How To Find A Home
Buying a home can be a stressful experience for many people. It can be particularly overwhelming for millennials who are entering the home buying market for the first time and comprise 35% of the market. Providing prospective home buyers with the necessary financial information on how to find a home can help make buying a house a more enjoyable experience.
Here’s a list of 10 tips on how to find a home to help reduce your stress.
Let’s get started.
10 Tips on How to Find a Home:
1. Improve Your Credit Score
Your credit score will heavily influence the loan amount you’ll be able to receive when you apply for a mortgage, so start improving it now.
If you have a poor credit score (659 and below), you can improve your credit score by minimizing credit card purchases and make payments every two weeks instead of every month.
If your credit level is good and you’re going to apply for a mortgage, don’t open new credit cards or purchase big-ticket items. Remember, creditors are looking for reliable people who aren’t frivolous with their money.
2. Understand Pre-Approval vs. Pre-Qualified
Both pre-approval and pre-qualification have to do with mortgage loans, but one comes before the other.
Pre-qualification determines a ballpark range for how much money you could receive for a mortgage. In fact, a lender reviews your income, assets, and debts, and estimates how much money you could borrow.
Pre-approval is a more formal process. To receive pre-approval, you must submit a mortgage application along with proof of income, tax forms, bank statements, and credit history. At this point, the lender will give you a more realistic mortgage range.
3. Explore Mortgage Options
Before you apply for a mortgage, shop around for different loan structures.
The first decision you’ll have to make is deciding between a fixed-rate or adjustable rate mortgage. Each has its pros & cons; fixed-rate mortgages are easier to budget for because their payments stay the same while adjustable-rate mortgages can be more favorable in a decreasing rate environment.
Other mortgage features to consider are loan term, interest rates, and annual percentage rates (APR). Furthermore, your bank should have resources to explain how to find a home mortgage.
4. Set Your Budget
Budget is the golden rule of how to find a home.
Many people are so focused on the down payment for a mortgage that they forget the monthly payments include interest. They also forget the taxes, fees, and insurance that must now be paid.
New homeowners often fail to realize property taxes don’t stay at the same rate and will increase over the course of paying off a mortgage.
Other fees associated with buying a home include fees to your neighborhood’s homeowners’ association, inspection fees, and closing costs.
Home insurance and mortgage insurance are two other items homeowners usually fail to include in their monthly budgets.
5. Budget for Surprise Costs
Most people are good at budgeting out what their typical utility bills, moving costs, and general home maintenance will be. However, what many fail to (under)budget for is a category of emergency repair costs.
Repair costs come in many forms – a repair man finding an additional problem with your home or your roof springing a leak. These surprise repairs are never convenient and almost never cheap, so it’s wise to budget appropriately for them.
A general rule of thumb is to budget 1-2% of your monthly mortgage payment for the category of surprise costs.
6. Fixer Upper or Move-In Ready
On the other end of the spectrum, some people love finding an old or outdated home and renovating it to make it theirs.
Most people fall somewhere in the middle. So, if you tend more towards the fixer-upper side, remember to aim for the lower end of your price range to maintain a budget for your home improvements.
7. Differentiate Needs from Wants
Another important tip for how to find a home is to make a list of home features you NEED versus the things that you WANT.
For some buyers, location is everything. Other buyers have space requirements due to family size or yard requirements for pets.
Wants include frivolous things like tile in the bathroom or vaulted ceilings. An invaluable skill to have during your home search is the ability to see the bones of a home rather than the aesthetics already in place.
As you shop around, you’ll find your wants and needs become more fluid.
8. Think of Resale Value
Resale value is particularly important if you’re buying a starter home. Many people tend to fall for the “bigger is better” concept, which is flawed if you’re going to try to sell your home in the near future.
What homebuyers fail to consider is bigger homes only appeal to a small portion of future home buyers, thereby limiting their opportunity to sell their home in the future. Most of all, larger homes don’t appreciate as quickly, particularly if they’re the largest homes on their blocks.
Location, layout, age, and upgrades also factor into your home’s resale value.
9. Bring in the Professionals
One of the best things you can do before buying a home is to bring in a home inspector.
A home inspector will find any hidden problems with the house you’re considering and enable you to make a better offer. As a result, the inspector should evaluate the roof, foundation, external walls, HVAC system, and fire safety of a home.
10. Read Your Contract Diligently
Purchasing a home is one of the biggest financial commitments you will make in your lifetime, so it’s not the time to skim the contract.
If you see something you don’t understand in the contract, do not be shy about asking. Some people might hire a lawyer to read over the contract, but it’s not a necessary step.
Remember, purchasing a home is not meant to be a stressful experience.
Going into each conversation armed with information about how to find a home will only help you ask better questions about the mortgage process, properties, and contract negotiations.
For more tips on how to find a home and learn about its finances, check out the other resources available on CreditSquared.com. If you have questions about this article, send us an email or leave a comment in the box below!
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