Home Buying

Are You Ready To Buy A Home?

If you are considering buying a house, there are a number of questions you need to answer.both for yourself and a mortgage lender. You are most likely ready to buy a home if you can say "yes" to each of these questions:

1. Do you have a steady course of income?
2. Have you been employed on a regular basis for the last 2-3 years?
3. Do you have a good record of paying my bills?
4. Do you have few outstanding long-term debts, like car payments?
5. Do you have money saved for a down payment?
6. Do you have the ability to pay a mortgage every month, plus additional costs?

Home buying can be a stressful time in ones life, but if you are well informed and know the basics of purchasing a home, then your home shopping will be a much more pleasurable experience.

Let's start with a few basics:

First, you need to know how much home you can afford? How much money do you have available to you for a down payment on a house? Generally, lenders want to see a down payment of 5% to 20% of the purchase price. The higher your down payment, the lower your monthly mortgage payments and closing costs will be.

Next, how much of your monthly income can go toward a mortgage payment?

Lenders generally want your monthly payments (which include principal plus interest, property taxes and home insurance premiums) to equal no more than 28% of your gross income. They also figure you can handle total debt (mortgage payments plus car payments, credit card payments, etc.) up to a maximum of 36% of your gross income.

For instance, if you have a monthly gross income of $4,000, multiply this number by ".28" or 28%, which equals $1,120. This is generally the maximum amount the a bank will lend you for a mortgage loan. But there is one more thing to consider. It is called the 36% rule, if you have a $4,000 monthly gross income, your total regular monthly debt (including a mortgage payment) should not exceed $1,440 ($4,000 x .36). So as long as your mortgage payment, credit card debt and car debt combined is under $1,440, the bank will probably give you a loan.

So now you know how much you can afford when buying a home.

Do you need a real estate agent?

Using a real estate broker is a very good idea. A good real estate professional can guide you through the whole process which makes for a much better experience. A real estate broker will be acquainted with the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.

When looking at homes and before you make an offer on a home, review these questions:

1. Is there enough room right now and in the future?
2. Are there enough bedrooms and bathrooms for the entire family?
3. Is the house structurally sound?
4. Do the mechanical systems and appliances work properly?
5. Is the yard big enough?
6. Do you really like the floor plan?
7. Will your furniture fit in the space? Is there enough storage space?
8. Does anything need to repaired or replaced? Will the seller repair or replace the items?
9. Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?

Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.

So should you buy an older home or a new home?

Generally, older homes are in more established neighborhoods, have more ambiance, and have lower property tax rates. People who buy older homes should keep in mind that their home will require maintenance and repairs sooner. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient.

If you do decide to buy an older home make sure to do these two things:

1. Have a home inspection. An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs that are needed. The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Hire a home inspector that is qualified and experienced. It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house as is." Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an 'out" on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

2. Look into getting a home warranty. Home warranties offer you protection for a specific period of time, generally one year, against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner's insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves tight on money.

Well that is a good starting point for learning more about home buying. Next, you can look at the detail surrounding getting a home loan.