Make Buying a Home Your New Year’s Resolution for 2020
The New Year is often a time to hit the reset button and start fresh. It is an excellent opportunity to start reaching towards an ongoing goal you have. If buying a home has been an ongoing goal, use the New Year to begin taking steps to become a homeowner. The path to affordable homeownership is possible! We have provided many useful tips to help you get there:
Track your spending. The first step to buying a home is to prepare financially. Track your spending to understand where and how you spend your money. This enables you to identify poor spending habits. Here are some helpful ways to monitor your expenses:
- Create a spreadsheet and manually input every purchase.
- Use a money-monitoring app, such as Mint, Acorns, Wally, etc.
- Check and recheck your credit card use.
Once you have tracked your spending for at least one month, you can determine where you need to cut costs and how much money you can save every month.
Save for a down payment. After you have tracked your spending, you are ready to begin saving for a down payment. Create a budget that is realistic for you. Ensure that you are saving money by allocating a certain amount of money toward your savings account each month. There are several small changes you can make that will allow your funds to add up over time. Start by cutting unnecessary living expenses, such as magazine and streaming subscriptions, eating out, gym memberships, etc. If you are disciplined and stick to your budget, you will see a significant increase in your savings and will be able to make a substantial down payment!
Improve/maintain your credit score. Your credit score is a significant factor that lenders use to determine your eligibility to buy a home. The better your credit score, the better your chances will be to secure a home loan. If your credit score is not where you want it to be, HOMESTAR is here to help you! Contact a Mortgage Loan Originator to learn more about boosting your credit score.
Get pre-qualified. Pre-qualification is an official method of determining if you qualify for a mortgage. It also shows interested parties that you are committed to purchasing a home. This will increase your chances when it comes to sealing the deal at the price you desire.
Hire a real estate agent. We suggest that you find a real estate agent to guide you through the homebuying process. An agent can make this process easier because they will work for you and provide the exact information that you need. Contact a HOMESTAR Mortgage Loan Originator for recommendations on a reputable real estate agent in your area.
Begin house hunting. Use real estate websites to help you in your home search. Websites like Zillow.com, Trulia.com, HomeFinder.com, or Redfin.com are great resources to discover available houses on the market. In addition, take advantage of open houses and visit properties in person. While you are in each home, take photos and notes to compare and contrast all the homes you visit.
Budget for utilities and home maintenance. You cannot know exactly what the cost of home maintenance and utilities will be for the house you buy. However, you can get a rough estimate of utilities by requesting the utility costs from the seller for the last 12 months. In addition, your home inspection will show you what home repairs you will need to make. This will give you a general idea of how much you will spend on home maintenance.
Consider other costs. Other monthly expenses to consider are homeowners insurance, property taxes, and private mortgage insurance (required if your down payment is less than 20%). The cost for homeowners insurance will depend on the size of the home, the location, the value of your personal possessions, and the age of the home. Property taxes are collected by county, city, and state governments, so your property taxes will depend on your home’s taxable value.
Avoid increasing debt. Income and employment history are two of the most important factors mortgage lenders consider. Your job history needs to be steady, and your debt-to-income ratio matters. These are two major factors that lenders consider when determining how much of a mortgage you can afford. Avoid making big purchases that will increase your debt!
Don't skip the home inspection. Home inspections are worth the investment. They can flag problems you may not see otherwise and give buyers peace of mind. A proper home inspection is important to make sure you are buying a home that is in good condition. Use these tips to get the most out of your home inspection:
- Show up and ask questions.
- Use someone you trust.
- Take pictures so you have proof.
- Do your own inspection first.
Understand the home appraisal. Your lender will arrange for an appraiser to assess the fair market value of the home you plan to buy. The appraisal happens after you sign a home purchase agreement and before your lender approves your loan. The purpose of an appraisal is to protect the buyer against paying more for a home than it’s worth. Here are some tips to help you prepare:
- You will most likely have to pay for the appraisal.
- Home appraisals are typically completed within 14 days.
- If an appraisal is lower than anticipated, you can negotiate the price of the home, appeal the appraisal assessment, or ask your lender for a second appraisal.
Be prepared for closing costs. Closing costs typically amount to 2%-5% of the loan principal and they vary state-to-state. The costs will usually include an appraisal, credit report fee, origination fee, application fee, and more. Your lender and real estate agent will discuss closing costs with you at the proper time. Consider these tips to help prepare you for closing costs:
- Consult a lender before you start looking at homes.
- Budget for closing costs in addition to the down payment.
- When you receive your Closing Disclosure, review each cost carefully and compare it with your loan estimate.
Close on your new home! When the time arrives to close on your new home, it will be an exciting day! You will need to be prepared with important documentation and ready to sign a lot of papers! Your real estate agent and lender will both be able to answer any questions you may have about closing day.
2020 is the year to make your dream of homeownership come true. HOMESTAR is here to help you get there. Apply now to begin the process!