First time house buyer tips can help buyers prepare to purchase a home they can afford. Buying a house is one of the biggest financial decisions you will ever make. Arming yourself with knowledge and understanding the market can save you time, money and unnecessary frustration.
The following first time house buyer tips can help make the process enjoyable and relatively stress-free. Understanding the process for purchasing real estate can help you locate suitable properties and capitalize on real estate deals.
Before you can buy a house, you need to know how much you can afford. One of the biggest mistakes first time buyers make is to miscalculate the true cost of homeownership. In addition to the mortgage payment, buyers must be prepared to pay multiple fees associated with the purchase. These unexpected fees can amount to several thousand dollars and quickly deplete your savings account.
Real estate fees include realtor commissions, homeowners insurance, property appraisals, land surveys, inspections, homeowner association fees, application and loan origination fees, recording fees, transfer fees, escrow deposits and legal expenses.
It is also important to calculate the required down payment. The days of no-money-down loans are history. Today, mortgage lenders require a good FICO score and a down payment of 10- to 20-percent of the purchase price. If your credit rating is insufficient, you will need to take steps to rectify your credit rating before applying for a mortgage loan.
One way to determine how much house you can afford is to multiply your total household income by three. If you earn $120,000 per year, look for homes priced no higher than $360,000. Realize you will be required to pay at least 10-percent toward the down payment; meaning you will need a minimum of $36,000.
Real estate experts recommend obtaining a prequalified mortgage loan before looking at houses for sale. Doing so lets you know exactly how much money the bank will lend and the amount of your monthly payments.
An added bonus of obtaining prequalification is it allows buyers additional room for negotiation. Many sellers will reduce the sale price if the buyer is already approved. Obtaining mortgage approval can take several weeks and buyers might lose out on the deal if prequalified buyer places a bid on the property.
First time house buyers need to calculate closing costs to ensure they are financially prepared to make the purchase. Some sellers agree to pay all or part of closing costs; particularly if the buyer is prequalified. Some lenders will roll the closing costs into the mortgage note; however they typically charge borrowers a higher rate of interest.
Although it can be tempting to include closing costs in the loan, it is important to calculate the true cost of doing so. An extra ½-percent extended over 30 years can add thousands to the actual cost of the house.
It is a good idea for first time house buyers to work with a qualified realtor. One of the best sources to locate realtors is through the National Association of Realtors at Realtor.com. Additionally, ask friends, family, co-workers or neighbors for referrals.
Realtors have access to thousands of homes and can help buyers locate properties within their price range and desired neighborhood. Many realtors specialize in distressed properties such as foreclosure, bank owned and short sale properties. Buyers interested in purchasing fixer-upper homes can save thousands by purchasing distressed properties.
In order to purchase a house, buyers must present an offer to the seller. Sellers are required to provide a disclosure report detailing known defects. If both parties agree, they must sign a contract to hold the property. Buyers must give the seller earnest money as a deposit. This generally amounts to $500 to $1000.
The buyer obtains a property inspection to ensure the house is in the condition described within the disclosure report. If the inspector discovers additional problems, the buyer can retract their offer or enter into negotiation to reduce the asking price.
The final step to purchasing a home involves closing the sale. The buyer provides the down payment and closing costs to the lender. The lender wire transfers funds to the seller and executes real estate transfer documents. One mortgage loan documents are signed, the buyer becomes a homeowner.
Real estate investor, Simon Volkov, offers first time house buyer tips, information and resources for home buyers and investors. Simon specializes in foreclosure, bank owned, short sale and probate real estate. Simon offers wholesale real estate priced well below market value. Discover exceptional real estate deals at www.SimonVolkov.com.
