What to Know Before Buying a House [The Ultimate Guide]

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Buying a house is exciting, thrilling, and very intimidating. Whether it’s your first big purchase or you’ve bought a house in the past, this article will give you information on what to know before buying a house. We will discuss everything from credit scores to homeowners insurance to make the process of buying less stressful and more enjoyable.

Buying a House

If you’re here, we’re assuming that you have started looking for a new home or have already found the right home for you. Your new home should not only cater to your present needs but also your future ones.

A single person might want to look for a small and cozy place to live, whereas a bigger house is needed for a family. For those with children, the home should include enough space for them to play and for you to relax. If you have a big family, and the even larger house would work well, as it would allow everyone to have their own space.

A home is not just for you, but also for your family and future. It is not just an infrastructure where you live, but a feeling.

With that in mind, let’s continue discussing everything related to buying a home.

DID YOU KNOW? According to NAR reports, 80% of Americans believe that buying a home is a good investment. Not only that, but it also provides a sense of stability to people.

What to Know Before Buying a House

Here are a few things you should pay close attention to before signing a deal on a new home.

Perform a Financial Check-Up

Your money situation is one of the most important things to look at before purchasing a house. This includes looking at your debt-to-income ratio, credit score, and the funds available for your down payment. You should also check the mortgage rates as well.

Consider Help From a Realtor

There are big misconceptions around the position of realtors in the buying process. A realtor understands your housing needs and finances to get you closer to your dream house. They help ease the process of buying as they are experts in the field, saving you lots of time on house hunting. These are just a few of the many reasons you need a realtor!

Determine If You Need a Home Loan

You should consider if you’ll need a home loan to buy your first home. If so, the bank will grant you funds depending on your credit score and loan requirement. You shouldn’t have many loans, so only take a home loan if you require one. In case you have bad credit, consider taking a mortgage loan.

What Inspections Should Be Done Before Buying a House

A house inspection is extremely important before you move into your new home; we also recommend hiring a professional inspector to check the heating and cooling systems, plumbing, water, sewage, insects, fire, and safety measures. Make sure to take a look at legal documents about the owner and construction approvals, and they will help you negotiate and determine if the house is right for you.

How Much to Save Before Buying a House

Ideally, you should save up to 20% of your house price to be paid as a downpayment. Apart from this, your savings should also include the cost of a realtor, home inspection, and legal fees.

Only Buy a House You Can Afford

This is related to finances; only purchase what you know you can pay for because you don’t want to be eating ready-made noodles every night after the sale. With so many loan options available, people tend to purchase more than they can afford, or worse, spend most of their income paying off debts. Take a thorough look at your finances and the house price, consider future costs and then determine if you can afford the new home.

Plan for the Future

Here is another piece of advice before buying a house: it is a long-term investment. We wouldn’t advise you to purchase a specific property just because it is affordable or you plan to make changes in the future. It will end up costing more down the line than simply buying a house that meets your needs in the present.

DID YOU KNOW? Few people have a fully functioning security system in their homes. Checking a system out reduces your chances of theft significantly.

Does Your Credit Score Allow You to Buy a House?

If you’re thinking of buying a new house, you should be familiar with the role of credit scores in the process. The better your credit score, the better your mortgage rate.

A good credit score reduces your interest rates. Minimum credit scores vary as they are set up by different organizations; in general, if you have a credit score above 670 you’re good to go.

The minimum credit score for qualifying mortgage loans is even less. You need a FICO score of just 500.

You might have also heard of conventional loans. These types of loans are not backed by government agencies, so they have a stricter requirement: a minimum credit score of 620. You can use the help of credit repair companies to improve your credit score.

DID YOU KNOW? When it comes to mortgages, having a bad credit score is better than having no credit score at all. No credit score implies that you have no financial history, whereas a bad credit score can still get you a mortgage loan at a higher rate.

Is It Okay to Sell Your Current Home to Buy Another?

