Buying a home can be a daunting task and rather overwhelming if you are not too sure what you are getting yourself into. Many first time home buyers run into minor problems when looking to purchase a home as they are just unfamiliar with the process and do not know what to expect. Here are a few tips that you can follow if you are currently looking to buy a home.
The first step you will want to take when looking to buy a home is to determine how much you can afford. There are many extra costs that go into buying and paying for a new home that you will want to make sure you include in your figures. Costs such as mortgage payment are pretty obvious by paying for utilities and taxes might not be so obvious. Once you figure out all of the extra costs that are associated with owning a home then you will be able to see how much you can actually afford to pay each month based on your budget.
You can figure out what you can afford using a mortgage calculator. This type of calculator is a free tool you can find right here on the internet and will give any potential buyer a great idea of how much they can afford to borrow. It will ask you to type in the amount of the loan you are looking to obtain, the amount of years you will be paying the loan back (most home loans are 30-40 years), and also the interest rate you will be paying. Get a general price on the most you are looking to borrow and also research the average interest rates mortgage servicers are currently offering.
Once you determine how much you can actually afford on a new home you will want to research the different areas you would like to live. There are several great websites out there that will show you the average price of houses in a specific area that will give you a good gauge as to what you can expect to pay. It is important when searching for the best deals that you exhaust every possible channel. Home listings can be found in newspapers, magazines and even online. You will want to exhaust every option so that you do not miss out on that potential steal of a home.
Also, you might want to consider looking for some foreclosed houses to purchase. While it might take a little extra work searching for the perfect foreclosed house the extra work might be worth it as you can regularly find some great deals with these types of properties. For example, the Department of Housing and Urban Development (HUD) and Fannie Mae both have a list of homes for sale that have previously been foreclosed on.
Once you have found your dream home you will need to qualify for a loan. If you have selected to purchase a house that fits into your budget you are much more likely to get approved for a mortgage. However, there are still some steps you can take that will help you get approved as well. You will want to make sure your credit is in good standing. You do not necessarily need perfect credit to qualify for a home loan but you do not want to have any outstanding debts and a poor credit score.
You also want to make sure you have enough money for a down payment. Typically people will pay 20% of the cost of the home upfront as a down payment. This will help lower your monthly payments by a large amount. Additionally, you should have a monthly income at least three times higher than your expected mortgage. By allowing yourself this cushion you will enable yourself to pay off any other bills you have acquired and you will more than likely start building your savings right away.
Please folks do not let some realtor or bank trick you into an adjustable rate mortgage or an Option ARM. These types of loans are a major reason why the housing market is in such a mess!