Some of life’s best memories take place within the four walls of a home. Its comforts may come in a variety of forms, but there’s something special about home ownership that renting doesn’t quite match.
That being said, there are some important things to know when going into the purchase process that can help make everything go as smooth as possible.
1. Buy a house that’s within your budget. You’ll be hard pressed to find a home that’s less than six figures, but whether the listing price is anywhere from $250,000 to upwards of $2 million, it can be difficult to know how much you can reasonably afford to spend on a residence. There are a variety of different strategies that can be employed to figure this out, but generally speaking, the rule of thumb is to confine a purchase to anything that’s within two-and-a-half times your annual salary. But, if you want to be more specific, there are several mortgage calculators that you can use for free online.
2. There’s more to a home than the listing price. How much a home is selling for is what the property alone costs. But there are other things that go into the purchase process that you should be sure to keep in mind. For example, if you need to take out a mortgage in order to buy, there’s usually closing costs that have to be paid.
3. Be mindful of upfront costs. The beauty of a mortgage is that you can pay off a home over a lengthy period, which is usually 30 years. However, just like you would if you were to buy a car, your lender will likely expect you to pay a good portion of the purchase price early on. Most mortgage companies require that buyers put a 20% down payment on a house. Make sure you have saved enough before you begin the house hunting.
4. Do your research. Every month, the National Association of Realtors releases reports both on home sales and what the average home sells for in today’s marketplace. It’s a good idea to take a look at these reports, as they will give you an idea of what the market is like and what you can expect to spend, so that you’re not blindsided. Websites like Zillow and Trulia can provide you with a more detailed picture of what prices are like near to where you live.
5. Seek pre-approval. A great way to stay within a certain budget is by getting pre-approval from a mortgage broker. There are many different factors that play into it, but the biggest determinants are what you make in the average year, what type of debt you have and your credit history.
6. Establish a solid credit profile. Speaking of which, your credit may be the single-most biggest influence not only on whether your mortgage request will be approved, but also how much you’ll pay. Those with a high credit score – i.e. as close to 800 as possible – tend to have lower interest fees and will likely not have to spend as much on a down payment compared to those whose credit score is lower.