umb skin1 Web Content Viewer

umb skin2 Actions

What to do before buying a home

Date posted:  5/4/15 07:30:00 AM First-time buyers should closely evaluate their finances before investing in a house.

The entire home buying process can be quite intimidating, even for individuals who think they are prepared to invest in their first home. However, with proper understanding and by knowing what they want in a home, young buyers can better navigate the process.

Follow these tips to guide yourself through the beginning of the home buying process:

"With homeownership, individuals are responsible for new expenses."

Evaluate current finances
Transitioning from renting to buying a house can be a difficult change. Renting allows tenants to pay a flat monthly fee for their home, and they can call the landlord or property manager if an issue or maintenance need arises.

With homeownership, individuals are responsible for new expenses related to home repair and other upkeep costs, and must complete other duties. When someone decides to become a homeowner, he or she must provide a down payment for a home, apply for a mortgage, make monthly payments on that mortgage, pay for property taxes and assume responsibility for any issues that arise, noted HGTV. These responsibilities must all be considered before making the decision to invest in real estate. However, if an individual feels prepared to meet these requirements, buying a house can be beneficial in the long run.

If you feel prepared to take on the financial responsibilities associated with owning a home, make sure you evaluate your current income, bills and savings. Armed with this information, an individual can determine whether he or she is financially capable of affording a home.

According to Bankrate, it's important to consider the debt-to-income ratio. Buyers who have acquired too much debt may not make the best candidates for a home loan, and lenders will be less likely to provide their services.

Choose is the best investment
When purchasing a home, buyers are investing in something they will continue to use for years to come. Be sure to consider all needs, wants and preferences before beginning the search for the perfect house. HGTV suggested buyers should consider their own lifestyles and evaluate what environment would best suit their needs. For example, if interested homeowners plan to start a family soon, finding a home in a safe neighborhood and close to good schools is likely going to be a priority.

Potential buyers must determine exactly what they want in a home and where they want it. Whether the preference is an urban townhome or quiet suburban house directly impacts the home search, in addition to narrowing options to what's available. To help you choose the perfect home, create a checklist with everything that's important in a home and rank it from most crucial to least. 

Having a savings account to help pay for a down payment will help improve a buyers chances of qualifying for a home loan.Interested buyers should work to and improve their credit score prior to applying for a mortgage.

Understand home mortgages
Very few people can walk into a home and pay straight cash for the property. Interested buyers first apply for home loans from lenders, sometimes before the search even begins. A mortgage is essentially a large loan borrowers pay back over an extended period of time. For example, a family who wants to purchase a house might decide to apply for a 30-year fixed-rate mortgage, which allows them to pay back the loan over the course of 30 years.

With a mortgage, borrowers are expected to pay interest, and the amount of interest paid is dependent on a number of factors. The aforementioned 30-year, fixed-rate mortgage allows borrowers to lock in a specific interest rate for 30 years. That locked-in rate depends on the family's creditworthiness as well as current market conditions.

In some instances, people would rather invest in a home and take out an adjustable-rate mortgage, which remains at a specific interest rate for a certain amount of time before adjusting to the market for the rest of the life of the loan.

According to Bankrate, it's important to know your credit score before applying for a home mortgage, because it can impact whether you qualify for the loan, and the interest you will pay on the loan. Generally, credit scores between 700 and 800 are considered good numbers and may ensure the borrower a better rate. Once you know what your score is, work to improve it by paying bills on time and in full, and eliminate as much debt as possible.

Realtor.com recommended that interested buyers should try to get a mortgage pre-approval prior to looking for homes. Doing so will make an offer seem more appealing to a seller because the potential buyer has already been vetted for the loan amount. 

Stay organized 
Invest in a portfolio or filing cabinet to keep all agreements, documents and even potential homes you might be interested in. Having everything in one, easy-to-access place will help a great deal during the home buying process.

If you prefer to go paperless, store everything on your computer, but ensure you can access information from any computer by emailing it or keeping it stored in the cloud.