What To Consider When Buying A House In 2019?

by Kahlia Meeuwsen, Finance Columnist


Published in Finance and Money on 23rd January, 2019


Buying a house is a complicated process, but there are some ways to simplify the concept so that those who are new to it can understand what they need to do.

In this article, we're going to take a look at the process of buying a home as well as what you need to consider as you start the process. Consider this your handy go-to guide for buying a house, ensuring that you have everything in order to purchase the ideal home!

buying a house

Thinking About Buying A Home This Year?

What better way to mark 2019 than by purchasing a home? Whether it's your first or fifth, it's worth making sure you know all of the ins and outs of the home purchasing process. This understanding can help to guide you as you check out your credit, navigate finding loans and start shopping for your house!

We'll cover many of the aspects of buying a home that you'll need to focus on, so that you won't feel left in the dark or left at the whims of those trying to sell to you. Things like interest rates, mortgages and negotiations are going to require a decent amount of knowledge, or at least a real estate agent you can rely on!

Take a look at all these steps, and consider how you can best prepare yourself at each one. Then you can take on the real estate market and find the home that you can enjoy for years to come!

What To Consider

These things are worth keeping in mind as you think about buying a home. Each of these aspects can help in a different way, and they are all key to making the process as smooth and easy as possible. Consider them all carefully, and use them well!

Your Credit

It's a good idea to get started by checking out your credit score. If it's as high as you want it to be, then you're in a good place to get started. Otherwise, you do have a few options for bringing it up a bit. Keep in mind that it can take a little time to improve your score, so be patient!

It's a good idea to get a copy of your credit report. Using that, you can dispute any errors and get to work resolving any problems to improve your score.

What Is Affordable?

Just like any other major purchase, it's important to know what you can actually afford. Keep in mind that this doesn't just mean whether or not you have or can obtain the funds for it, but whether or not the mortgage will be sustainable going forward considering the amount of income you have.

affordable house

Luckily, there are plenty of calculators out there online that can help you with determining what you can afford when it comes to a home. In addition to this, knowing what you want in a house as far as square space, the number of bathrooms and bedrooms, acreage and more can be very helpful.

Gaining The Funds

You have a few options to consider when it comes to gaining the funds you need for your home. It's pretty rare that people begin home shopping with the funds already saved up. Consequently, many turn to things like home loans or even sometimes grants to help with paying for the home.

These are both great options, worth looking into so that you can make sure you get the option that will work best for you. Below, we're going to take a deeper look into these options so that you can learn a bit about how they work!

Loans

Most people who buy houses end up having to get a loan of some sort. The good news is that there are some pretty decent options out there for you. Things like FHA loans and USDA loans can help with getting your home, allowing you to move in and make payments on the loan after.

Some loans out there come with a down payment. FHA loans can come with down payments that range from about 3.5% to 10%, depending on what you qualify for. On the other hand, the USDA loans offered typically don't come with a down payment.

Grants

In some cases, those who are buying homes for the first time can also receive grants that make it a bit more easier to afford. These are typically provided by the HUD and can differ based on where you live. Each state can offer something a little different, so make sure to check out what's available in your area!

Local government can also offer some help in covering your down payment, which is excellent for those who can't get a USDA loan. Make sure that you check to see if you might qualify for these options, as they can really help to bring down the out of pocket expenses!

Keep In Mind Your Ratio Of Debt To Income

The ratio of debt to income is important to keep an eye on, as a ratio that is too high in favor of debt can make it less likely that you'll get a good rate. Lenders take a look at the ratio to get an idea for how well you do with keeping a handle on any debts that you have incurred.

Essentially, you want to aim for the lowest debt-to-income ratio possible. Don't forget that there are two sides to this ratio, the back-end and the front-end. Ideally, you'd have less than 36% on the back end, and 28% or lower on the front end.

Remember The Extra Costs!

There are a number of added costs that can play into the home purchasing process. These are worth keeping in mind, as they can certainly add to the overall cost.

extra costs house

Some of these added costs can include closing costs, home insurance, fees for home inspection and appraisal, HOA fees and more. It's worthwhile to take a more in-depth look at all the different fees that can be included, and get and idea for how much they are likely to add to your expenses.

Think About Your Employment

This is one of the more obvious aspects of purchasing a home. Naturally, if you have a solid, stable history of employment, lenders will be more likely to see you as a worthy investment. When you're asking for money, it's a good idea to make sure that you're showing lenders what makes you a reliable borrower.

