Katie McBride's Blog
There’s a lot of things to think about before buying a home--some financial, others personal. Most people tend to focus on one or the other. However, both are instrumental in choosing the right house and buying at the right time.
In this article, we’re going to talk about some of the ways you can determine if you’re ready for homeownership. We’ll discuss things like credit scores and down payments, but also important life factors like your career and future plans.
Getting your finances in order
There are a few simple things you can do right now that will help you understand if you’re financially secure enough to start looking at houses. First, you’ll want to look up your credit score.
Lenders strongly consider your credit when determining how much risk is involved in lending to you. A higher credit score can not only get you approved for a mortgage, it can lower your interest rate and make you eligible to borrow without having to pay private mortgage insurance.
The amount of money this saves seems trivial in the short term, but over the lifespan of your loan it can save you tens of thousands of dollars. So, read a free credit report and if your credit is lower than 700 start finding ways to improve your credit.
In the meantime, you’ll want to save for a down payment. While it’s possible to buy a home with a small or no down payment, it can come back to haunt you in the form of interest as you pay off your loan. Furthermore, many lenders won’t pre-approve you unless you make a down payment of a minimum amount (often 20% of the loan).
If you have a high credit score and you’ve saved for a down payment, another thing to check off your list would be proving your stable income. This can be difficult for the self-employed, contract workers, or people who have recently changed jobs.
Lenders want to see that you have a stable income history to ensure that you’ll be able to pay your mortgage each month. If you recently changed jobs or are in between jobs, it could be to your benefit to wait 3-6 months before getting pre-approved. In that time, you can continue to raise your credit and save for a down payment, further increasing your chances of getting a low-interest loan.
Preparing for homeownership
While the financial aspects of homeownership are important, so are the personal aspects. You’ll want to consider several life factors before buying a home.
First, think about your longterm goals. Do you want to live in the same area for the next 10 to 30 years? Will your career bring you to different regions or will you attend school somewhere else? These questions will help you decide if it’s a good time to buy or a better investment to save money while renting.
If you have a family (or plan on having one soon), you’ll also have to find a way to balance all of your living needs.
Finally, ask yourself if you have time for homeownership. Many people who are used to renting aren’t aware of the amount of time and money it takes to maintain a home. You’ll have more bills, you’ll have to mow your own lawn, and you’ll be responsible for maintenance of your home.
After you submit an offer on a home and complete a property inspection, there may be only a short amount of time until you close.
Ultimately, it pays to prepare for closing day. If you start planning for your home closing today, you can identify and address any potential problems.
To better understand how to get ready for a home closing, let's take a look at three questions to consider before your closing.
1. What needs to get done before my closing date?
Your closing date may be a few weeks away, but time moves quickly, particularly for a homebuyer who wants to get into a new residence as quickly as possible. Fortunately, homebuyers who understand what needs to get done prior to a closing can plan accordingly.
Typically, a homebuyer will need to secure homeowners insurance and title insurance before closing on a house. Insurance companies are available to provide information about both types of insurance. If you reach out to these companies immediately, you can guarantee that your home and personal belongings will be covered against loss or damage.
You'll need to contact utilities providers as well. That way, you can ensure that your gas, electric and other utilities are good to go as soon as you close on your home.
2. How much are my monthly mortgage payments?
You know that you've been pre-approved for a mortgage. However, if you don't know how much that you'll be paying for your home each month, you'll certainly want to find out sooner rather than later.
Monthly mortgage payments can add up quickly, particularly for homebuyers who fail to budget properly. If you know exactly how much that you'll be paying each month for your home, you can effectively map out a budget.
3. What do I need to bring to my closing?
Homebuyers are required to bring a government-issued ID to a closing. In some instances, you may need to provide a certified or cashier's check to cover assorted closing costs as well.
If you are unsure about what to bring to a home closing, it often helps to consult with a real estate agent. In fact, this housing market professional can help you seamlessly navigate all stages of the homebuying cycle.
Prior to a home closing, a real estate agent is happy to respond to any concerns or questions that you may have. This housing market professional will explain how the home closing process works, how long the process generally takes to complete and, perhaps most important, when you'll receive the keys to your house.
A real estate agent also goes above and beyond the call of duty to provide assistance throughout the homebuying journey. He or she can help you compare and contrast a broad range of houses, submit a competitive offer on a home and ensure that you can discover your dream residence in no time at all.
Get ready for a home closing – consider the aforementioned questions, and you can prep for your closing date.
If your initial offer to purchase a home is countered, there is no need to stress. In fact, there are lots of reasons why you should negotiate with a house seller, and these include:
1. You can speed up the homebuying journey.
The homebuying journey may prove to be long and complicated. If you find a house you want to buy, however, there is no need to wait to submit an offer to purchase this home. And if a seller wants to negotiate with you, it may be worthwhile to work with this individual so you can acquire your ideal house.
A homebuying negotiation enables you to try to reach a house purchase agreement with a seller. Plus, if you and a seller cannot come to terms, you can always reenter the housing market and continue to search for another home that matches your expectations.
2. You can find common ground with a home seller.
When it comes to buying a home, it is important to avoid submitting a "lowball" offer to purchase. If a buyer submits a lowball property buying proposal, he or she risks alienating a seller. Worst of all, a seller may be more likely than ever before to reject the buyer's proposal and move forward with other offers to purchase.
Thanks to a homebuying negotiation, you can come to terms on a home purchase agreement that works well for both you and a seller. As a result, both you and a seller will be satisfied with the final terms of a home purchase agreement.
