Buying a house is one of the biggest steps you will take in your life. At every corner, there might be something unexpected to deal with, which can make the process easily intimidating. Here are some useful tips to give you the confidence you need when preparing to buy a house:
Save For a Down Payment
You are required to have at least 5-20% of the purchase price of your home saved before buying. If the purchase price is less than $500,000, the minimum down payment is 5%. If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 and 10% on any remaining amount. When your down payment is less than 20%, you are required to pay insurance on your mortgage. Many strive to save for this amount to avoid increased monthly payments and higher interest costs. If you are in the market for a home over $1 million, a 20% down payment is a requirement.
Get Pre-Approved / Pre-Qualified
Meeting with a lender can be an eye-opening, but an important experience when preparing to buy a house. By examining your income, assets and liabilities your lender can help you determine how much of a mortgage you can afford when buying a house. They can also let you know what credit score you might need in order to qualify for a more reasonable interest rate for your mortgage. Getting a pre-approval is vital because it presents you as a serious, qualified buyer and also gives you a good idea of what your budget is.
Check and Clean Up Your Credit
Your credit score affects your mortgage interest rates: the higher your score, the lower your interest rate, and vice versa. You can determine your credit score by using a credit-reporting bureau like TransUnion or Credit Karma. If you find your credit score needs a bit of improvement, pay off as much debt as possible along with any bills that are past due or in collections. Additionally, you can close some credit cards (tip: keep the one you have had the longest open, even if you never use it) and ensure that you pay your bills in full and on time each month.
Find Your Perfect Neighbourhood
Knowing where you want to live in is important when preparing to buy a house. Spend time researching neighbourhoods and narrow down your search to no more than five locations you find ideal for buying a house. With a few top choices, you will be able to efficiently monitor the market and see what is available. Visit Open Houses in your desired areas to get a feel for the neighbourhood and the types of homes available.
Buy Within Your Means
Ideally, you want to spend 30% or less of your annual income on your home. If you spend more, you run the risk of being ‘house poor’ and struggling to make monthly payments or handling unexpected expenses. Plan and budget in advance for the type of lifestyle you would like to have.
Buy For Tomorrow, As Well As Today
You may love your lifestyle right now, but what are your major plans in the next five, ten years? When buying a house, it should be able to grow with you. Remember that it can take at least 5 years to pay down any real equity into your home.
Use a Trusted REALTOR®
It is important to have someone on your side that can help you every step of the way: from assisting with your search to scheduling viewings to negotiating the best price for you – an experienced REALTOR® can be one of your best assets.
Are you ready to start your search? Check out this simple guide to get you started.