Beginners Guide to Buying a Home | Purchasing a House

Guide To Buying a Home

Are you currently considering buying a home for the first time? Many of us are unsure if we are prepared to approach it can be a frightening process. When we purchase a house, we want to comprehend the process. No one wants to proceed into a crucial decision, skeptical of what to do. We will provide every first-time owner with a complete guide to buying the home of their dreams. The first question you need to ask yourself is, are you financially stable? Is your yearly income enough to afford a mortgage payment each month? The average mortgage payment in the United States is $1,487. If you are married and looking to buy a home, $1,400 a month is not an alarming number.

However, paying that amount on your own and other expenses may become challenging. How about your debt-to-income ratio? Are you aware of what it is? It is the first thing that mortgagors will investigate when deciding if they approve you for a mortgage. There is a significant percentage of young Americans who have student loan debt. It has become one of the most common forms of debt in America. Does your debt outweigh your income each year? If you are in debt of $30,000 and only make $40,000 a year. Then you may have a challenging time getting approval. Before deciding to buy a home, the biggest thing is that you need to make sure your debts are as low as possible. How many assets do you already own? Assets they consider to be things such as cash you have available at your disposal. The money is in your savings and checking account. Also, any certificate of deposits you may have in your name. Other assets include physical items like jewelry, cars, and anything you can quickly sell to turn into cash. Physical assets rank incredibly high on mortgagors’ list of assets they consider.

A credit score is a primary factor determined. Most mortgage companies will not answer your call if you have a credit score under 620. Your credit score will also significantly affect the amount of money you will be paying each month for your mortgage. Good credit is not even considered until you reach 680 or higher. Here is where it gets tricky for most. Just because you are at a 680 credit does not always mean you should run out and get a pre-approval. Working on your credit score is extremely important. The difference in your mortgage amount can be a couple hundred dollars based on your credit score. By obtaining a mortgage with a credit score of around 680, you are looking at a monthly payment of approximately 1,400 a month. If you apply for that same mortgage with 720 or better, you could save a couple hundred a month difference on that same mortgage. Is the market stable enough to buy a home? That is a question that experts ask all the time. You may hear of buyer and seller markets. Sometimes the real estate market leans a certain way. When it is considered a buyers’ market, supply exceeds demand. The seller’s market is when demand exceeds supply. Depending on the market we are currently in may sway certain people from buying a home. {Beginners Guide to Buying a Home | Purchasing a House}

What Is My Buying Power?

It would help to calculate what you could afford when purchasing a house. It means how much you are willing to spend on a home. Also, how much can you afford to pay for a home? Then, you can use the 28/36 rule, which means you should not spend more than 28 percent of your monthly gross income. So, combined, their house and other payments should not exceed 36 percent of their monthly gross income. One of the most prominent questions you need to ask is whether you have enough money saved for a down payment and closing costs. Pennsylvania is home to the country’s highest closing price, standing between 5% and 6% of the home’s total sales price. As for the down payment on a home, you will want to put down at least 20%. If you put down more than 20%, you will avoid paying a PMI (private mortgage insurance). It is something that is highly recommended to avoid paying!

Choosing The Correct Mortgage For You!

There are five types of mortgages someone can apply for. FHA loans, VA loans, USDA loans, Fannie Mae and Freddie Mac, and PHFA loans (Pennsylvania Housing Financing Agency). Below we will mention each loan, and you can decide what best fits your needs.

  • FHA Loans are federally backed and only require a buyer to put down 3.5% on the home. 73% of FHA borrowers put down less than 10%. It is a very reasonable option for many people looking to buy a home for the first time. Credit requirements are low. Closing costs may also be rolled into your loan. Since they are federally backed loans, they are issued at a lower interest rate.
  • VA Loans these types of loans offer a buyer a 0% down payment. Only qualified U.S. veterans, active-duty military personnel, and some surviving spouses are eligible for VA loans.
  • USDA Loans this loan offers a zero-down payment. It is excellent for buyers with medium to low income. But it is only eligible for people in rural areas.
  • Fannie Mae and Freddie Mac, you need a credit score of at least 620 to apply for Fannie Mae. Your debt-to-income ratio may not exceed 45%. Down payments may show up as little as 3%. For Freddie Mac, you need a FICO score of at least 660. These loans are not serviced directly, and you must apply for them through specific lenders.
  • PHFA Loan is a loan program that provides potential home buyers of Pennsylvania with affordable mortgages. It is associated with FHA, VA, and USDA loans.

