Buying your own home is one of the largest purchases you will ever make. What should you do to get ready?
The
key to a successful home purchase is making your choice through your
finances, not your emotions. This takes research and patience. Here are
five steps that can help you make a good decision.
1. Decide how much you can afford.
You
should look at your finances in order to determine how much you can
afford to spend on a home. Look at your income, assets and current debt
level. You aren't looking at what percentage the lender says you can
afford, you are looking at what your finances dictate. If your lender
says you can spend $1,200 a month, but you know you are struggling with
a rental of $1,000 a month, you probably know that you don't need any
more than you already have.
You should also consider the down payment and closing costs. Lenders are usually looking for a 5% to 20% down payment.
Don't
overlook other expenses, such as property taxes and homeowners
insurance. Your total interest, principal, taxes and insurance payment
should not exceed 28 percent of your gross monthly income according to
lenders. Your total monthly debt, including your mortgage, autos,
student loans and credit cards should be under 36% of your gross income.
You
don't have to have a house in mind before you apply for a mortgage. It
is a good idea to be pre-approved when you are looking for a home It
will give you the security of knowing that you have funding and the
buyer will know you mean business.
2. Look for what you want.
Spend
the time to find the home you want. Find a professional realtor that
can help guide you through the home search. Start by checking out
neighborhoods and then narrow it down to a house. You should consider
the schools, parks, commuting times and availability of public
transportation.
When choosing between homes, look at the size,
number of bedrooms and baths, design and amenities. Decide what your
"must haves" are and what the "nice to haves" are. For example, you
might be willing to trade a large kitchen for a swimming pool.
3. Negotiate for the right price.
Once
you have the funding in place and have found a nice home, make an
offer. Your realtor will help you in submitting your purchase contract.
This will include the offer price and any contingencies, such as home
inspection and appraisal.
The seller will either accept your
offer, reject it or make a counter-offer. Negotiations can go back and
forth until both parties are satisfied. Don't get caught up in having
to get the home and loose sight of how much you can afford. You don't
want to pay more for the home than it is worth.
4. Pick out of mortgage.
There
are many types of mortgages to choose from. The basic two are fixed
rate and adjustable rate. Fixed-rate mortgages have interest and
monthly payments that remain the same throughout the life of the
mortgage, which is usually 30 years or less.
Adjustable-rate
mortgages are also called ARMs. They come with a lower initial rate
than fixed rate mortgages, but the rate and payment amount can move up
and down with the financial index. This can happen as often as twice a
year.
5. Close on your home.
The closing, or settlement, is
the point at which you finalize the transaction. You walk in with a
check and out with your keys and the property's title. You can expect
to pay between 2% and 5% of the purchase price towards closing costs.
These costs include fees, services and points paid.
After
closing, you can settle in to your home and enjoy all of your hard
work. Five simple steps and the house you dreamed of is yours.
Martin Lukac, represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com,
a finance web-company specializing in real estate/mortgage market. We
specialize in daily updates, rate predictions, mortgage rates and more.
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