Buying a house is one of the most massive financial decisions a person will ever make. So it’s important that you’re completely confident that you’ll be able to manage your mortgage before you commit to it. Don’t just find the perfect home and rush into something you aren’t ready for. Take time to consider these questions, and make sure your finances are in order before you move ahead with your house search. Check out this guide on ‘7 Questions You Need To Ask Before Buying A House and learn more about whether or not you are ready to buy a house.
Here are some deciding factors to determine whether you may buy a house or not.
1. Do You Have Enough Capital For A Down Payment?
Having a 20% down payment is one of the most common perceptions while buying a house for the first time. Although, it’s not completely the truth. A homeowner needs a minimum of 3.5% – 10% for an FHA home loan and around 3% – 5% for a conventional loan.
For example: If you want to purchase a house worth $900,000 your lender will require a total of 3% as a down payment depending on the type of loan you qualify for. Hence, 3% of $900,000 will be $27,000 as the down payment.
The only thing to remember is the larger the down payment the lesser will be your EMIs and interest. Although, in a lower down payment you are entitled to pay Private Mortgage Insurance (PMI) that protects your lender in case you don’t pay your mortgage. This is only applied when you put less than 20% downpayment, the PMI will be added to the monthly payments.
2. Do You Have A Good Amount Of Savings And Emergency Funds?
You may have saved enough money while thinking about making a big down payment, but did you think about closing costs? Closing costs include multiple fees like legal fees, lender fees, taxes, etc. The total is usually 2%-5% of the home’s purchase price. Additionally, there are many things that show up while a home inspection related to home improvement which you might want to care of. If the septic tank is leaking or there are cracks in the ceiling, this is where you’ll need emergency funds.
3. How is your credit score?
The first thing homebuyers think of is having a perfect credit score with no red dots. Although, the truth is you don’t need to have a perfect credit score to buy a house. There are multiple home loan and homebuyer programs available for first-time homebuyers that do not require a perfect score. Furthermore, a minimum credit score of 600 or higher is favorable. Keep in mind a high score (that is above 700) will aid in qualifying for a lower mortgage rate.
4. Worried About Having A Handle On Your Debt?
Buying a home doesn’t mean you have to be debt-free. You might have an outstanding student loan, car loan, bills, etc. which makes purchasing a home difficult. Fortunately, many companies these days understand it is impossible to expect potential homebuyers to be debt-free. The main objective of most companies is to know if you will be able to fulfill the mortgage payments. Keep in mind the savings you have versus how much you’ll pay in the future.
Your lender will have a look at your debt-to-income ratio, which simply means what chunk of your monthly income goes into debt payments. You need to have a 43% debt-to-income ratio to qualify for any mortgage on the house.
5. Can You Afford Your Monthly Expenses?
The first while figuring out expenses is to know if you can afford additional payments to your existing monthly expenses. To calculate this you can use an online mortgage calculator. Additionally, you must also check with the other financial aspects like –
- Property insurance and taxes
- Other Home expenses (sewage, garbage, internet, etc.)
- Utilities (water, electricity, etc.)
- Home Owner Association (HOA) fees (if applicable)
It is vital to do your calculations before you move on with the transition from renting to buying your house. As you might be paying multiple bills already and there’s going to be an additional amount as a mortgage payment.
6. Do You Have A Stable Income Source?
Having a stable job is extremely important for home buyers as losing a job after moving into a new house can be a nightmare. A stable job is a good indicator for lenders as then qualifying for a mortgage and fulfilling the amount is possible. Furthermore, even if you can show financial stability on paper, you must only buy a house knowing your income will remain steady in the future.
7. How Much Space Do You Need?
Before buying a house always ask yourself the question ‘how much space do you need?’ While planning on money and other aspects you may forget this important aspect. Whether you need an extra room for office space or a gym thinking through it is always advisable. If you have kids or expecting a child, then buying a house with extra space is ideal.
Takeaways
Buying a house comes with a long list of questions and contingencies. Make sure you think through the options and make a wise decision. If you’re someone who wants to sell your house fast before moving to a new one you may contact us at Elite Properties. We’re ‘we buy houses all cash’ company which offers people home selling and buying services with no obligations. You can get in touch with us by calling 718-977-5462.
As a seller, you simply can’t deny the fact that there’ll always be a lot of paperwork involved while selling your house. Whether you pick a real estate agent for a home sale or you do it yourself, there’s no running away from the verification and paperwork. Home selling is a big transaction and if you need to know what goes into a home selling process then read this blog till the end, ‘Selling house by Owner? Check The Paperwork You Need’.
Where To Find The Right Paperwork?
Starting off, different states have different laws and you’ll have to line up all the necessary documents according to your state. It is extremely vital to do your research and gather all the information before proceeding with showings. Now the question is how and where do you find the appropriate documents to sell your house by owner?
