home to have. Unless you have unlimited funds or you are building a home from scratch, be ready to make compromises. Decide which amenities are priorities and which are desires. Two bathrooms for a family of five is likely more important than a large garage.
Although your real estate agent should be well versed in sales trends, it is a wise investment of your time to research the asking prices and the selling prices for similar houses in specific neighborhoods.
This determines which houses fall within your household budget plan and how much you should offer for an opening bid. Informational websites, such as Zillow, Trulia, NeighborhoodScout and HomeGain, provide comprehensive neighborhood demographics, school statistics, crime rates as well as home value gains and losses and other house buying tips.
Shopping in the autumn and winter, when home sales slow down, may result in a better price. Also, provide a 10 percent cushion in the price range and location when browsing the MLS listings.
After looking at a few dozen houses, the details begin to blur. On your house hunting adventures, snap some shots of what you like and what needs repairs. When you get back in the car, jot down a few notes about how the house made you feel. Most importantly, trust your instincts. Most happy homeowners report they just knew when the right home came across their paths.
Take these house buying tips seriously, and you will be much happier with the process of buying a house.
Be Alert to Hidden Costs
It is very possible for your mortgage to be the same amount as your rental unit, but there are many hidden costs associated with home ownership. As such, you must perform an honest assessment of your current debt and realistic expenses. If you have not already done so, create a household budget on paper so you can see what you are realistically able to afford as a monthly payment.
In addition to utilities, property taxes and homeowner’s insurance, you need to buy appliances and perform repairs as issues arise. You may also be required to pay community co-op fees or maintain your home in accordance with neighborhood association requirements.
Close the Deal
Once you are ready to submit a bid, hire an independent appraiser to evaluate the condition of the house. Handing over an additional $300 to $500 for an inspection is worth the expense. The results can prevent you from making a bad investment or potentially drop the selling price more than the appraiser’s fee.
Definitely put this on your house buying checklist. A significant hazard to the home is also one of the few reasons you can legally back out of good faith contract.
I trust these house buying tips prove to be useful, saving you money and stress. Please let me know of our own experiences and strategies to save money during the process of buying a house below.
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