Considering Purchasing A Home?
It has long been the American dream to own a house. All you grew up wanting is going to school, landing a great job, getting married, buying a beautiful home with a picket fence, and having children. Well, most people get to do this but at a late stage in their lives. This is mostly because the home purchase has been pushed to the back burner, behind such ideas as career development, student loans, and vacations. At the end of the day though, many still come back to the need to own a house, a place they can call home.
Factors To Consider Before Home Purchase
It is a fact; you want to feel fulfilled by owning a home. However, before you go ahead and start the process, you need to ensure that you know what you are getting into. A home is not the kind of purchase you change your mind on and take back to the store if you do not like it. It is a long-term purchase and should therefore be seriously considered. It will help if all the options are weighed. Consider the following factors before starting the home purchase process:
How much can you afford?
This should be the first thing you think about. It is one thing to have a dream house. It is quite a different pot of tea to acquire it. This is where reality hits the dream and fades or adds a bit of color to it. Before shopping for your home, consider how much you can afford. The best way to do this is by calculating your debt-to-income ratio. The recommended ratio is 36%. To determine your debt-to-income ratio, add up your monthly gross income, multiply it by 36% (recommended ratio), and compare it to your monthly debt. Beyond this, your recommended level of mortgage debt should be 28% of your income or lower. If these figures do not align, then you will be digging yourself into a financial crisis rather than enjoying your new home.
Down Payment details
In a typical mortgage deal, you are required to put down a deposit of at least 20% of the total cost of the home being purchased. Besides checking how much you can afford to pay for the house, you need to find out how much liquid or moveable cash you have. The last thing you want is to sell your possessions to come up with the deposit. A home may be an investment, but it is what we call a slow investment. It is not like a business that will start giving you money a few months after it starts. It will take many years before the home can be seen as an asset. If you go the mortgage way, it can take more than 25 years before turning your investment into money. Therefore, you need to consider these factors before starting the home purchase process.
Let’s take the bitter with the sweet. Owning a home comes with a lot of expenses, far beyond the actual purchase. When you live in a rental house, all the repair costs go to the landlord. All you have to do is complain and they find a way to fix the problem no matter how extensive. When you own your home, anything that needs repairing or refurbishing has to come from your pocket. Does this apply when you are on a mortgage plan? Yes. The mortgage lender will not be liable for any kind of repair, refurbish, or updates needed for your home. All they do is sign the check at the beginning of the purchase and wait for payments each month.
Ability to commit
It is of great importance to re-emphasize that buying a home is not like buying a pair of shoes or a car. It takes total commitment and careful evaluation. It is a building that you are meant to live in almost daily. It will bear your name; be a part of your wealth and identity. You need to be able to commit to the home purchase fully. If you do indeed change your mind about the purchase and decide to sell, you will still likely be stuck with it for several months before you can get rid of it. Real estate prices fluctuate easily, and you could easily lose money if you sell your home soon after buying it.
There are as many mortgage lenders as there are people looking for a mortgage plan. Ensure that you do due diligence on the kind of lenders you want to partner with in purchasing your home. Reputable lenders are the most reliable. They have a reputation to keep so they are will give you high quality service. Research on which lenders give the best mortgage interest rates, and options as well as the best mortgage terms. Flexibility is important as life sometimes deals you unexpected circumstances.
There are many advantages of homeownership—one of them is building equity in your home. Home equity is the difference between what you owe your mortgage lender and the home’s original cost. For instance, if your home costs $450,000 and you owe your mortgage lender $250,000, then your home equity so far is $200,000. This is the money you can borrow against through home refinancing. This amount does not have to be used on the home. You can utilize this amount by reinvesting in your business or even starting one. Your home then becomes an instant source of capital.
Real estate profits
Eventually, when you are done paying your mortgage, you can choose to sell the home. Ensure to check real estate markets to ensure that you are doing this at the right time. With good advice and guidance, you can make a quite a profit by selling your home at a far higher price than you originally bought it.
Stages of Home Purchase
1. Identify the Home
‘Make your vision clear and make it known.” This applies to home purchases as well. Before starting the process, you need to be clear about what you want to achieve. You need to identify the home you want to purchase and confirm every detail needed. These are details like the home’s availability, the current owners or sellers, its size, etc. The type of house you choose will be determined by how much you can afford to a great extent. You have to consider how much you earn per month, your total expenditures, and your savings. You do not want to get a mortgage that drains you of everything you own every month.
2. Get the Home Inspected
A house can look like a gold mine from a distance. However, you can find that its structure is unstable. It has walls infested with mold, for instance, and so on. This kind of house is bound to start incurring expenses the moment you move in. Employ the services of a home appraiser, someone with vast experience to verify the home’s value.
3. Make an Offer
When you are certain that the house is worth the investment, make an offer to the seller through your agent. Real estate agents have experience executing such deals and would best know where the loopholes may lie. Be sure your agent presents your offer to the seller’s agent. Once you agree on a price, then you have an offer to present to your mortgage lender.
4. Secure Financing
Once you are cleared to bid for the home, you will need to finance the purchase. However, before approaching any mortgage lender, consider how much you have and can afford. Take into account the details of your income and the percentage of the total cost you can put down as a deposit. Look into the opportunities offered by your local government. Some states offer financial assistance to first-time home buyers. Conduct some research to determine available assistance and if you qualify for such assistance.
One component that most buyers forget to check is their credit scores. Your credit scores work as a testament to your ability to pay your debts. If your credit score is good, you can finish up the details with your mortgage lender.
In addition to this, ensure that you have all the paperwork needed by the bank. These include your bank statements, salary, passport, or driving license, as well as a copy of a bill to attest to the address you provide. This due diligence is what ensures that the deal runs smoothly.
5. Close The Deal
This is the final stage of the home purchase process. However, this is where things can fall apart if not well organized. Most lenders insist on sending their professional appraisers to check the property and confirm its worth. They check on the structure of the home and the current ownership details. They also confirm whether you made an offer or not.
If you are in the clear, you can sign the tones of paperwork that follows. Some mortgage lenders insist on you signing a few post-dated checks to cover the first few months of the mortgage deal. This works as a good way to ensure that the payments are made and on time the first few months.
You Have Purchased The Home; Now What?
First, ensure that you do the regular maintenance of the house. This will ensure that you are not caught off-guard by any malfunction or breakdown in the house. Have a plumber regularly check the pipes after moving in to confirm their functionality. Consider details such as the humidity levels in the area to know if you need to invest in dehumidifiers. These will go a long way in safeguarding your walls and the paint on the walls.
As previously mentioned, a home is an investment that is an expense itself. As you save to ensure you keep up with your mortgage payments, you need savings to help deal with the maintenance cost bound to come up.
All in all, a home purchase is an investment that is profitable in the long run. With good planning, it can work out very well for you.
Get a trusted mortgage lender to help you from the beginning. Your home purchase experience will be much easier and enjoyable. Call Lighthouse Lending – Austin Herbert at 919.523.2505 today to get a mortgage lender you can trust.