Consequently, lenders may be a little more cautious about an unstable work history, or work that doesn't offer the most stable pay. Some kinds of self-employment can tend to be more irregular when it comes to pay. Some self-employed individuals have started seeking out bank statement mortgages as a result.

Considering Mortgages

As you do your research, make sure that you learn about the different mortgage options and how they function. For example, knowing the differences between mortgages with an adjustable rate and those with a fixed rate.

As you might expect, those with a fixed rate will remain the same until they are paid off. On the other hand, adjustable options often begin with a lower rate and can end with a rate higher than you'll see with most fixed rate options. Within the latter option, you'll also find that the adjustment is made on a yearly basis.

Think About The Time Frame

Buying a house isn't a quick and easy process. It can take a decent amount of time, though that can depend on variables like the need for a loan, pre-approval and how long it takes for you to find the ideal house for you at a price that is going to suit your needs.

On the lower end of the spectrum, it may just take a couple weeks to locate the home you want and go through the buying process. However, for others the process can take a year or more. It really functions on an individual basis.

Interest Rates!

Understanding interest rates is also going to be key to getting into the best situation possible while buying a house. You'll want to consider whether the rates are on the rise, or falling. Interest rates tend to rise when the economy is going strong, and they can drop when the economy isn't in such a great place.

economy rates

So as you're shopping, make sure to consider whether or not the economy is doing well or not. This is important to keep in mind because each percent effects your the interest on your loan and how much you end up paying overall.

Reliable Professionals

There are some professionals that you'll need to rely on as you shop for your home. Among these can include lenders, real estate agents and more who help you through certain aspects of the process. It's worthwhile to take your time to find professionals who have your best interests in mind.

For example, a real estate agent should be helping you to find what you want, at a price you're willing to negotiate with rather than trying to push you into the first or most expensive option on the market. A lender should be able to provide a decent rate, based on your credit and other factors.

Pre-Approval

When you're interested in making an offer on a home, it's worthwhile to remember that there are two pre-approval paths for mortgages that you can make use of. These two options can offer difference conveniences and inconveniences depending on your situation.

Underwritten pre-approvals tend to take a little longer, but they are more in-depth and accurate. Consequently, they are more likely to be accepted when you make an offer, because they have more backing. Fast pre-approvals on the other hand are quicker, but not as in-depth and less likely to be accepted.

What About The Neighborhood?

While this isn't as much of a financially-related aspect, it's worthwhile to do some research on the neighborhoods you're considering living in. Make sure to take a look at things like crime rates, convenient commuting, great aesthetics and a good school district if needed.

If you've found a great real estate agent, they will be able to discuss some of the aspects of a given neighborhood with you so that you can get a clear picture. It's still always a good idea to do your own research or even take a drive around the area if you aren't familiar with it already!

Shopping

When you're pre-approved and have everything else in line, you can get started with your shopping! Think about what you really want from a home, and start window-shopping options in areas you want to live in. If you have a real estate agent, they may be able to streamline that process a bit for you.

Make sure that you get something you want rather than settling for something that doesn't measure up. While negotiating is a pretty large part of the process, it's important that you're happy in the house you end up living in.

Making An Offer

When you've found a house you're interested in, you can send out an offer. This is another place where it will be quite handy to have a good real estate agent. They can help to provide you a good idea of the offer you should provide, as well as aid in negotiations.

making an offer

This can be a tricky part of the process, as in some cases there may be multiple offers put in on a house, and you may be essentially outbid. It's worth keeping in mind that sending out and offer doesn't always guarantee that you're going to get the house, but it's a fantastic start!

Have The Home Inspected!

When your offer has been accepted, it's time to have the home checked out. At this point, someone will go take a look at the home and make sure it's in good shape, avoiding any large problems that might be just out of sight, waiting to pop up and cause you a lot of expense somewhere down the road.

It's a good idea to hire a certified inspector to complete this task. When they're finished, they'll write up their findings. With that, you'll be able to see what kind of issues might be going on with the home, large or small. If there are problems you feel need repairs, you can request that the sellers handle it.

Appraisal

After the inspection, it's time to get the home appraised. This essentially lets you know what the home is worth, and will often dictate what loan you'll receive. For example, if your offer was for 290,000, but the appraisal comes back at 270,000, then the bank is likely to only approve a loan for the latter amount.

If that occurs, you may be stuck paying the rest yourself, or you can ask if the sellers are willing to lower their price a little.

Finishing Up!

When you're finished, you can celebrate your new home and get started on the process of moving in! Working with your real estate agent, you'll be able to wrap up all the finishing touches, officially take ownership and you'll be ready to enjoy the comfort of your home.

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