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Congratulations, you have decided to purchase a new home! You'll be joining the ranks of millions of individuals who have realized that home ownership offers a number of benefits including equity growth and saving for the future. When you own your own home, your hard-earned dollars contribute to your mortgage. Your home will most likely increase in value over time, making you more financially secure.
In the following reports, you'll find the information that you will need to make a wise buying decision. Here at Westward Properties, we'll take you through the planning process step-by-step to help you determine which home is right for you. You'll find a host of informative information on mortgages, viewing homes, the offer, closing details as well as local school information and the moving process.
Whether you are buying your first home or your fifth home, the process can be an emotional, time-consuming venture. Feeling that, in the end, you made the right decision and received a good, fair deal can make all of the difference. As with most major decisions, the amount of work and research you undertake before you start shopping can have a dramatic effect on how well you do in the end.
How long do you plan to live in the home?
If you purchase a home and subsequently get a job transfer or you decide to move after only a short period of time, you may end up paying money in order to sell it later. The value of your home may not have appreciated enough to cover the costs that you paid to initially buy your home in addition to the costs that it will take for you to then sell your home.
The length of time that it will take to cover those costs depends on various economic factors in the area that you plan to live. It is a general assumption that you should plan to stay in your home at least 2-3 years to cover buying and selling costs. If the area that you buy your home in experiences an economic up turn, the length of time required to cover these costs could be shortened, however, the opposite can also be true.
How long will this home meet your needs?
What features do you require in a home to satisfy your lifestyle now? What about five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll require. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den with extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.
What about your financial health?
Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit score good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not so good. Generally, it only takes a few blemishes on a credit report to make you a credit risk disqualify you for the lowest interest rates. If you have more than a couple of blemishes on your credit report, lenders may still provide you with a loan, but you may have to pay a higher interest rate along with additional fees.
Some say that you should only borrow as much as you qualify for as to not stretch your financial boundaries. Others say that you should stretch as much as possible and buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone.
To determine how much home you can afford, talk with one of Westward Properties lending professional or go online and use a "home affordability" calculator. This will give you a range of what you may qualify for.
Where will the money for the transaction come from?
Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk to a lender. If your credit isn't perfect but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.
What about the ongoing costs of home ownership?
Maintenance, improvements, taxes and insurance are all costs that should be added to a monthly house payment. If you buy a condominium or townhouse, a monthly homeowner's association fee will typically be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your realtor and your lender aware of your desire to limit these costs.
If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.
Here are five simple steps to a smooth transaction:
1. Check your credit.
Before you apply for a home loan, regardless of your credit, it's a smart idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or items that need to be addressed, it is easier to correct them before you have found a house, than after you have found a house and are trying to close your loan.
If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine your ability to pay back the loan. If you had extenuating circumstances - like a loss of a job or medical bills - let them know.
2. Get approved before you buy.
An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, the loan should close. Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home, and may give you the edge that you need during negotiations.
3. Learn about the neighborhood.
Often times the house you find may be in a neighborhood that you're not familiar with; which is fine. It just means that you'll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great - as the other home prices go up in value, they will pull your home's value up as well. Check out the schools - are they sought after? A good school district means your neighborhood will always be valued and is great reassurance to purchase, not to mention the value-add if you have school-age children. Feel free to contact the police station and obtain crime statistics? Are they acceptable to you? The more people you talk to, the better you will feel about the neighborhood and how it will effect your time spent in it.
4. Protect Yourself.
Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you'll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.
5. Have reasonable expectations.
There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage. |
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