Saving money to buy your dream house is not an easy task. So when the time comes you have to decide on which property to purchase, make sure you are financially prepared and make a list of all needs and wants and follow it.
Here are some tips you can follow for a hassle-free purchase of your dream house.
Many financial institutions offer loans to help you purchase your dream house. These institutions have loan packages that will meet your needs as a buyer, unless you’re planning make your purchase with cash.
When applying for loans, it is best to remember people have different level of credits.
The amount you borrow depends on the cost of the property. Property cost, on the other hand, depends on its size, location, design and other factors.
Applying for a loan and getting pre-approval will help you establish a better position for bargaining. Knowing how much money you need for a property means it will prevent you from overburdening your financial capabilities.
To understand the loan application process, you must first familiarize yourself with mortgages.
A mortgage is a loan that makes house purchase easier if you can’t afford to buy a house in cash, up front. A mortgage note is given to approved applicants to remind them that they have to repay their borrowed money, usually with an agreed upon monthly payment for a certain number of years, typically between 15 and 30 years..
Mortgages are commonly offered by banks. There are different types of mortgages and that’s why it is important to know the pros and cons before agreeing to one.
Mortgage payment comes in either a repayment or interest-only type. Borrowers commonly agree to the repayment mortgage type, wherein interest is added to the amount lended to them. On the other hand, the interest-only type requires the borrower to pay the interest monthly and at the end of the mortgage term, they will have to pay the full amount of their loan.
One advantage of interest-only is the cheaper monthly payment. However, lenders are stricter when it comes to approving applications for this type of payment. Many banks and lending institutions are cautious, because at the end of the mortgage term, many borrowers appear to have insufficient funds to pay their loans.
Before applying for a mortgage, be sure to prepare all requirements which can include a deposit of at least 5 percent. However, financial experts recommend a deposit higher than 5 percent will actually give you a better chance of approval and more competitive offers due to a lower financial risk.
As mentioned, some people have better credit than others. One way to improve your credit score is to avoid too much debt. If possible, settle your pending credit card obligations. Avoid too much debt and situations where you can’t pay your debt in a timely manner.
If you are employed, prepare a copy of your payslips for the past three months. For business owners, bank statements are also submitted to lenders. Your income and current assets will be the basis on how much a lender will approve you for. Banks typically approve up to five times the amount of your salary.
In the UK, lenders conduct an assessment to know more about the borrower’s insurance and retirement plans, existing debts and dependents and spending habits. The Mortgage Market Review (MMR) helps the lender understand the factors that might affect your income and financial capability.
Knowing your financial capability will help you obtain the right house mortgage. Lenders will only provide loans to people if they know they can afford a property with their annual gross income, businesses or other assets. Lenders also consider the current savings or ownership of credit cards of the borrower.
It is also best not to fully depend on loans. Saving for a down payment will help you lessen the amount of money you will have to borrow – this means lower interest and length and payment for you!
Financial experts recommend to save at least 20 percent of your ideal purchase price.
It is also advisable to consider your long-term plan. Do you plan to buy another house in the future? If not, it would be wiser to get a 30-year fixed rate mortgage since it will divide the loan in a smaller amount. To get the best mortgage deal according to your financial capability, you can shop around different lenders and banks.
Now that you know your financial capabilities and the loan amount you can use for the purchase, it’s time to identify your needs and wants and consider other factors that will affect the quality of the property.
As mentioned, several factors will affect the price of the house you want to purchase. With that, identifying your needs first will help you visualize your ideal house.
For instance, you can determine your desired number of bedrooms by looking at your current situation. Are you a single person? Maybe a single room is enough. Or if you have a growing family, then maybe it’s time for you to consider having two rooms or more.
Everyone has his dream house but sometimes, a dream house is not what you need but only what you want. List the things and features you want to see in your future house. These may include a pool, a large garage, an audio-visual room or maybe a small bar. Some buyers want a lawn while others think that it will be costly and time consuming to maintain.
Buyers should be open-minded and flexible when evaluating their needs and wants. You can visit several houses and check their amenities. This will help you answer whether you need them or you just want them.
After enumerating your wants, ask yourself if you are financially capable of having those features and paying for them in cash or like most people, in payments spread out over a predetermined number of years.
Once you are done enumerating your needs and wants, it will be easier for you to check other factors that can influence your house purchase.
Sure, everyone wants a peaceful and happy neighborhood. Nobody wants a house built in a chaotic village because this is where you and your family will spend many years of your lives. To make sure you will be purchasing property in a friendly community, do some simple observations and background checks first.
Ask questions and gather facts. Does the village have a low crime rate? Are your neighbors composed of professionals like you?
To know more about this, you can do several things such as contacting the local police department. The department will give you details about the location’s crime rate. You can also check the neighborhood yourself.
Ask your friends to accompany you on a morning and evening drive so you can check the traffic and vibes of the area. Some neighborhoods also have available online statistics which can be very useful when doing background checks.
Talking to people from the neighborhood will also give you a hint whether your prospective house’s location is good or not.
Location can either increase or decrease the value of your house.
