Buying a house is a true commitment. You must be willing to stay in one place long enough to pay down the loan on the house and you will no longer be able to call a landlord to come repair something if it breaks. However, there are a lot of benefits to homeownership. These benefits include stability and equity, just to name two. If you've been contemplating the purchase of a home, you may be ready to take the plunge mentally, but there are a lot of things that go into buying a home and it's best to know what you're in for before you begin.


How to Start a Good Credit Report

The first step in assuring that your credit report is ready to earn you a mortgage loan is to get a copy of your credit report from each credit reporting agency. It's important to ensure that all of them are accurate. If there are mistakes on your credit reports, it can hurt your credit score. Get any discrepancies fixed immediately. Next, make sure that the number of loans or revolving credit accounts, like credit cards, that you have stays constant. You want to show stability in your financial life. The balances on credit cards should stay low compared to the limits on them so that it shows you have some spending power if needed. The biggest way to ensure your credit report stays clean is to make timely payments for all bills. Use automatic payments if needed. Once you are behind on an account, you can get caught back up again but it still shows on your credit report for seven years.

Knowing What House is in Your Means

Once you know that your credit report is good enough to get you into a house, it's time to decide how much house you can afford. Knowing your limit will allow you to look at houses that fall within your budget. You can always buy a house that costs less than your maximum amount but you never want to spend more. If you have gotten a pre-approval for your mortgage, don't take the amount they've pre-approved you for as your maximum. That is what they are willing to loan you but you may not be able to comfortably afford that. The best way to find out how much house you can afford is to have a monthly payment in mind and to use a good home cost calculator that takes into consideration the cost of the home, the insurance for it, as well as the property taxes you'll have to pay.

How Much Money Do You Put Down?

If you've been toying with the idea of buying a home for a while, you've probably been putting aside some money to help cover the cost of the down payment. Most banks require that you have 5-20% of the loan as a down payment. This ensures that you will get the best interest rates and other terms available. However, there are other loans that require less money down that you may qualify for. VA loans require no down payment at all and are backed by the federal government. If you can qualify for a Federal Housing Administration (FHA) insured loan, you can pay a down payment of just 3.5%. Fannie Mae and Freddie Mac loans have strict requirements but can help you into homeownership with a down payment of only 3%. Even if a larger down payment isn't required, the more you put down the less your payments will be and the better the terms will be for your loan.

Why Is It Important to Get Professional Help?

You'll need to have professional help from the bank in order to secure the mortgage loan. The loan representative at the bank has knowledge of the industry and the bank's policies that you don't in order to make sure the loan goes through correctly. Just like consulting with a bank professional to get a loan, it's important to consult a homebuying professional to buy a house. This professional is usually going to be a real estate agent, oftentimes called a realtor. A real estate agent has information about the housing market in the area in which you want to buy and they know the laws that govern the purchase of a home for your state, county, or town. They can put you in contact with other professionals that you'll need in order to ensure you get the best deal possible on your new home, such as various types of home inspectors or those who can help you find a home warranty.

What Are The Different Types of Mortgages? Points vs. Rates?

The most common type of mortgage is a fixed-rate mortgage. The interest rate on this mortgage will not go up or down during the life of the loan. An ARM, or Adjustable Rate Mortgage, will allow slightly lower payments at first but the payments will increase over time as the interest rate rises. Jumbo loans are created especially for those purchasing homes over a certain cost. There are many types of mortgages available and a loan specialist at your bank will be able to show you the best options for you. Points are charged for one of two reasons usually. The bank can charge points, one point equaling one percentage point on the loan, as a fee for its services. You can also pay to have points reduced on your loan so that you pay a smaller interest rate.

Why Should You Get Pre-Approved For a Mortgage?

There are a couple of benefits to getting pre-approved for a mortgage. One of them is to avoid the most common problem that those without pre-approvals face: losing an opportunity to someone who does have a pre-approval. If you find the house that you'd like to buy and make an offer on it that is accepted, you would then need to get the bank involved if you haven't been pre-approved. However, if you've been pre-approved, the bank already knows you, knows you want to buy a house, and has given you permission to buy a house up to a certain cost. The loan will then go through much faster and the sellers will most likely choose the person with the pre-approval over the ones without. Another benefit to getting a mortgage pre-approval is that the bank can tell you how much you have to spend according to their calculations. This allows you to look for homes within that price range instead of having to change your price range once you get the bank involved.

Why a Home Inspector is Important

A home inspector, usually recommended by your realtor and sometimes required by your bank, is trained to spot potential problems in the home you want to buy so that you know what will need to be repaired, if anything, after the home is yours. What the home inspector tells you about the home may make you decide to find a different house, especially if they find something that is a major problem and would require a lot of time or money to fix. Home inspectors are especially important for older homes but should be hired for new home construction as well. They can perform visual checks of the entire home, but also do air quality checks to test for mold or gases in the home and can test for lead paint in homes that are old enough to have it.

 

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