The first place you should begin is to find out how much home you can afford to purchase!
Now if Aunt Tilly just passed away and left you a cool million or two this is a no brainer! But if you are more like me it would be a good idea to head to your local bank or real estate mortgage broker and have them run a report for you! You don’t want to waste your time looking at homes you can’t afford, and you also don’t want to pass up homes you thought you couldn’t afford but which might actually be within your reach. Most people can afford a home that costs up to three times their annual household income. If you have little to no debt and can put 20% down you can probably buy a house worth close to four times your annual income. Marriage allows a couple to combine their incomes to afford a better home. The broker can give you a pre-qualification letter which gets you on your way to me, your local Realtor® where the fun begins!
Anyway the mortgage broker will be looking at how much you make, how much money you already have to put down on your new home and how much you owe on all your toys and purchases… they will pull up a current credit report which will give them most of this information. Putting 20% or more down opens lots of doors. Debt holds you back. Buying a duplex or a house with a garage apartment increases your buying power. And finally we’ve left out one important thing — closing costs. You’ll need to
either pay the closing costs from your savings (lowering the amount you have
available for a down payment), or qualify for a loan that’s a little larger than
the house you want to buy, and have the closing costs added to the loan (which
is called “rolling the closing costs” into the mortgage).
Summing it up here is what you will need:
You generally need four things to qualify for a mortgage:
- Money to make the down payment.
- Income that’s 2 to 3 times higher than your mortgage payment.
- Two years of solid employment history (same job or field).
- Decent (not perfect) credit.
The next step will be finding a real estate agent (get referrals from friends). The seller pays the commission to your agent, so it costs you nothing to have an agent. Your
agent serves you by letting you know what houses are available that meet your
needs and the location you want (we have access to a special database called the MLS) and by answering your questions about the process.
This leads to the fun part of looking at homes and when you find that special one we begin the process by writing an offer to the seller. They will look it over and decide if they want any changes or to accept it. Then they will send it back to us to approve or renegotiate once more. Once it is accepted it will be time to get a home inspection done. Then the bank will have the home appraised to make sure the value is there for the loan to be processed. You will need to get insurance set up also and then it will be on to closing. Once the home is funded (all the money changes hands) then you get the keys and start moving in!
It all sounds like a lot of work but it will be worth it all when you walk into the home for that first time and realize it is now yours!
Best to you in your search for that perfect home and if I can help in any way let me know! Until next time have a blessed week, Joe