We’ve discussed everything related to buying a new home. But what about your current home? Selling a house and buying a new one has both pros and cons.

One of the main benefits of selling your current home is the money you’ll receive. The down payment given through your buyer could help finance the cost of your new home! Selling your current house would also save you from paying two mortgage payments, making it easier for you to qualify for a new mortgage.

Despite all this, a major downside of selling your house before buying another is that it will leave you without a home. The feeling can initiate you to make haste decisions about your next home purchase; the process also doubles moving costs.

If you’ve decided to sell your current house, promoting it locally is a good idea. It will help attract more buyers and can speed up the selling process; after all, you don’t want to spend months trying to sell your property. Also, you can take a home equity loan to buy a new house.

Promote the place on social media, put you’re ‘For Sale sign outside, hire an agent to ease the process, and have a look at real estate market predictions in 2021.

DID YOU KNOW? Based on a survey, most Americans only move an average of 15 miles from one house to another.

How Long Does It Take to Buy a House?

We’ve all become accustomed to fast delivery and fast purchases, but buying a house is not the same as simply purchasing a new appliance. It is a big investment that requires patience. Having a general timeline of the process can help a first-time homebuyer set realistic expectations.

The first step towards buying a house is to save for a downpayment, meaning the process of purchasing a home starts before you even begin looking at a place. Once you save up enough money, the next step is to arrange all your legal documents. It does not seem like a time-consuming process until you can’t find a certain piece of paper that you need.

After all the prerequisites are completed, it’s time to find a suitable house. The home buying process includes hours of house hunting; one house may have a good backyard but may not have a location near downtown, for example. After finding the perfect home, you will have to make an offer, negotiate, do a home inspection, and finally sign the legal documents. Remember that it will also take some time to move in the house.

Generally, it takes at least 6 months to complete the purchase of a home.

DID YOU KNOW? Buyers spend an average of 12 weeks house hunting. They also visit at least 10 homes before making final decisions.

What to Know Before Buying a House in 2021

COVID-19 has affected the real estate market significantly. While experts predicted that the real estate market would fall at the beginning of the pandemic, the opposite has actually happened. There is a significant increase in demand for new homes in 2021, which could be because most people started working from home.

Even mortgage rates are at an all-time low, encouraging people to go out and look for houses to buy. Low mortgage rates mean, again, that you would pay less each month.

Mortgages aside, one thing that might come between you and your dream home is the price surge in 2021. With the increase in demand for houses and a decrease in supply, prices of houses have shot up. There is a significant drop in the number of sellers.

DID YOU KNOW? Prices of homes hit an all-time high in 2020, and continue to rise.

Are You Ready to Buy a New House?

In conclusion, make sure you check several things before buying a house, as it’s a complicated process. This includes financial check-ups, hiring a realtor, house inspections, securing a home loan, and knowing how much to save as a downpayment. Your credit score affects your purchase as well, as a good credit score will provide a lower mortgage rate. If it applies to you, many also sell previous homes to buy a new one as it helps finance the cost.

FAQ

Should I open a credit card before buying a house?

Ideally, you should avoid any new credit applications a year before buying a house; focus entirely on your mortgage application. Several new credit lines can impact your mortgage rate negatively.

Should I pay off my debt before buying a house?

If you have a good payment history of your debt, then there is no need to pay off debt early. Timely payments reflect positively on your financial history and can grant you a lower mortgage rate.

How much money should I save before buying a house?

While discussing what to know before buying a house, the first thing mentioned is savings. You should save 20% of your home cost to be paid as a downpayment, as well as some extra to pay for realtors, house repairs, and moving costs.

ABOUT AUTHOR

Alex is an IT wizz gone SEO gone fire-juggler. We’re not even joking. When he isn’t researching why one personal loan is better than the other and which piece of hardware you should buy next, he’s rollerblading or selling homes (because he does that, too, the smarty-pants).

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