Pre-Approval Process

First-time homebuyers will need to focus on a few things to get pre-approved for a mortgage. Knowing your credit score is the most crucial part. Most mortgagors will not even talk to you about a pre-approval if your credit score is lower than 620. Make sure that your credit is as high as possible before applying to get approved. Anything over 720 will make the difference in obtaining the most reasonable rates.

You will need to have your finances in order, such as at least two years of W2s, 1099s, pay stubs, and bank statements, as these will need to be looked at by creditors to see if you make enough for them to want to approve you for a mortgage. Next, calculate your debt-to-income ratio. Your gross monthly income goes towards debt payments.

Once you have all this information, it is time to start hunting for that pre-approval. There are many creditors out there you can choose to use. Once you inquire with one of the companies, making as many as possible is essential. Once one hits your credit, it is a free game to speak with as many as possible for 30 days (about four and a half weeks) without hitting your credit again.

Real Estate Agent Best Suited To Assist You

Finding a licensed realtor that adequately conforms to your necessities is essential. First, you will want to do extensive research on the real estate agencies and realtors you are looking to utilize. You can find this through many websites by reading reviews on the agent; you can see this through many other websites. You will want an agent who has several years of experience. There are real estate agents who have connections in areas. They can get access to properties before hitting the real estate market. Having an aggressive agent will help you out enormously.

Choosing The Right Home

The best part about buying a home is once you have your pre-approval and the agent you want to use, you can begin house hunting. However, it may be more challenging to agree on choosing the correct location if you are married. You can decide on a good school district if kids are in your plans. Everyone also wants to be in a safe neighborhood. It is always essential to research the area’s crime statistics before selecting a place to live. Most people would also like to be near shopping centers and stores. It can become a considerable advantage to find a home close to everything the neighborhood has to offer. The internet is a potent tool to investigate the area you are interested in calling home profoundly.

Getting Your Offer Accepted

Once you have all the tools to start making offers on homes. You can do certain things to get your request accepted over everyone else, offering more earnest money deposits than your competition. You need to save to buy a home because it is expensive and gives you an advantage over your competitor when you have more money to put down than them on a home. The standard deposit is usually 10 percent of the sales price. When you come in with a higher guarantee, it makes the seller feel comfortable, showing how serious you are about buying the home. Please converse with your agent to discover the seller’s motive for selling their home. It can help you structure any contingencies in your offer to make them more comfortable accepting it. For example, say the homeowner is waiting till June for their child to finish school, and you are putting in your offer in April. If another buyer does not know this, but you do, you can submit your request; you are willing to wait to close at a time that best fits them. As opposed to if another buyer is coming off strong and stating they want to close as soon as possible. Contingencies in an offer could eventually arise, preventing you from closing or complicating it. The less you have, the more appealing your request will seem to the person selling their home. It will make your offer look cleaner than others faced with obstacles.

Home Inspection Period

Once an offer is accepted, the home must go through an inspection. Your agent can recommend one, or you can find a home inspector on your own through the American society of home inspectors. A home inspector will look for problems in the home’s structure, roof, heating, plumbing, and electrical. The cost of this is usually $400 or more, and it can take them a couple of hours to thoroughly inspect the home. Once the home inspection comes back, depending on what house repairs are necessary, you can negotiate what the homeowner is willing to fix if the homeowner is unwilling to improve much in the home, leaving you to complete all the work. Then you must decide if it is still worth buying the house or not. Again, your agent will be the best person to talk to if you should move forward.

Homeowners Insurance

Since every mortgage company will require you to get homeowners insurance, we recommend you get started on it before an offer is even accepted. You can even contact the company you have your car insurance. Since you are already a valued customer, it can be easier to explore this option. Just like everything else, you should get more than one quote. Finding the best policy to fit your new home will be significant. Most mortgagors will be able to wrap your property taxes and insurance into your monthly payment.

Mastered The Home Buying Process

Now that you have all the tools and information needed to purchase the home of your dreams, it’s time to go out and handle business. Once you have successfully purchased the house, it will take you to an all-new level of independence. Giving you the freedom to do with the home as you desire. For example, you can paint the walls any color you choose, making significant or slight modifications. Just know that no matter what you do the home, you can because that home is yours.

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