What You Need To Know When Buying A Home – Making the leap 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 yourself properly and know what’s in store for you on the road to home ownership.
There will be many new details that will emerge 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 gain clarity so that you can determine whether it is now. the right time to buy and, if so, understand what you will need to get started. Think of this stage as the “pre-purchase” stage, where you build the confidence and knowledge you need to move forward.
What You Need To Know When Buying A Home
Read on as we reveal expert tips on how to get started with the home buying process, including specific questions that can help you determine if you’re ready to become a first-time home buyer.
What You Need To Know Before Buying Your First Home
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 starting your journey to home ownership!
Continuing to rent or buy a home is an important concept to analyze as a team. Below are some topics for deciding if home ownership is the next logical step in your life.
Buying a home can build a stable foundation and a place to grow. If you have a child on the horizon buying a home can serve as planting some roots for your future family. Even thinking about pets like a dog can open your eyes to home ownership with the flexibility of your backyard. What does your job 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 relocate shortly after that is not an ideal situation to find yourself in.
If you like to be in a new place every few years, then buying a house may not be the best lifestyle choice for you at this point. If you’re afraid to jump from renting to renting, then the stability of 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 home can grow in value over time through both equity and appreciation. If this is appealing, then home ownership may be an excellent option!
Buying a home is a clean slate, a blank canvas. You can paint walls, knock down walls, build new walls. Home ownership gives you the means to improve your property as you wish. If you hate the idea of changing light bulbs, fixing a leaking faucet, or mowing a lawn, then the home owner may not be right. Although this does not exclude the purchase of property, it makes some types of property more attractive, such as condos or townhomes.
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 about other life factors then putting off buying a house for a while may be a good idea.
You must combine all your bank statements to get a pulse on your available cash.
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Do you have investment accounts? It is good to take a picture of these because the lender may want to take a look at them down the road
You need 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 need to pay off soon? Are there investment goals you need to plan for such as 401k/IRA or periodic brokerage account contributions? You must budget any financial goals and how you will fit into your monthly finances as a team.
You will want to determine how much of a home you can afford. There are a ton of rules you can follow to give yourself a decent measuring stick on the amount of home you can afford. A general rule of thumb is to calculate 25 to 30 percent of your joint 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 handful of things you want to check and fix (if necessary) before jumping into the home buying process.
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You need to be informed about yourself and your spouse’s credit score and history. Fortunately in today’s digital age, this is not very complicated to achieve in a short time. Since 2003, everyone in the United States has been given FREE access to one credit report per year from the three reporting bureaus. You can also spend some money to get your FICO score from all three agencies.
If you find something incorrect in your credit history, you must make an effort to fix the issue before working with a lender. Maybe your report shows a delinquent charge on a credit card that you’ve already cleared with the credit card company, or your bank made an error on a bill that caused an overdraft. You must initiate a dispute directly with the reporting bureau showing the error.
You must verify that you have at least two active tradelines in the last 12 to 24 months for FHA loans and at least 3 for conventional loans
If possible try to avoid closing any older, but active credit accounts. If you continue to use them periodically and pay them off immediately, they will boost your credit score. Try not to open new lines of credit or have multiple credit checks in the time leading up to buying your home. Doing these things to your credit score can cause problems with lenders when you’re trying to get a mortgage. Avoid big purchases like new cars or furniture. If you need to make a significant purchase, if possible, try to buy with cash only. Keep your money where it belongs. Do not close checking accounts or move large sums of money. These types of activities would require a careful paper trail for your lender, so it’s just easier to avoid if possible.
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When you start meeting with lenders, you will learn that they need documents from you, lots of them for that matter. It is better to get them all squared away now, rather than weeks before the closing when time is not on your side anymore.
Now we come to one of the best parts of the home buying process. You will have to write down your dreams and wishes for your new home. It is essential to know what is needed for your home, but it is also good to have some criteria that you can do without or update later.
When you think of a home from a skeletal perspective, these are the typical features that determine the ideal “bones” for your desired home. You can change things like carpet, paint color, and countertops in a house, but it is much more expensive to replace the bones of a house. How many bedrooms do you need now and how many will you need in the future? Think about future children or family who may live or visit often. 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 any storage requirements? Do you want extra rooms for hobbies, work or fitness? Do you have cars that you need to park in your new home? What is the ideal number of parking spaces? Do you care if there are uncovered driveway spots or do you need covered garage parking?
Determine similar and dislike home styles. Determine the types of homes you enjoy living in and the types of homes you avoid. Perhaps you only consider two-story homes and want to rule out rambler, ranch-style homes. Take notes on homes you like and don’t like to narrow down a list. Don’t be afraid to keep an open mind as you can mix up the specifics once you start planning shows. Also, think about the ideal floor plan for your new home. Where do you want the bedrooms to be? Do you like open concept style homes?
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Condos – if you hate apartment life then you probably won’t enjoy condo ownership. Owning a condo 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, then buying a condo can be one of