A real estate attorney can help you provide all the information and legal documents that you need while selling your house. Keep in mind hiring an attorney will require fees, so make decisions on your suitability. Additionally, there are also state and county government websites that help you find relevant information.
Documents Needed For A Home Sale
Given below is a list of documents that you’ll require before proceeding with the home sale with the process. (Note: the documents mentioned below may differ depending on the states you reside in)
Property Survey
A survey document determines the boundaries of the specific land or property based on the legal documents filed on it in the past. The document also includes details about fences, driveways, etc. if any.
Receipts And Warranties
The document helps in documenting information on any new appliances or improvements done to your house.
Plans And Permits
This document ensures that you have made changes or upgrades in your house with due permissions, additionally, it’s proof for the potential buyer to cross-verify.
To get this document you’ll have to visit the municipality, get the permit pulled post which you’ll have to get an inspection done, do necessary repairs, and again get the house inspected again. The certificate signifies that your house is safe to reside in and is compliant with all the building codes.
Loan Documents
The document usually comprises your first mortgage, second mortgage (if any), and any home equity lines of credit (if any).
Latest Utility Bills
The document showcases the monthly amount spent on the household such as electricity, gas, water, etc.
Latest Property Tax Bill
The bill gives an idea to buyers of how much tax they’ll pay post purchasing the home.
Title
This document shows that you own legal/equitable interest in the property.
Homeowners Association Covenants and Agreements
This document signifies a detailed set of rules established by the body that governs the neighborhood. The rules usually contain information about pets, noise level maintenance, etc.
Floor Plan or Blueprints, If Available
Having a plan or a blueprint of your house makes the buyer understand in-depth about the property. Make sure you have two sets of all the documents, furthermore, make sure to add anything that pertains to the ownership of your house.
Selling House by Owner, Here’s How You Do It
If you’re stuck with limited funds, selling a house to an owner is the ideal way out. To know how it’s done follow the process below –
Assess Your Property’s Value
Always assess the value of your property before listing it. There are certain setbacks while you list your house like over or underpricing. What do you do in a situation where you are aware of the drawbacks? First off, check the estimated value of your house from home value sites available on the internet.
By only paying a small amount for an FSBO home evaluation you’ll have a licensed professional who’ll do an in-depth evaluation of your home. In 5-7 business days the person will visit your house and you’ll have a detailed report in your hand.
Get Your Home Sale Ready
It is an unsaid rule to keep your home in its best shape before putting it on the market. You might want to showcase your home’s full potential by rearranging furniture, decluttering waste, and giving your walls a fresh coat of paint.
Promote Your Home’s Sale
As old-school as it may sound, putting a sign in your yard saying ‘for sale’ makes a lot of difference in the sales. People in the neighborhood will take note of the sign and spread the word. Furthermore, list your house on famous FSBO (For Sale By Owner) listing sites and MLS (Multiple Listing Service) and take that extra step to generate more traffic to your house.
Negotiate The Sale
A buyer will always offer a price that’s below the asking price or ask you to pay the closing costs, here’s when you have to negotiate. At this stage, you’ll need documentation, within days of accepting the buyer’s offer it is mandatory to have a copy of their mortgage approval. Post this the buyer will submit a written offer that is mutually acceptable. It is only now that you must draw up a contract that includes closing concessions, final price, closing date, location, and a list of contingencies.
The contingencies are put in the contract by keeping in mind the buyer’s security and allowing them to back out if things fall out of place.
Close On the Sale
A closing may either take place at the real estate attorney’s office or the title company depending on the state laws. Make sure everyone is on the same page and the communication is free of any loopholes as the date of closing is the final stride to complete the sale.
Disclosure Statement
What is a disclosure statement? It is a document required by most states that outlines defects of the property. It may include mold, flooding, lead paint, radon, structural problems, etc. A disclosure statement protects the seller from any post-sale claims made by the buyer of which they didn’t know initially. Fill out this Disclosure Form before selling the property.
Things That Must Be Included in a Real Estate Contract?
Here’s a list of things that you must touchdown while drafting a real estate contract –
- Property And Its Characteristics
- Identity Of the Parties Involved
- List Of Fixtures/Personal Property
- Purchase Price
- Earnest Money Amount and Financing Terms
- Target Closing Date
- Contingencies
- Proration
- Title
- Closing Cost
- Notice Or Default Legalese
- Miscellaneous Provisions
Conclusion
If you’re a first-time seller and trying to sell your house on your own, we hope the blog might help you in the process. Furthermore, if you wish to sell properties online you can contact Elite Properties, we buy houses New York and if you want to know more about the home selling process, contact us today at 718-977-5462.