Steps to Buying a Home with a Traditional Sale
Is Now the Right Time To Buy?
The decision to buy a home is a very important and highly individual one. You must consider many different factor including both market factors and your own individual circumstances. If you have decided that now is indeed the right time for you to buy a home, you will now start the process of buying a home.
How Much Can I Afford?
The first step in the homebuying process is deciding how much you can comfortably afford. You do not want to waste your time looking at a home that is out of your price range. You must figure out the most you will be able to afford on a home. This is not necessarily the price of the home you will buy but rather your upper limit. A general rule of thumb is that most people are able to afford a home that costs up to three times the amount of 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.
You must consider current debts when you are thinking of buying a home. Having current debt will decrease the amount you can afford. It is a good idea to reduce your debts before starting the home buying process to ensure you are getting the best deal.
The money involved in buying a home comes from two sources; the down payment and the bank loan. To decide the price of the home you can afford you just add these two items together. Your down payment is the amount of your savings you are willing to put into your home. Your bank loan is how much the bank is willing to lend you based on things such as your income, credit rating and how much you are able to put down.
Find a Lender- Get a Prequalification
In order to determine the size of your bank loan you must first find a lender and prequalify for a loan. There are four possible places to find a lender: your current bank, a local mortgage broker, an online mortgage broker or an online lender.
Once you have decided on a lender you will need to fill out a loan application. This will ask you for things such as financial status and employment history. Along with this, you may need to provide documents like pay stubs or income tax returns. You will also be required to pay around $40 or more so they can run a credit report on you.
Once they have run the credit report and processed your application they will be able to tell you how much they are willing to lend you and under what circumstances. It is a very good idea to shop around and get quotes from at least two lenders to ensure you are getting the best interest rate available to you. Remember that is possible to negotiate loan amounts and interest rates. For example, if one bank offers you 6.5% while the second offers you 6%, go to the first bank and let them know, asking them why you should take their loan over the second bank.
The larger your down payment, the better chance you will have at obtaining a loan and the larger the loan they are likely to give you. If you are able to put down 20%, the bank will be willing to loan more than they would otherwise and you will not have to pay for PMI (Private Mortgage Insurance).
Once you know how much the bank is willing to loan you, you must decide how much you can afford on monthly payments. This should be an amount that you will be comfortable paying each month, not just what you can absolutely afford. Qualifying for a loan means just that, you qualify; again, make sure the amount of the loan you accept is what will be comfortable for you to pay back each month.
You must also consider current debts when you are thinking of buying a home. Having current debt will decrease the amount you can afford. It is a good idea to reduce your debts before starting the home buying process to ensure you are getting the best deal.
Decide what you want
Now that you know what you can afford, you must decide what it is exactly you are looking for. To do this you must make three lists; deal-breakers, wish list and must haves.
Deal Beakers - In this list you will come up with a list of things that make a possible home an absolute no-go. This often includes the location of the home such as homes in high crime or natural disaster areas./p>
Wish-list - You will fill this list with things you would like to see in a home but are not absolutely necessary.
Must Haves - This list will be filled with the things you require in a future home. This category often includes things such as a good school district or a two car garage. You should take care when compiling this list as you do not want to purchase a home without all of your