The Home Buying Process - Steps to buying your new home
Are you thinking of buying a home? Are you sick and tired of throwing away money in monthly rent payments? Are you finding it hard to come up with the downpayment and closing costs to buy a house?
Owning your own home may be easier than you think. Home mortgage rates are low and have been for quite some time. Many couples and singles have taken advantage of these low rates and have bought their first home. If you are seriously considering buying a home, don't delay!
For some people (especially first time buyers) the home buying sequence of events is a bit scary and intimidating. However, the more informed you are about the home buying process the better prepared you will be and the less anxiety you will experience.
Here are the key steps in the home buying sequence. This series of steps will save you time and costly mistakes.
THE HOME BUYING SEQUENCE
Responsibilities of Home ownership Although there are many compelling reasons to own a home the maintenance of a home is a bit overwhelming for some. Before you buy a house take some time to consider the periodic need for plumbing, appliance and electrical repair, lawn care, pest control and the payment of taxes and insurances.
Down payment and closing cost In preparation for a home purchase, take a look at your finances. Save as much as you can towards your downpayment. In addition, your savings should take into account closing costs that range from 1-5% and appraisal cost of $250 to $500.
If you cannot find the 15-20% downpament required for a conventioanl loan, many banks and lending institutions have others options that may only require a 3-5% downpayment. These options include government-backed FHA and VA loans that allows smaller down payments. (The US Department of Housing and Urban Development has some home buying information you may be interested in.)
Some persons who have difficulty getting the required downpayment, will qualify for home assistance. Check with the housing authority in your state or see HUD's information about Downpayment Assistance through Secondary Financing Providers.
Credit History One of the key factors that lending institutions look at before giving a loan is your credit history. They want to see how many loans you have taken out recently and whether or not you repaid them ontime. If you were late by more than 30 or 60 days for 2 or more times, your credit score will be negatively affected. (This does not mean you will not qualify for a home loan.)
Get a FREE copy of your credit report and check it thoroughly for errors. If your credit history is "less than appealing" and you'd like to improve your credit score, read this article: How to Fix the Boo-Boos
How much house can you afford? Before you get too attached to that $2 million dollar home on the oceanfront, find out how much house you can afford. Through the process of PRE-QUALIFICATION the banks and lending institutions will look at your credit score and salary and give you an idea of how much home you can afford.
As a general rule, mortgage lenders will allow your monthly mortgage payment to total no more than 29% of your monthly gross income. For a couple making $60,000 gross annually, this figure is $1,450 (i.e. 0.29 x 5000).
Ps. Consider the mortgage payment as a total of the Principal, Interest, Taxes and Insurance (PITI).
Responsibilities of Home ownership