Steps in the Home Buying Process
Taking the right steps in the home buying process can be complicated at times. But with the right guidance and preparation, you will navigate easily through the process.
Many people dream of owning their own home. However, it can easily turn into a nightmare if a first-time buyer/couple is not prepared.
There’s a steep learning curve in terms of everything required to make the process go smoothly.
Getting the right mortgage will be one of the most important financial decisions you will ever make in your life. So you will want to be sure you are doing everything right.
Start from Where You Are
Unless you have enough cash in hand to pay for the home of your dreams, chances are you will have to come up with a down payment for the house you want.
You will also have to take out a mortgage for a certain length of time, which will be a financial commitment to pay off the house each month.
In doing so, you will not be paying rent, but building up equity or a stake in the house, until you’ve finally paid off the mortgage, taxes and so on and the house is completely yours.
Your first steps in the home buying process are to determine how much cash you have on hand for a down payment.
The more you have for a down payment, the better terms you can get for your mortgage. But let’s not be too hasty. There are a lot of other financial concerns you might not know of.
Any mortgage lender will want to see 3 to 6 months’ worth of pay stubs and bank account statements. This will help show whether you will really be able to afford the mortgage payments.
Check Your Credit Score
The higher your credit score, the better the terms will be for your mortgage.
Some lenders stipulate a minimum before they will consider approving a mortgage.
If you are thinking of buying a house, pare down any unnecessary expenses for several months.
Don’t start buying a lot of things for your new home and then discover that cash is tight.
Armed with your personal paperwork, you can shop around for mortgages and get pre-approval.
This will be a rough estimate of the top limit they will allow you to borrow.
Then it will be a case of finding the right home within your price range.
The Mortgage Payment Is Often More Than Just the Bank Loan
Be clear about everything you need to pay in total before committing to anything.
Many lenders include other items as part of the monthly payment, including:
* Mortgage insurance (in case you can’t make payments)
* Home insurance (fire, damage, and theft insurance policies)
* Taxes on the property
Other Paperwork and Fees
There will be various legal fees involved, such as a title deed search, surveying the property to ensure it does not need major repairs, legal help with the paperwork, and so on.
Do your research to find out how much these might add up to.
You might also ask someone you know who has purchased a home recently to get an idea of the costs involved.
Beware of Predatory Lending Practices
Some people sign a loan agreement to get the down payment for the house – the equivalent of two mortgages on the same property.
Others never see the entire “bottom line” of what it will cost per month until it is almost too late.
They are congratulating themselves on the great “bargain” until they see the grand total of all taxes, insurance, and so on.
A couple might think a $2,000 per month mortgage sounds great when they are already paying $1,800 in rent each month, but if the payment shoots up to $2,600, and they are only taking home $2,500, things will never work out.
It is always best to count the cost before making such a huge investment. It’s always best to be at least familiar with the steps in the home buying process. However, with the right planning and preparation, buying a home is a dream within reach.