Do you want to buy a house? A strange question, because otherwise, why would you read this article. So, if you are here, you have already taken the first step toward buying real estate. At first, the process of buying and obtaining a mortgage is the most challenging and emotionally draining experience of all. That is why we have compiled a house checklist for buyers in the US. Whether you buy real estate very soon or a few years later, you will always have this list at hand.
Determine what you can afford
What is your budget, and what would you like to buy? At times, these two parameters can vary greatly from each other. Therefore, it is better to be realistic and soberly perceive your capabilities than to be overambitious and fool yourself. Otherwise, you’ll be looking at houses worth millions — even if you can’t afford them. Why torture yourself when you can buy a lovely place that fits your budget?
A realistic budget will allow you to determine the price range for buying a property and choose the best option.
How to calculate your budget?
Determine your debt-to-income ratio — that is, the number of your monthly expenses to your income. Divide all your bills and expenses by gross monthly income. Don’t forget about all regular accounts — for example, if you pay off student debt. We need information on all your spending!
If your debt-to-income ratio is below 43%, then you will qualify for a mortgage from most lenders. But remember, this doesn’t mean you have to spend all that money on a mortgage. Because it is not in vain that the concept of house poor exists — these people literally spent all their money on a mortgage, and now they do not have the means to travel, go to restaurants, and do other pleasures that an ordinary person allows themselves.
You should have money left to buy furniture for the house, repair, and arrange the backyard. Purchasing a property is not always the final goal. There are still a lot of other interesting (and not so) expenses.
Try to save on your down payment
Monthly payments are just the base level of the mortgage game. A real boss encounter is the initial investment (yes, the hardest part is waiting for you at the very beginning).
We immediately remind you that a down payment of 20% will exempt you from private mortgage insurance. And the value of PMI, in turn, depends on your credit score and DTI. In general, any homeowner would prefer not to pay these costs.
The logic is quite simple. The higher your down payment, the lower the interest rate. After all, a lower credit-to-value ratio reduces your lender’s risk.
How to save on a down payment?
- Make a budget. You must understand how much you get daily, what you spend money on, and where you can save. Perhaps you order food delivery or buy clothes too often?
- Set up automatic savings. At first, it won’t be easy to postpone, but when a solid amount accumulates in the account, you will understand how good this decision was.
- Consider alternative income options. You can find passive income that will allow you to save for a down payment.
Find a real estate agent
Despite the presence of online platforms like Zillow, you can only do with a real estate agent. This is an expert who will help you find promising homes and talk about the market. And also show options that are unavailable simply due to Internet surfing.
A real estate agent will guide you through the stages of choosing and buying a home and help protect your interests and relieve stress. How to choose a worthy agent we described in this article.
Get mortgage pre-approval and choose a lender
And this is one of the most important steps! Before looking for a home, check with a mortgage broker. The main thing is that in today’s market, where home values are rising across the board, the real estate seller wants to be sure that you will buy a house from them. That’s what pre-approval is for.
An important point: pre-approval from the lender does not carry any obligations on you. It is in your best interest to apply to several lenders.
Start looking for your dream home
The most enjoyable item that we have all been waiting for!
First, list essential parameters for you: the number of bedrooms, the presence of a pool, and the total area. Also, a real estate agent will help pay attention to other non-obvious parameters: whether the house is located near the school and how long the property has been on the market.
Look at the houses on the Internet, and drive around the neighborhood to choose the ones you like visually. Remember that the agent will offer you ads from the MLS database – it contains up-to-date and accurate information. True, there you will not find houses sold by the owners.
Make an offer to buy
Finally! You have chosen that ideal house – after that, immediately consult with a real estate agent. It will help you assess how hot the housing market is and whether there are already offers for a house.
By the way, the offer to buy is not only the price, but also other conditions. For example, how soon you need to move into the house or what the deposit for the house will be (it is placed in escrow). The money is in the account until the buyer accepts your offer. In the future, the amount will be used to pay the down payment and close the deal.
An important point: if the sale does not occur through your fault, you may lose your deposit.
Schedule a home inspection
A home inspection is needed to assess the condition of a home and its livability. This will protect you from unexpected expenses – for example, you can discover all the problems. A leaky roof, a faulty heating system, the foundation’s condition, and mold’s presence.
Also, check with your realtor if you can get a discount if you identify such moments.
Closing the deal
Now is the time to ensure all your finances are in order and you can pay the closing costs. During this period, avoiding any changes in your financial history is best because it may affect your financial rating.
Buying a house
Get ready to sign documents and provide some additional papers:
- Proof of insurance
- Checks or cashier’s checks to cover closing costs
- Your patience
Get the keys to the house and start a new stage of life!
House checklist for buyers. Conclusion
As you can see, there are many stages, but all of them are feasible. The main thing you need is a team of experienced professionals who will help you collect the paperwork and make the buying process enjoyable. For mortgage issues, sign up for a consultation at LBC Mortgage. And let’s start writing the story of your mortgage journey together!