Lets Get Some Questions You May Have Out of the Way!
If you’re a first-time home buyer, you probably still have a million questions, starting, with, how the hell can afford a home anymore.
It’s certainly not easy especially with, student loans, lower wages and rising health care costs making home ownership a dream for many. But with some planning and patience, you can save up enough to buy a house.
How Much to Put Down on Your First House?
A lot of people people think 20 percent is the necessary amount to put down on a house, but the national average is actually six to 11 percent. That gives new home buyers more wiggle room than they might expect when it comes to buying a house in certain markets.
Can You Get a House for 2 to 3% Down?
Actually, yes you can but more realistically you’re looking at 3.5% depending on the market you live in, the house, your credit and a few other factors.
How Much House Can You Really Afford?
You should put more than 3.5 percent down if you can. Between student loans, car loans, credit card debt and now your housing payments or another things you pay for in your life, you should be paying close attention to your debt-to-income ratio as it should not exceed 36 percent, so you’ll want to get all of that in order before you start looking.
Now for the Steps you need to prepare for!
1. Saving for a down payment
You’ll need to have some money saved for a down payment. If you put down 20 percent, you can save money by not having to pay for private mortgage insurance, an expense required by lenders if you put down less than 20 percent of the home’s price. In high end luxury areas you should be able to put down 10 percent, for example, you’ll need to work with a lender who will research loans that require a lesser down payment. Your real estate agent can help with recommending good lenders to work with
2. Is this your forever home?
If this is your first house, chances are this is not going to be your forever home. You should plan to live there less then 5 years. Now that is a specific time line and there is a reason, that reason is that If you live in a home for at least 2 years minimum and up to 5 years (aka. your mailing address is that house), then you are entitled to 250,000 tax exemption from capital gains. Homes don’t always appreciate but chances are it will, so lets say you buy a house that needs a little love and affection. I go into more detail on this topic in another post.
3. Prepare from some Maintenance
You have two choices in this matter, first if you’re a handyman then you’re good to go, second if you’re not you need some money put away for this. You wont concern your self with this if you’re a renter but you should plan to spend around 1% of your home’s purchase price in yearly maintenance. You should also consider for monthly expenses such as lawn care, higher utility bills, and if you have a pool the extra cost of keep it looking nice.
4. Have Good Credit and Little Debt
You should have a credit score of at least 580 and debt that is not more then 35% of your income. Your credit score and debt-to-income ratio are what lenders use to gauge if you are responsible enough to make the mortgage payments without defaulting on the loan. Lenders don’t want to go through a foreclosure process if they don’t have to but they will if necessary
5. Get Preapproved For a mortgage loan Loan
For sellers to take you seriously, you need to be preapproved for a mortgage loan. You need to prove to them that you have have the funds to pay for the homes and the lender is going to supply a mortgage. This shows your proof of income, employment, assets and debt.
6. Use A Real Estate Agent
Even though you can buy a house without an agent, if you’re a beginner, an agent will walk you through the whole process. Plus as a buyer you don’t pay the agent, the seller does!
7. Look Online and Visit Homes
Figure out the parameters of your home search, price, size, neighborhoods. Then visit the homes you like. Just looking online wont help you beyond a first impression you need to drive through the neighborhood and walk through the house. We at Elvis Realty, figure out your wants and needs, then use a process of elimination while sitting down with you to see which houses are worth looking at. Our clients find their house the first time they are out about 60% of the time and by the second day out 80% of our clients have found their new home!
8. Make An Offer
When you find your home, make an offer with an earnest money deposit. The higher the earnest deposit the more attractive your offer is. Look at the market and see the average days on market to see if its moving quickly (you can find this information in our communities pages,) don’t wait to make that offer. If you wait, especially in hot markets like Royal Oak, you could lose the home quickly to another buyer. We help our clients and guide them on what to offer the seller.
You’ve made your offer, now the seller can turn it down, counter offer or accept your offer. If its turned down then move on to the next house. If they counter offer, consider accepting or give another offer. If the seller accepts your offer, you can celebrate a little.
10. Seller Accepts Your Offer, What Now?
Once the offer is accepted and cleared by all parties, there is more work to do. You need to get the final approval on your loan, then agree to accept or negotiate the results of a home inspection and the ability to clear the title of the home, which is why you need to have title insurance. Elvis Realty Provides and works with some of the best lenders and title insurances.
11. Getting the KEYS!
If you work with Elvis Realty we will walk you through the final processes before closing. You’ll have to pay the closing costs, which include attorney fees, title fees, prorated property taxes and the down payment. This is usually in the range of 2 to 5 percent of the home’s price, these will all be given to you before closing.
Now You Can Celebrate!
If you have any questions please feel free to contact us.
You favorite real estate agent, Elvis.