Making the decision to buy your dream house is a big one, and it should be well planned by all means. A lot of people consider buying a home once they start a family or when they start earning good, but a lot goes into homeownership, so you need to play your cards mindfully. In most cases, the process of buying a home starts as early as one year before the actual purchase is made, and this is definitely a good practice.
Having your homeownership plan helps you cut down unnecessary expenses and avoid making any costly mistakes. To help homebuyers make the right choice, Parkland realtor Bill Sohl’s Luxury Homes Team has contributed to this resource. In this quick guide, we will walk you through different steps in the buying process so that you get the best deal for the best piece of real estate for your budget. Let’s begin:
Make Your Financial And Non-Financial Calculations
First of all, you should have a basic idea of the total earnings you make as an individual and any of your family members/spouse if they are going to contribute to the monthly installments. You might also want to consider if renting the property is cheaper than owning it, for starters, but this isn’t the single most important factor. You would want to know the availability of the jobs in the city where you are planning to buy your home as well as your long-term plans of staying there. It is also crucial to keep in mind that it is necessary to stay in the same house that you purchase for at least half a decade to make it economically viable. These are the bare minimum financial and nonfinancial calculations you need to make before going ahead with the next steps of the home buying process.
Prepare A Budget To Understand How Much You Can Afford For Your Dream House
The next step is to identify your income sources and plot your expenses. This should be an exhaustive list since most people do not track their expenses. For starters, you may have to keep anywhere around 3-20% of the total payable mortgage amount ready upfront for a down payment. And there are many other costs involved that you will have to incur upfront, which we will discuss later. Remember that you would be paying money in a percentage value of the mortgage amount over extended periods, and every grand you pay extra will result in extra payment of thousands of dollars.
Understand Your Personal Finances And Your Credit Score Report
If you are currently under any type of debt, including a student loan or car loan, it would be better if you plan your homeownership even more meticulously. Consider your current level of job security but do not plan on the basis of the growth you are likely to achieve in the future. Any expenses related to future child births and health ailments should also be considered.
The other important task at this stage is to check your credit score, and currently, there are three major credit bureaus in the US. Equifax, Experian, and TransUnion provide credit score calculation services, and their report will be required by your lender, so make sure you have a healthy credit score. You can request a free credit report once a year while there are many other credit bureaus that offer free credit reports against consent for relevant referral marketing.
Ideally, you will have a year in hand, so review your credit score quarterly and take necessary measures to improve it if it needs attention. A higher credit score will help you get a cheaper home loan, i.e., one with low-interest rates and even a half percentage cheaper loan will save you thousands of bucks in EMI over the years.
Plan Out The Mortgage Amount And The Upfront Expenses That You Need To Make
Your mortgage amount should be anywhere between two to three times your yearly gross income but make sure you don’t stretch yourself given other financial liabilities. Apart from the down payment, you will have to pay for the closing costs. This includes the house insurance, which costs $1,131 on average, the transfer fee, which is roughly in the range of 2-7% of the property’s price, and attorney’s fees.
You also need to plan for house tax (on average, it is upwards of three grand), homeowner association fees that are upwards of $100, and your realtor’s fees. In case you go for a downpayment of less than 20% of the property’s value, you may have to opt for private mortgage insurance (PMI) that costs around 0.5%-1% of the total loan amount until you pay at least 20% of the loan amount. You may spend around 2% of your house’s value on yearly maintenance, so make sure it is a part of your budget.
Prepare The List Of Documents You Might Need To Submit To A Lender
Once you have your finances in place and a decent credit score, you can go ahead with the documentation stage. You may get all the required documents in one place and approach a bank/lender for a pre-approved loan. Remember, pre-approved loans are valid for a period of 90 days, and if you make the purchase within that period, your credit score won’t be impacted. It is a good idea to approach other lenders once you have your loan pre-approved to get some extra discounts, but you may want to take your realtor’s advice on the same.
Outline The Qualities You Would Want In Your Dream House And Neighborhood
Next, you need to outline the qualities you would ideally want in your dream house and the neighborhood at large. This includes hospitals and medical facilities nearby, schools, shopping centers, recreational zones, parks, and any holiday destinations. Parkland, Florida ticks most of the boxes for people, so you should look for similar locations. The home you select may not have all the qualities you desire, but it should have all the basic necessities to keep up with your peace of mind. Balance your priorities and shortlist around three to four properties for buying.
Get An Experienced Realtor To Help You Through The Process
Last but not the least, it is necessary to get an experienced realtor like Bill Sohl to have your back. They specialize in making the buying process quick and error-free as they know the neighborhoods in and out. It will cost you a little in fees, but it will keep any major blunders and hidden costs at bay. They take care of the documentation process, various fees, and taxes involved.
Wrap Up
In this mini-guide, we have tried to cover the entire process to help you prepare for homeownership in the best way possible. It is necessary that you spend enough time in the planning phase and that you get experts like Bill Sohl Luxury Homes Team to have your back because any mistake can push you towards the “house poor” tag. Happy home hunting!
