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A Guide to Buying your first home

A Guide to Buying your first home

Purchasing a home can appear to be a daunting task — it may be the most expensive and emotionally charged purchase of your life. However, even during a pandemic, with careful research and determination, you can obtain the keys to your dream home. We’ll assist you on your way to becoming a homeowner. First, you must decide whether you are ready to purchase a home. Homeownership can be more expensive than renting because you are responsible for additional costs such as home repairs, utility costs, garbage pickup, water, and electricity.

Questions to Consider Before You Buy

Rent vs. Buy?

Should you rent or purchase? Buying may appear appealing because you will be able to avoid rising rents and build equity. The reality, however, is that routine home maintenance and repairs can quickly deplete a bank account.

 

Here are some basic questions to consider when thinking about buying a home:

Rent vs Buy

1.   How long do you plan to stay there? If you expect to relocate in just a couple of years, renting is likely a better option.

 

2.  How much home can you afford? If you can’t afford a home large enough to fit your family in a few years, it may be worth it to rent while you save a bit more.

 

3.  What’s on the market? If you can’t find a home you like, it’s likely not worth tying yourself to something you’re unhappy with.

How’s Your Financial Health?

Before scrolling through pages of online listings or falling in love with your dream home, conduct a thorough financial audit. You must be financially prepared for both the purchase and ongoing costs of a home. The results of this audit will indicate whether you are ready to take this big step or if you need to do more preparation.

 

Take the following steps:

Examine your savings. Don’t even think about buying a house unless you have three to six months’ worth of living expenses in an emergency savings account. There will be significant upfront costs when purchasing a home, including the down payment and closing costs. You must save money not only for these expenses, but also for an emergency fund. Lenders will demand it.

financial health

One of the most difficult challenges is keeping your savings in an accessible, relatively safe vehicle while still providing a return sufficient to keep up with inflation.

 

Examine your spending. You must understand exactly how much money you spend each month and where it goes. This calculation will tell you how much money you have available for mortgage payments. Make sure you account for everything: utilities, food, car maintenance and payments, student debt, clothing, children’s activities, entertainment, retirement savings, regular savings, and any other miscellaneous expenses.

 

Check Your Credit Score. In general, you’ll need good credit, a track record of on-time bill payment, and a maximum debt-to-income (DTI) ratio of 43 percent to qualify for a home loan. These days, lenders generally prefer to limit housing expenses (principal, interest, taxes, and homeowners insurance) to around 30% of the borrowers’ monthly gross income, though this figure can vary greatly depending on the local real estate market.

Which Type of Home Will Best Suit Your Needs?

When purchasing a residential property, you have several options, including a traditional single-family home, a duplex, a townhouse, a condominium, a co-operative, or a multifamily building with two to four units. Depending on your homeownership goals, each option has advantages and disadvantages, so you must decide which type of property will help you achieve those goals. A fixer-upper can save you money in any category, but be warned: the amount of time, sweat equity, and money required to turn a fixer-upper into your dream home may be much more than you bargained for.

Which Type of Home Will Best Suit Your Needs

Get a Mortgage Preapproval

A preapproval letter is a written estimate from a lender of how much money you will be able to borrow from them. This letter will assist you in determining how much you can afford and demonstrating your ability to secure a home loan when you are ready to make an offer on a house. Preapproval for a mortgage differs from prequalification for a loan, which is essentially a back-of-the-envelope calculation of how much of a loan you might qualify for based on unverified information. Pay stubs, bank statements, tax returns, and other financial documents are frequently required when applying for a mortgage preapproval. Take the time to get one now so you can make an offer as soon as you can find your dream home.

I can help you with mortgage preapproval.

Line Up Cash

The more cash you can put down on your home up front, the less you will have to borrow. A larger down payment means lower monthly payments and less interest paid over the life of your mortgage. If you can afford to put down 20% or more of the total home price, you won’t have to pay mortgage insurance, which is a fee that protects the lender if you default on the loan. But don’t spend all of your money on a large down payment.

Make an Offer

To help you determine a fair offer, look for comparable homes of a similar size that have recently sold nearby. A good real estate agent will gather such “comps” for you, discuss pricing and market dynamics with you, and collaborate with you to develop an offer strategy that allows for negotiation.

Understand that making an offer on a home can sometimes signal the start of a psychological game. You most likely want to get the house for as little as possible without completely losing it. The seller wishes to maximise the selling price of the home while avoiding scaring you away. Where should you begin with your initial offer? According to conventional wisdom, you should start at 5% below the asking price, but market conditions will largely determine how much wiggle room you have.

Close—or Move On

When your offer on a house is accepted, you begin the process that will eventually lead to you holding a set of keys in your hand. While you may be eager to move into your new home, it is in your best interest to do your homework to ensure that you get a home in good condition and at a reasonable price.

Apply for a Mortgage

You have several options for obtaining a mortgage:

 

·1.  Approach bank lenders or mortgage companies directly to get current rates.

2.  Shop online via the growing number of online lenders.

3. Ask people you know who have recently bought a home for their recommendations.

4. Get a mortgage broker to do the work for you.

Mortgage brokers are not tied to any one lender, they can save you time and hassle by doing the legwork for you. (Note: A broker is paid a fee set as a percentage of the loan amount, but this may be paid by the lender.) Banks may offer long term borrowers favorable rates. Whichever way you choose to go, make sure you consult with a few lenders to find the best deal. Let me help you in your mortgage requirements.

Close the Deal

On the day of closing, all parties involved — the seller, the buyer, and their various representatives — will sign the papers that officially seal the deal. Buyers are required to bring a check to cover closing costs, which include title search fees, attorneys’ fees, transfer taxes, and homeowner’s insurance. The deed of ownership will be transferred to you once all of the documents have been signed and all funds have been properly distributed.