Real Estate

You’ve saved your money, you’ve paid off all your high-interest credit cards, and you’re ready to buy a home. Congratulations! Becoming a homeowner is an exciting time in anyone’s life. But the process of buying a home can also be daunting at times since there are many legal papers that need to be signed and fees that need to be paid.

Before starting the process of becoming a new homeowner, make sure you understand what needs to happen from beginning to end. Here are seven things you need to know before buying a home:

1. You Will Need a Down Payment

The most important thing to understand before buying a home is that you will need enough money saved up for a down payment. A typical down payment for most homeowners is 20% of the purchase price.

If you can save more than that, it will be helpful when negotiating with the seller. For example, if your desired property costs $200,000 but you have enough money saved for a down payment of 30%, then you could offer the asking price of $180,000 to get them to lower their selling cost.

2. You Will Pay Closing Fees

Once an offer has been made on the property and accepted by both parties, there are usually two closing dates scheduled — one for when you will make the down payment and one for when you will make full payment.

It is important to check with your agent (or the seller’s agent) about what fees you may be charged on closing day. This can give you a heads up about what sort of checks need to be written out and how much money should be available to avoid costly overdraft fees at your bank.

3. You Will Need Homeowners Insurance

Once you have purchased a home and made your down payment, you will be provided with an owner’s policy document. This is the homeowner’s insurance for the property.

The typical cost of homeowners insurance is $400 — $1,000 per year, depending on your location and the home’s value.

4. You Will Need to Pay Property Taxes

One of the most significant expenses you are likely to have as a homeowner is property taxes, especially if the home that you buy has a higher market value than what you sold your previous one for.

Typically, this amount will be around 1% — 3% of the total market value of the home, depending on how much it is worth. This means that if you bought a house for $200,000, expect to pay between $2,000 and $6,000 per year in property taxes alone.

5. Mortgage Payments are Necessary

If you have not already obtained a mortgage before purchasing your new home, then this is another huge financial commitment you will be taking on.

Although your mortgage may look different from someone else’s since different loan types are offered by trusted mortgage companies.

You will need to understand all the terms and conditions associated with your mortgage so that you can budget properly and pay it off as soon as possible.

6. Property Taxes & Insurance Go Up Over Time

The first cost increase that most homeowners don’t anticipate is property taxes increase as the value of their home goes up or as it gets older. Not only this, but homeowners insurance premiums also tend to rise over time due to changes in local crime rates and other factors that are not under the homeowner’s control.

If you plan to stay in this property long-term, it is best to factor these types of yearly increases into your budget.

7. It Takes Time to Sell a Home

When selling a home, especially if it has been in your family for several generations, there is no telling how long it will take before someone makes an offer or even expresses interest in looking at the property.

This means that you cannot count on selling your home and making a profit immediately after purchase. Studies have shown that most buyers typically have to wait around six months before selling their home, and the longer you have it on the market, the more likely you are to suffer from a loss.

Remember that your realtor is not obligated to tell you if they sell the property, so it’s best to ask them yourself how many days it has been since you placed your sign in the yard.

Although buying a home is an important goal for most people, it can be tough to achieve with all the new responsibilities of owning property. Once you’re ready to buy your first house, there are seven key things that you need to know in advance before signing on the dotted line.

So you’ve finally found the house of your dreams. Congratulations! Now it’s time to make sure you have all your ducks in a row before making an offer. This includes getting pre-approved for a mortgage, setting a budget, and being mindful of your monthly expenses. It’s also important to save for a down payment and have money set aside for repairs and unexpected costs. By making smart financial decisions, you’ll be able to buy the home of your dreams without putting yourself into debt!

What to do before you buy a home:

Before you buy a home, it’s important to make the right financial moves to secure your investment. Here’s what you should do before you buy a home:

• Get pre-approved for a mortgage.

Lenders look at three factors when determining what size loan they will approve: how much money can be made from the monthly payments, what real estate the money will be used to buy, and how much of a down payment can be made. When you get pre-approved, that means a lender has assessed your financial situation and determined precisely how much they are willing to loan you. This saves time because you won’t have to keep re-applying for a mortgage each time you find a house you want to buy.  

• Set a budget.

You must have a good understanding of your mortgage rate. This is an important question to ask yourself before you begin searching for homes, but it’s even more essential that you know the answer once you’ve found one. The home’s cost shouldn’t exceed 28% of your total household income. Before deciding on which home to buy, consider other costs, such as closing costs, down payment, and future repairs or maintenance, so that they don’t take away from other financial goals.  

• Be mindful of your monthly expenses.

Can you fit it into your monthly budget without any difficulty? If not, then skip to the next step! There are many hidden costs associated with home ownership that can add up over time, so you’ll need to have an idea of what you can comfortably spend before buying a home. To get a better sense of how much money you should set aside for monthly expenses, consider your current rent payments and total expenditures. Then subtract any recurring savings plans or credit cards transactions that pop up regularly  

• Save for a down payment.

This is probably the single most important step of all! You may be able to secure a mortgage with just 5% down, but having no money at all will make homeownership impossible. A good rule of thumb when trying to calculate how much you’ll need to put down when buying a home: add together the full price of the house and closing costs, and then multiply it by two. This means you’ll need to save between 10 – 15% of the home’s value before buying.  

• Have money set aside for repairs and unexpected costs.

When buying a home, make sure you have an emergency fund that you can tap into if something goes wrong with the house. A good rule of thumb is to add another 5% of your total purchase price to cover such expenses (up to three months’ worth).  

What to do when you find a home:

Once you’ve found a great house and want to move forward in the process, certain things should be taken care of immediately:

• Get approved for a mortgage again.

Before you give an offer on a home, it’s necessary to get re-approved for a mortgage. This gives the seller confidence that your offer isn’t just hot air, they know you have the financial means to purchase their house! Make sure the lender who re-approves you is different from the one who pre-approved you.   

• Get inspections done.

When buying a home, it’s important to have both interior and exterior inspected. For example, if there are problems within the walls or electrical fixtures, then these will become your responsibility when buying a home. You’ll also want to be aware of any potential structural damages which could escalate how much money it takes to maintain the property in its current state.  

• Research homeowners’ associations.

A homeowners’ association can help pay for repairs, but they also have the power to pass special assessments that are levied against all members of the group, so keep this in mind! You may also want to determine whether the HOA has any rules against owning certain pets.   

By making smart financial decisions, you’ll be able to buy your dream home without putting yourself into debt!