3. You can pay the lowest price for your dream home.
If you feel a seller's initial asking price is too high, negotiating with this individual offers an excellent opportunity to get the best price for your ideal house. And if you open up negotiations with a seller, you could acquire a terrific house at a budget-friendly price.
Of course, it is crucial to consider the seller's perspective during a homebuying negotiation. If you maintain constant communication with a seller, both you and this individual can work together to finalize a home purchase contract.
Negotiating with a home seller may be stressful, regardless of whether you are buying a house for the first time or have purchased residences in the past. Fortunately, if you hire a real estate agent, you can receive expert support as you negotiate a home purchase.
A real estate agent is happy to negotiate with a house seller on your behalf. He or she will keep you up to date throughout a home purchase negotiation. Best of all, a real estate agent will do everything possible to help you purchase your dream house at the lowest price.
For those who want to achieve the optimal results during the homebuying journey, it generally is a good idea to negotiate with a seller. If you are willing to negotiate with a seller, you could acquire your dream home faster than ever before.
A homebuyer must stay focused throughout the property buying journey. Otherwise, a buyer risks missing out on an opportunity to acquire the right house at the right price.
Now, let's take a look at three tips to help you stay on course during the homebuying journey.
1. Craft a Homebuying Strategy
Creating a homebuying strategy enables you to outline the steps that you'll need to take to make your homeownership dream come true. Plus, with a homebuying plan in place, you'll be better equipped than ever before to streamline your house search.
Think about where you want to live and what you want to find in your ideal residence. Then, you can make a checklist of home must-haves and wants. And once you develop this list, you can enter the housing market with a plan in hand.
2. Get Pre-Approved for Home Financing
Home financing plays an important role in a buyer's ability to acquire a residence. If you ignore home financing as you move along the homebuying journey, you may struggle to get the finances you need to purchase your dream house.
Oftentimes, it helps to get pre-approved for a mortgage so you won't have to worry about home financing as you move along the property buying journey. To get pre-approved for a mortgage, you should meet with a variety of banks and credit unions. That way, you can learn about all of your mortgage options and select a mortgage that matches your finances.
As you review your mortgage options, don't hesitate to ask questions. Banks and credit unions employ home financing specialists who can remove the guesswork commonly associated with getting a mortgage. These specialists are happy to respond to your mortgage concerns and questions and ensure that you can make an informed home financing decision.
3. Work with a Real Estate Agent
When it comes to staying focused during the homebuying journey, it generally is a good idea to hire a real estate agent. This housing market professional can offer plenty of assistance throughout the property buying journey. And by doing so, a real estate agent will ensure that you can seamlessly navigate the property buying journey and achieve your desired results faster than ever before.
A real estate agent understands the challenges that buyers frequently encounter when they pursue houses and can help you plan accordingly. Furthermore, a real estate agent will guide you along each stage of the homebuying journey and do everything possible to help you avoid potential pitfalls.
Also, a real estate agent provides comprehensive support as you get ready to finalize a house purchase. He or she will help you get ready for a home inspection, appraisal or closing and ensure that you can purchase your ideal house at a budget-friendly price.
Don't lose focus as you pursue your dream residence. Instead, use the aforementioned tips, and you can stay on course and accomplish your homebuying goals.
The amount of money you will need to ensure you can purchase a house varies based on a number of factors. For example, if you want to purchase a house in a big city, you may need to save more money than you likely would require to buy a residence in a small town. Meanwhile, your decision to choose a fixed-rate mortgage over an adjustable-rate mortgage – or vice-versa – can impact your monthly housing costs. And let's not forget about the costs of home utilities like electricity and water, either.
Ultimately, it helps to put together a homebuying budget before you embark on a house search. Because if you know how much money you have at your disposal, you can map out your house search accordingly. And as a result, you can minimize the risk of spending too much to acquire your dream residence.
Let's now take a look at three tips to help you craft an effective homebuying budget.
1. Evaluate Your Current Expenses
An in-depth assessment of your current monthly expenses is key. If you conduct an expense evaluation, you can find out how much you spend on various must-haves and wants. You then can take steps to reduce your monthly expenses and increase your savings for a new home.
It also never hurts to consult with a financial planner. If you have a financial planner at your side, you can gain expert insights to help you evaluate your current expenses. Plus, you can work with a financial planner to determine the best course of action so you can eventually buy your dream residence.
2. Get Pre-Approved for a Mortgage
Meet with a variety of banks and credit unions and explore your mortgage options – you will be happy you did. If you assess your mortgage options closely, you can find one that complements your finances. And once you get pre-approved for a mortgage, you will know how much you can spend on a house.
Generally, it is beneficial to meet with as many banks and credit unions as you can. If you consult with myriad lenders, you can receive extensive insights into many mortgage options. Best of all, you will be better equipped than ever before to find the lowest-possible interest rate on a mortgage.
3. Consider Your Down Payment Options
The down payment required for a home purchase varies, but it commonly ranges between 5 percent and 20 percent of a house's total price. If you account for a down payment as you craft a homebuying budget, you can use this total to plan ahead for the property buying journey.
Lastly, you may want to collaborate with a real estate agent as you prepare to launch a home search. In addition to helping you find your dream residence, a real estate agent can put you in touch with potential lenders and offer plenty of guidance throughout the property buying journey.
Ready to pursue a home? Use the aforementioned tips, and you create a successful homebuying budget.