5 Things to Do Before Buying a House

Buying a home is a big deal. As with undertaking any major task or life-changing event, it’s important to be well prepared. No one wants to go into the process of buying a house flying blind. By the time you start looking at homes you probably have tons of questions about the process. This process however does not have to be such a daunting and stressful ones. To ensure you have the basics down before you jump head first, here’s a list of the top 5 steps to buying a house:

 

 

Get a pre-approved loan

 

 

Before you even begin looking at properties, always be sure to talk to a lender and get pre-approved. Figuring out your budget first is the key to making sure that you don’t end up getting too attached to a home you can’t afford. In many cases, people can end up losing a home they want because they haven’t been pre-approved. 

 

One figure that is crucial in getting approved for a loan, besides your credit score, is your debt-to-income ratio. This is the percentage of your gross monthly income that is spent on monthly debt payments. A general rule of thumb is to make sure this number does not exceed 43% in order to be approved for a loan. 

 

 

Get a good real estate agent

It’s natural to do some browsing on your own, but for the best results you’ll want to get in touch with a real estate agent. When we buy homes, we don’t always have the knowledge to figure out how to get the best deal. That’s where having an agent is helpful. An agent can give you important information into the market your looking at, whether an asking price is too high, etc. 

 

A good way to find trustworthy agents is to simply ask friends and family who they worked with and if they recommend them. 

 

 

Save for a down payment

 

 

When buying a house, your monthly mortgage payments are only part of the equation. Ultimately, you mortgage rate is determined by the size of your down payment. Typically people aim for a down payment that is 20% of the total cost. This way, buyers avoid the need for purchasing private mortgage insurance. These days it’s not uncommon to put down less than 20% and some options such as FHA loans allow you get approved for a loan with just 3.5% down. However, keep in mind, the smaller your down payment is, the higher your mortgage will be so it’s important to budget accordingly. 

 

Smaller monthly payments also have the ability to positively impact your borrowing power which will make it easier for you to qualify for loans in the future. Before you make any decisions, make sure you’ve budgeted your costs and have a sufficient down payment. This is also something you can talk about with your real estate agent.

 

 

Set up a home inspection

Once you’ve isolated a property, schedule a home inspection to fully evaluate the house. It’s impossible to truly know what you’re getting into with a full inspection detailing the condition of the house. This way you’ll also avoid any unexpected costs once you complete your purchase. The worst case scenario is buying a house and learning it has all kinds of repairs that need to be done. A home inspection with a detailed list of upgrades and the condition of all appliances and other amenities lets you know exactly what you’re buying. Before making any kind of offer, get an inspection.

 

 

Prepare for the closing

 

 

Closing on a home is a step that’s frequently overlooked. Costs associated with buying a house do not just include the down payment. The closing process comes with fees of its own. The closing price will also include things like the home inspection. Make sure that all your finances are ready to go to close.

 

Have your lender make an appraisal of the house your interested in. In the event that your lender’s appraisal is less than the asking price you may as the seller to either lower their asking price or to assume more of the closing costs.

 

During the closing process you’ll also want to carefully look over and compare your loan estimate with your closing disclosure. Ideally there will be no significant changes to the total costs from one form to the other. During this time you’ll also want to get home owner’s insurance as you’ll very likely need to show proof of this at the closing.

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