Buying A House

Every man dreams of having their piece of real estate. However, shopping for a house isn’t as straightforward as choosing a piece of property and moving in. Some things that factor in your decision include your preferences and finances.

Here are some things you should know before buying a house.

1. Look At Your Credit Score

Many people finance their homes through a mortgage.

Therefore, when applying for a mortgage, your credit score affects the interest rates you are eligible for.

Credit Score

In most cases, the lender will check your credit score and use it to assess your risk as a borrower. The higher your score, the lower your risk and the more likely you are to qualify for a mortgage.

As such learning your credit score will help you determine where you stand with lenders. Consider improving your credit score before applying for a mortgage. The higher your credit score, the lower your interest rates.

Some lenders will look at your credit history for the last few months. Therefore, start by paying some of your debts and reducing your credit card expenses.

Also, keep your credit utilization low and avoid opening too many new accounts. Lastly, secure a copy of your credit report and dispute any errors you see with the credit bureau. Doing all these things can lift your credit score and make the home-buying process more seamless. 

2. Review Your Budget

Some factors that affect the cost of owning a home include homeowners’ association fees, property taxes, and the cost of insurance. Also, consider the costs for movers, renovations, and maintenance.

Ensure your house expenses don’t exceed 28% of your monthly gross income. Therefore, monthly property taxes, mortgage, and homeowners’ insurance payments shouldn’t exceed this threshold. 

Your “Debt-to-Income” ratio is another thing you should take into account. It is the proportion of your monthly salary that is used to pay off debts, such as credit cards, student loans, and other debts.  The ideal DTI for getting a mortgage is 36%. A lower rating allows you more room to compare home loans.

When reviewing your house budget, you need to determine the type of house you want. Some housing options include single-family homes, townhomes, condominiums, and manufactured homes. Think about your lifestyle before deciding the kind of home most suited for you.

3. Don’t Finance Assets Before Buying

One of the biggest mistakes you could make when applying for a mortgage loan is financing your car.

Some buyers purchase new furniture and accessories on credit before their mortgage closes. Lenders typically check your credit before closing, which could affect the loan approval if they notice new debts.

Finance Assets

Buying a car on loan or financing big items like a wedding or vacation will raise your debt-to-income ratio (DTI). This lowers your chances of being approved for a mortgage.

Lenders consider you a risky borrower if your DTI is above 43%. Therefore, it is smart to avoid making big purchases on loan, at least for a year, before you plan to buy a home.

4. Talk To Several Mortgage Lenders

Many people are in a hurry to buy a house and go to the first available lender. While lenders’ rates may be close in price, some lenders charge high-interest rates. It is tempting to believe that your longtime bank will give you the best deal.

Ensure you shop around and get quotes from different lenders. Start with your current bank’s rates and then compare them with online mortgage lenders, mortgage brokers, and credit unions.

When choosing a lender, consider the options for a down payment. This is the upfront cash required for the home purchase. Down payment requirements will vary from one lender to another. Some states have programs that combine low-interest-rate mortgages with down payment assistance.

When choosing a mortgage lender, determine how much you need to raise for a down payment. Choose a lender whose down payment requirement is favorable to your financial situation.

On the other hand, finding and dealing with a lender doesn’t have to be a challenging undertaking with the help of a dedicated mortgage broker. They’re a licensed professional who works with various lenders and helps you find the one that suits your budget and needs. 

Given their excellent relationship with them, mortgage brokers can help you access lower interest rates and other reasonable fees. They also help you understand the various types of mortgages available and assist you with the entire process, from pre-qualification to closing. 

To work with a mortgage broker, look for someone with valuable years of experience and reputation. Ask your family and friends for recommendations, or search for prospects online. For example, if you’re from Vancouver, you can use your preferred search engine to find the best Vancouver mortgage broker near you. 

5. Research About Your Local Real Estate Market

Every city or suburb has distinct neighborhoods with unique personalities. When choosing a home, you should determine where you would like to live and how far you want to be commuting to work. Additionally, consider the amenities you want.

Check listing websites and market reports from local real estate agencies. Consult real estate experts and read online reviews of homeowners in the neighborhood you want to move to.

Research Real Estate Market

All this information will help you learn about home prices and the demand for homes. Consequently, you will get a rough idea about the price of your dream house and the competition you will face when making offers to sellers.

Many home buyers think hiring the services of a real estate agent is an unnecessary expense. However, a real estate agent is familiar with the local real estate market.

A real estate agent can narrow your search based on your specifications and preferences. Furthermore, the professional will help you with buying, from negotiating a fair price to home inspections.

Bottom Line

Buying a house can be exciting, especially if you have been renting condos or apartments for many years. The freedom of owning your piece of real estate is every person’s desire.

However, to find the ideal house, you must perform due diligence. Ensure you have a solid plan that takes into consideration your finances, creditworthiness, and the real estate market. Consider consulting a real estate agent to help you find the most appropriate house.

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