Everything You Need To Know About Buying A House – Going from renting to buying is a major life decision, but it doesn’t have to be stressful. The key to making sure your first home buying journey goes smoothly is to prepare properly and know what to expect on the road to home ownership.
There will be many new details that will pop up once you officially start looking for a home and work with a realtor to purchase your new home, but right now your main goal as a potential home buyer is to get clarity so you can determine if now is the right time to buy and, if so, find out what you’ll need to get started. Think of this stage as a “pre-purchase” stage where you build the confidence and knowledge you’ll need to move forward.
Everything You Need To Know About Buying A House
Keep reading as we reveal expert advice on how to start the home buying process, including specific questions that can help you determine if you’re ready to become a first-time home buyer.
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Now that you know the general steps and considerations involved in starting the home buying process, let’s break down each of these tips in detail. We hope this can help you learn more about getting started on the road to home ownership!
Continuing to rent or buy a home is an important concept to analyze as a team. Below are some topics to help you decide if home ownership is the next logical step in your life.
Buying a home can build a solid foundation and room for growth. If you have a child on the horizon, buying a home can serve as a way to plant some roots for your future family. Even the thought of pets like a dog can open your eyes to home ownership with the versatility of your yard. What does your work look like? Do you see yourself staying in the same position or staying in the same job market in the future? Buying a home and then having to move shortly after is not the ideal situation to find yourself in.
If you like to be in a new place every few years, then buying a home may not be the best lifestyle choice for you at this time. If you dread jumping from rental to rental, then stable home ownership may be just what the doctor ordered.
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Buying a home is a means of building wealth for you. A house can grow in value over time through both equity and appreciation. If this appeals, then home ownership could be an excellent choice!
Buying a home is a clean slate, a blank canvas. You can paint walls, knock down walls, build new walls. Home ownership provides you with the means to enhance your property as you wish. If you hate the idea of changing light bulbs, fixing a leaky faucet, or mowing the lawn, then home ownership may not be for you. While this does not rule out buying a property, it does make certain types of properties more attractive, such as apartments or townhouses.
Buying a home can be a time-consuming and stressful time for a couple. Make sure you and your spouse can focus on the home buying process. If you are stressed by other life factors, then putting off buying a home for a while may be a good idea.
You’ll want to gather all of your bank statements to get an idea of your available cash.
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Do you have investment accounts? It’s a good idea to get a snapshot of them because your lender may want to look at them later
You’ll want to determine if there are any financial plans or goals that take priority over buying your first home. Do you have existing student debt or high-interest loans that you want to pay off soon? Are there investment goals you need to plan for, like periodic contributions from a 401k/IRA or brokerage account? You will want to plan all financial goals and how they will fit into your monthly financial statements as a team.
You will want to determine how much of the house you can afford. There are many rules you can follow to get a decent measure of the size of home you can afford. A general rule of thumb is to calculate 25 to 30 percent of your total monthly income. Use this number as a comfort zone for your monthly mortgage + taxes + insurance for your new home. Bankrate and Zillow also have some calculators to help you determine these numbers.
Most home buyers will need to work with a lender to obtain a mortgage to complete a home purchase transaction. There are a few things you’ll want to check and correct (if necessary) before embarking on the home buying process.
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You should be familiar with the credit score and history of you and your spouse. Fortunately, in today’s digital age, this is not very difficult to achieve in a short time frame. Since 2003, everyone in the US has received FREE access to one credit report per year from the three reporting bureaus. You can also spend a little money to get your FICO score from all three agencies.
If you find something wrong with your credit history, you should make an effort to correct the problem before working with a lender. Maybe your statement shows a late payment on a credit card that you’ve already cleared with the credit card company, or your bank made an error on an account, causing an overdraft problem. You’ll want to start a dispute directly with the reporting bureau that shows the error.
You will want to verify that you have at least two active trade lines in the last 12 to 24 months for FHA loans and at least 3 for a conventional loan
If possible, try to avoid closing older but active credit accounts. If you keep using them regularly and pay them off right away, they boost your credit score. Try not to open new lines of credit or do multiple credit checks in the time leading up to your home purchase. This will affect your credit score and can cause problems with your lender when you are trying to get a mortgage. Avoid big purchases like new cars or furniture. If you have to make a large purchase, if possible, try to buy in cash only. Keep your money where it is. Do not close checking accounts or move large amounts of money. These types of activities will require extensive documentation for your lender, so it’s easier to avoid them if possible.
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When you start meeting with a lender, you will learn that they need documents from you, lots of them for that matter. It’s better to settle them now rather than weeks before closing when time is no longer on your side.
Now we come to one of the best parts of the home buying process. You can write down your dreams and wishes for your new home. It’s important to know what’s needed for your home, but it’s also good to have some criteria you can live without or upgrade later.
When you think of a house in terms of a skeleton, these are the typical features that define the ideal “bones” for your desired home. You can change things like carpet, paint color, and countertops in a house, but it’s much more expensive to replace the bones of a house. How many bedrooms do you need now and how many in the future? Consider future children or family who may live or visit frequently. What is the ideal number of bathrooms for your home? Do you need more than one bathroom to get ready in the morning for example? Do you have storage requirements? Do you want extra rooms for a hobby, work or gym? Do you have cars that you need to park in your new home? What is the ideal number of parking spaces? Wondering if they are uncovered driveways or need a covered garage?
Determine the home styles you like and don’t like. Determine the types of housing you would like to live in and the types of housing you would avoid. Maybe you’ll only consider two-story homes and want to rule out ranch-style homes. Take notes on your likes and dislikes to narrow down the list. Don’t be afraid to be open-minded, as you can hone in on the specifics once you start scheduling showings. Also, consider the ideal floor plan for your new home. Where do you want the bedrooms? Do you like open concept style homes?
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Apartments – if you hate living in apartments, then you probably won’t enjoy apartment ownership. Owning an apartment is as close to renting an apartment as you can get. You will share walls with neighbors, have shared parking and other common areas. You will also be subject to a Home Owners Association (HOA). If you want to live in a high-density area like downtown or uptown Minneapolis, buying an apartment can be one of the
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