Are you tired of the uncertainty of renting? Are you done paying your landlord’s mortgage? Or your family’s constant remarks about how you should get out of their basement and start living your own life already?
Whatever your reasons are, there are many benefits to owning a property, to having a place you can call home.
So, let’s check and see what are some of the things you should be aware of before making one of the biggest moves in your life.
1. Think about your finances
Usually, first-time homeowners need a loan to be able to buy the property and that comes with rules of its own.
Lenders want to see that you can pay back the loan over time, so it’s of utmost importance to have a job or to have a proven way of making money – as an independent contractor, for example. The standard is a 2-year work history or a continuous revenue for that same period if you are not a W2 employee.
And of course, you need some money for the down payment, which can be as little as 3.5% down.
2. Bad credit, no credit, everyone qualifies?!
That is the other big thing. Unlike those used car dealerships, the conditions when buying a house are on the complete opposite side of the credit spectrum.
The buyer needs to have established credit and preferably good credit to qualify for a mortgage. You can get a free full credit report from the website Annual Credit Report (authorized by federal law) or you can monitor your credit for free with different online sources. One of them is offered by the credit bureau Experian at this link.
3. Check with a lender – check with a thousand lenders
You will never have the time to work with a thousand lenders but working with only one doesn’t guarantee you the best deal.
Check big names you can find with a simple Google search but also check your local lenders, credit unions, etc. Sometimes you can get better options with them.
And don’t forget to ask if you qualify for an FHA loan. Do you remember the 3.5% down payment from the first tip? A government-backed mortgage can offer you that.
4. Get a real estate agent! It’s free!
If this is your first time buying a home and you don’t know anything about the process, you must be wondering how much it costs to work with a professional – a licensed real estate agent.
Fortunately for you as a homebuyer, in most cases, it would be totally free. The standard in the real estate industry is that both the buyer’s and the seller’s agents get paid a percentage of the sale, but that money comes from the seller’s side. You need to know that because of this, certain sellers decide to sell on their own without using an agent, but even then, most will agree to pay the buyer’s agent fee just to close the deal.
You should know that it’s fine and even expected to interview a couple of agents before choosing one.
5. Choose wisely and do an inspection!
Unlike with renting which can be over once the lease expires, when you buy, you should expect to stay in the same home a lot longer – like 10 years or more. Experts advise against buying unless you plan to stay for at least 5 years. The market can have ups and downs and you don’t know if your moving plans will align with it. If they don’t, you can lose tens of thousands of dollars.
That’s why it’s really important to choose a neighborhood that works for you right now, but that can also work for you and your family in the next 5 to 10 years.
And even more important than the location, should be the state of the house itself. Do not make the mistake that many buyers did during the Covid-19 craze and now regret it. Never buy a house with waving inspections and appraisals. Always make an inspection and if the inspection shows issues with a certain part of the house, you can call a professional with that specific expertise to do another check and even give you, in most cases – a free quote for fixing it. Then, you can ask for seller’s credit.
Hard work that pays off
There are so many other things to be said, but those are the basics.
And while all of this may seem overwhelming to someone new to this process, it will pay off in the long run. You can’t predict the future and know for sure if the house, the price, the interest rate, the school district, your work, the area, or everything else will seem like a good idea in the long run, but making informed decisions is the only way to be as close to a winning situation as possible.
Finally, now, that you are informed, go there and start working towards your homeownership dream!
Written by: Jovan Postoloski