Some of the important points a buyer must consider when searching for a good location are prices and size of houses, school ratings, proximity to other establishments, local economy and tax rates.
Buyers with children should prioritize buying a house located near good school districts. On the other hand, some retirees planning to purchase a property may prefer a house that is close to nature. These people simply want to enjoy the lakes, some trees and a peaceful neighborhood. However, houses that offer scenic views can be more expensive.
For single people, houses situated near work, shopping districts and entertainment hubs are more common. Many of these individuals would prefer to be within walking distance from these places so they can enhance and enjoy their career and single life more.
Wise buyers would actually look for stable neighborhoods that can withstand economic instability and even natural calamities. These people are after the assurance the value of their homes will remain intact despite economic difficulties and nature’s wrath.
Location can be less favorable depending on your judgment. If you don’t like people loitering, then don’t look for a house downtown. If you hate noise pollution and heavy traffic, avoid properties near freeways, railroad tracks and flight paths.
If you’re too busy to search for a good location or doing a background check of your prospective neighborhood, you can contact an agent or a realtor to help you with these tasks.
You can ask your friends for a reference of a reliable agent or realtor who can assist you in the process. Professional assistance and services are definitely worth the money because of their years of experience and training. These professionals know the most-affordable properties available.
However, you have to remember real estate agents can help you locate the safest neighborhood. These professionals choose not to speak about demographics, crime rates and other factors because it is unethical for them. You don’t have to blame the agents for not sharing these details to you because it is just illegal for them to do so.
Got Time? Maybe You Don’t Need an Agent or Realtor
On the other hand, some buyers choose not to utilize the services of agents and realtors because they want to save money.
Some buyers believe that technology has helped them spot listings of available properties. Likewise, there are real estate magazines you can check to make sure you are on the For Sale by Owner (FSBO) listing.
You can also drive through places to check For Sale signs. After getting the seller’s number, contact them and ask all important details about the property. You can also set an appointment with them for physical inspection.
These means help buyers directly transact with sellers at a cheaper cost since you don’t have to pay the 5 percent commission rate realtors tend to charge.
There may be a “love at first sight” scenario too when finding an ideal house. However, your first love may not be your true love. With many available houses for sale, it is best to list down prospects first, compare them then select the one that perfectly meets your needs and wants.
Comparison can help you check the price range in the market. If you found a house that agrees with your financial capabilities, it is possible there are other houses which do the same.
Comparison also prevents you from regretting a lifetime purchase because you can justify your property is the best among your choices. Of course, you don’t want to be wishing all your life that you could have bought a different house!
However, listing properties for comparison does not mean you have to list all of them. This might cause confusion and make it too difficult to arrive at a sound decision. List at least 10 properties so you can carefully check their good and bad qualities.
Some decisions are better when there is second opinion. In order for you to decide which house to purchase, maybe someone, apart from agents and realtors, can help you.
You can ask a family member, relative or a friend to check the property with you. If you have a family, it is best to check the property with your spouse and children.
Your spouse can help you decide whether both of you can afford the cost. Your children can tell you if they are comfortable with the place and its size.
A close inspection will help you with your final decision as it will reveal the quality and overall condition of the property. If during the inspection you find defects and issues which were not disclosed, you can either back out or proceed with the transaction if the issues are acceptable.
However, negotiations can be made with the seller. They can either offer a discount or repair, at their expense.
You can also hire an appraiser to help you assess the value of the property. If you are a techie, you can utilize available internet home value tools which can help you know the property’s estimated worth.
When you find a house that needs renovation and repair, think twice! Will it be cheaper to buy an previously owned house than a new one? Or will it be too laborious for you and your family to have the house repaired?
Another expense that comes with a new house purchase is transportation costs. Whether you are commuting or driving your own car, always think of how your new location will affect your transportation costs.
Remember, buying a new house will require you to invest your money, and as much as possible, you want to avoid additional expenses.
Expenses does not end after the purchase. Regular maintenance is another expense you have to be prepared for. However, this will manage and address small issues before they become problems that may deteriorate the value of your property.
It always pays to be wise and legal. You must protect yourself. Having everything in black and white means all the agreements and deals you and the seller have established are closed with the appropriate legal documents. This will prevent you from getting scammed!
Before signing any document, make sure to carefully read and review the details. In case there are statements difficult to understand, seeking expert and legal advice is always the prudent course.
When a house you bought features everything you want and need, then you are a true winner! However, it is important to remember it does not happen all the time. Some houses may be cheaper but do not have complete amenities. While others may appear grand but their prices are beyond your financial capabilities.
Always be ready to compromise some of your wants for your needs. If you really are familiar with your true desires and necessities, it will be easier for you to purchase the most ideal house where you and your family can live for a long period of time. Also, buying a house that fits your budget will not put you in financial peril.
Always remember you still have to pay for regular maintenance and complete your mortgage term. Saving even after the purchase will help you have an emergency fund so you will not suffer from bankruptcy by the end of your payment period or when inflation of interests are to be applied.
The thought of having your own house is quite exciting. But remember purchasing and maintaining a house is a responsibility, so make sure to do it wisely from the beginning. Happy house hunting!