Deciding to purchase a house is a big decision. It’s likely to be the largest capital outlay you’ll ever make. The good news is that you’re not the first person to do this, and you won’t be the last.
There is already a tried and tested method of purchasing any property, whether you’re after a first home, retirement dream house, or an investment opportunity. You may even be interested in a prefabricated building solution.
Every real estate purchase is unique, but the steps to successful completion are the same.
Confirm Your Why
You may want to buy a house because it’s the next logical thing on your life journey. You may be looking to build wealth, or perhaps you simply want a place to call your own.
Whatever the reason, it’s worth taking a moment to consider why you’re looking to buy real estate. It’s a big commitment and one you need to be sure of.
Consider Your Location
In the past people looked for a home in the same locality that they currently lived. It made sense, you needed to be close to work.
However, it’s estimated that 36.2 million Americans will be working remotely by 2025. You may no longer need to live in the same city as your job. That means you can look elsewhere and potentially get a lot more for your money.
Assess Your Finances
Before you start looking, you need to consider your finances. Part of this is establishing a downpayment. Although 20% is often mentioned, the average property buyer has a 7% deposit. Of course, the bigger the deposit, the more attractive the interest rate and terms will be.
You may be able to borrow as much as six or seven times your annual wage. The exact amount will depend on your debt, the amount of downpayment you have, and the current mortgage rates.
It’s time to speak to a mortgage broker and find out how much you can borrow. Don’t worry if you can’t get a conventional loan; there are other options, such as this FHA mortgage loan in Arizona.
It’s worth noting an FHA loan can ask for a downpayment as low as 3.5%.
Once you’ve spoken to the broker and given them all your financial facts, you’ll know how much you can borrow and how much downpayment you need. This will tell you the maximum amount you can spend on a property. With correct paperwork and accurate financial facts, you should be able to get preapproval for a mortgage loan.
If possible, before you start applying for mortgages, you should downsize any debt you have. In addition, don’t apply for new loans, make any major purchases, or take out new credit cards. All these things will lower the mortgage amount you can borrow.
There are several types of mortgage loans:
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Conventional
These are supplied by private lenders, that’s banks and similar institutions. They can’t be higher than a limit set by the Federal Housing Finance Agency. By adhering to these guidelines these loans are comparatively safe for lenders. That makes them easy to get. They are known as conforming loans.
Non-conforming loans are those that don’t follow government guidelines. There is no limit to how much can be lent, but because the risk is higher, the conditions for approval are much stricter.
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Government Backed
Government-backed loans are insured by the government. The two main forms are the Fair Housing Administration (FHA), and the Veterans Affairs Department (VA).
These loans aim to make mortgages more affordable to lower-income people. Because they are backed by the government, they are comparatively safe for lenders.
Check Interest Rates
Mortgage companies will issue fixed or adjustable mortgage rates. They will generally be slightly higher than the government interest rate. The exact rate will depend on your credit rating.
Fixed rates have the advantage of ensuring you know exactly what you’ll be paying each month. However, if the interest rate decreases, an adjustable-rate mortgage may become cheaper.
Look At The Market
Before you start house hunting, look at the market. A market with excessive properties available is known as a buyer’s market. In short, there are more sellers than buyers, making it easier for you to find a property and negotiate over the price.
A seller’s market means there are more buyers than sellers, it will be harder to secure the property you want. If it’s a seller’s market and you can afford to wait, it may be worth waiting to get a better deal.
Find Your Home!
Once you have your finances in order, a downpayment ready, and know how much you can borrow, you’re ready to start searching for a property.
Before you do, consider the size of the property you need, what type of neighborhood is desirable, and what facilities need to be on hand. In short, create a list of essential features and desirable ones.
Summing Up
Start your real estate search online and then find a real estate agent. They will guide you through finding a property, making an offer, and ultimately completing on your dream property.
