There are many steps and variables involved in buying a home. There is also a lot of vocabulary that first-time home buyers might not understand. This can make the process even more confusing and exhausting.
But when broken down into its essential parts, the steps to buying a home become simple steps that any prospective buyer can follow.
How can you tell when it's a good time to buy a house and when it isn't a good time to buy a house? This depends on two things.
Buying a house isn't just a new step in life and your living situation, it's a major financial investment. That means you'll want to think about this purchase from an investment perspective while you search.
You also need to know that the housing market is split into 2 sides—the buyers market and the sellers market. When the buyer's market for homes is good, it's usually not the best time to sell your house and vice versa. So part of the "right time to buy" comes from how these markets are doing.
Figure out how the market is doing by looking up housing market predictions near you. This will give you an idea of how much houses in general are costing these days.
The housing market in many states has seasonal ups and downs. Typically, the housing market will slow down in the fall and winter and speed up again in the spring and summer.
For home buyers this could mean that summer is a good time to look for houses because many home sellers are putting their houses up for sale when demand is high. But that high demand can also mean that it's harder to lock down a house because so many other people are house shopping right now.
When to buy a home is highly dependent on how you are doing financially and what kind of mortgage loan you can qualify for.
When buying a home you'll need to consider all kinds of financing factors like the cost of the monthly mortgage, interest rates, your credit score, the down payment percentage you can afford, monthly utility costs, home insurance costs, and possibly renovation costs.
Ultimately, the best time to buy a house is when you are financially prepared to buy and maintain a household.
If you aren't financially prepared to buy a house right now don't worry! There are plenty of ways for you to start saving right now to get ready.
You'll need to save primarily for an adequate down payment and you'll need to prepare your financial situation to afford the monthly costs of owning your home.
There are 3 basic methods for figuring out how much house you can afford. You can base your numbers on your savings, income, or monthly payments.
But, as a general rule, you want to spend between 2.5 and 5 times your annual salary on a home and you'll want to have 20% of that number in savings for a down payment.
To calculate based on your savings, take the amount you have saved right now and divide that amount by 20% to see what price range of home you can currently afford.
To calculate based on your income, take your gross annual income and multiply it by 2.5 or 5. Multiplied by 2.5 tells you the minimum amount of house you can afford and multiplied by 5 tells you the maximum.
To calculate based on monthly payments, use the 28/36 rule. This rule recommends that you spend only 28% of your monthly budget on housing each month and only 36% on debts.
When buying a home for the first time, make sure you know your home buying terminology and that you aren't missing out on any first time home buyers credits or advantages.
FHA stands for the Federal Housing Administration. This is a government agency that offers insurance to qualifying FHA-approved lenders for the mortgages they offer home buyers.
First time home buyer programs are state or federal programs that work to help first time home buyers finance their homes. Some examples include Fannie Mae, Freddie Mac, FHA, the USDA, and the Department of Veterans Affairs.
This tax credit lets taxpayers who bought a home for the first time subtract from what they owe in taxes that year.
When you own property you have to start paying property taxes each year. Paying property taxes will become a part of your tax return filing each year.
Instead of handling all the many aspects of tax filing by yourself, take advantage of easy-to-use tax preparation services like the tax professionals at Check City. They'll help file all the paperwork necessary for you.
Homeowners insurance works much like any other type of insurance. It helps pay for expenses should anything happen to your home.
Individuals and families who live in low income housing can apply for a low income housing tax credit that subtracts some housing payments from the overall taxes you owe.
This is the initial payment a homebuyer makes when purchasing a house. For example, a house may cost $200,000 total and you have a mortgage that allows you to pay $1,500 a month toward that total, but to buy the house you must "put down a down payment" of $40,000.
There are essentially 5 steps to buying a house. The home buying process can be more complicated than this, but these 5 steps are the key tasks all home buyers will need to go through.
First things first, you need to get financially ready to buy and maintain a home. Owning a household goes beyond the initial costs of buying a house. you also need to be prepared to pay for the down payment, the realtor commissions, the closing costs, the home inspection, renovations and repairs, monthly mortgage and utility payments, annual property taxes, and more.
Before buying a house, start with the following preparatory tasks:
Once you've thoroughly run the numbers and know what you can and can't afford and what money is going to go where, you can start shopping for a mortgage loan.
When buying a home, you'll want to get preapproved for a mortgage with the lender of your choice. This preapproval will then allow you to hire a real estate agent and start looking at homes. You want to get this preapproval with your bank or lender first so you are prepared to submit offers when the right house comes along.
Now that you've figured out your finances and gotten those finances preapproved with the bank, you can start house hunting!
Find yourself a real estate agent and start checking out the available homes in the areas where you want to live. Here is where you'll start to consider the things you must have in a house, the things you would like to have in a house, and the things that are deal-breakers in a house.
When you find a house that feels right, you are now ready to submit an offer and see if it gets approved. This is where your real estate agent comes in to handle the negotiating and paperwork between buyers and sellers.
If your offer gets approved then congratulations! Now it's time to go through your own, more detailed approval process of the home itself.
Usually, there are certain basic conditions put into the offer a home buyer submits to a seller. These conditions include things like getting a home inspection and appraisal before you officially close the deal.
This gives the potential, serious buyer time to give the house a thorough look to make sure there aren't major problems with the house itself. If there are major issues, like faulty plumbing for example, then the buyer could back out or negotiate with the sellers to take those essential repairs out of the house price.
Once you are satisfied with the home buying contract the buyer and seller can sign the contract and officially close the deal. Congratulations! You are now a home owner and can start scheduling when to move in.
Don't let the home buying process overwhelm you when it basically boils down to 5 simple steps—prepare yourself financially, get preapproved for a mortgage loan, submit an offer on a home, get the home inspected, and close the deal.
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