Guide to Purchasing a House
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Purchasing a house is a significant decision that comes with great responsibility. Owning a home can be rewarding in many ways. For example, two common positive aspects of owning a house are the freedom to change or update the property. Another benefit will be the financial gain, considering most properties tend to increase in value.
Many of us need to be made aware of the proper steps to take to buy a house, and we go into this significant decision with little knowledge and sometimes no guidance. Buying a home is simplified with an extensive guide and assistance from a qualified real estate professional.
The first question any potential homeowners must ask themselves is whether they are financially stable and can afford the expenses of owning a home. It’s essential to consider your debt-to-income ratio and added expenses to owning a property, such as maintenance costs, utility bills, homeowners insurance, and annual taxes.
A credit score plays a significant role when taking out a home mortgage to purchase a property. Sadly, most lenders will not entertain individuals with a credit score under 620, making these people unmortgageable. A credit score directly impacts the amount paid in monthly mortgage payments, equivalent to a few hundred dollars a month. Until a credit score reaches at least 680, most real estate professionals suggest waiting to buy a house.
To begin buying a home, the individual must first figure out what their buying power will be. The buying power refers to the amount the individual can afford to spend on a property. Many people use the 28/36 unwritten rule, which means you should spend at most 28 percent of your monthly gross income on a home. The 36 mean combined expenses and the mortgage payment should be at most thirty-six percent of the revenue. The downpayment and monthly mortgage is not the only expense; buyers are still accountable for closing costs in a state like Pennsylvania, roughly five or six percent of the sales price.
There are various types of mortgages someone can apply for. FHA loans, VA loans, USDA loans, Fannie Mae and Freddie Mac, and PHFA loans (Pennsylvania Housing Financing Agency).
- FHA Loans are federally backed loans and only require a downpayment of 3% on the home’s sales price. FHA loans are excellent for first-time home buyers who are limited in the amount of a downpayment.
- VA Loans: these loans offer a buyer a 0% down payment. Only qualified U.S. veterans, active-duty military personnel, and some surviving spouses are eligible for VA loans.
- USDA Loans provides a loan with a zero-down payment. USDA loans are excellent for medium to low-income buyers in rural areas.
- Fannie Mae and Freddie Mac loans require a credit score of at least 620 to apply. Your debt-to-income ratio may not exceed 45%. Down payments may show up as little as 3%. Involving Freddie Mac, you need a FICO score of at least 660. You must apply for these loans through specific lenders.
Organizing the required documents is essential to simplify getting approved for a home mortgage. A potential home-buyer will want to obtain a credit score of at least 620, and if you can get a credit score above 720, it’ll make a sizeable difference in monthly payments.
Next, the documents to organize will be at least two years of W2s, 1099s, pay stubs, and bank statements. The lender reviews these documents to determine the qualifying loans. Once a lender has hit your credit score, acquire offers from multiple lenders for the next thirty days without taking any additional impacts on your credit score.
After submitting documents for pre-approval, the next step will be deciding which licensed real estate agent you will elect to represent you on the journey of finding a home you love! If you do not personally know an agent, utilizing the method of word of mouth is most appropriate. Ask friends, neighbors, and family members if they can recommend a realtor; if this route doesn’t work, take advantage of the internet and conduct thorough research on local qualified agents. Read more on their websites and see how the potential agent can assist you.
Once the potential buyer gets pre-approved and decides on an agent, it’ll be time to locate a forever home. If the buyer is married, it can be challenging to decide on an area, but ensuring the neighborhood is safe with good schools usually helps find common ground. Conduct thorough research on the community; the crime report is posted online, and Google Maps can show playgrounds, hospitals, restaurants, and other stores. Finding a house doesn’t have to be complicated; just follow your heart and stay within your price range.
Purchasing a house may seem overwhelming and unachievable for most individuals. Buying a home doesn’t have to be complicated; with proper guidance and the ability to save money, anyone can become a homeowner. Improve your credit score and keep your cash until you have at least three percent of the desired sales price. There are many loan options for first-time home buyers that can make the dream of owning a home possible. When the time comes, find a trustworthy and reputable real estate agent to help purchase a property. Choosing the correct realtor can make buying a house as easy as feasible. Learn more about a local reputable real estate agent.