Congratulations on deciding to purchase a home! It is a very exciting time and the process might seem like a roller coaster of emotions and sometimes overwhelming but hopefully this guide will help to get you prepared for what is to come.
What do you want your new home to look like?
There are many things that will affect the final decision when it comes to a new home. Some of the questions you should ask yourself are: how many floors would I like, what kind of architecture style do I want, How many rooms and bathrooms would be comfortable for me, does it have a pool, how big is the backyard, how old is the house, how close is it to work, is it in a part of the city I want to live in, what is my budget, ETC. Knowing this can knock considerable time off of the home buying process and help you get an idea of what you want to spend your hard earned money on.
How much you should have saved up to start the process?
There are two separate amounts, one for the home buying period and the other for the closing of your new home.
For the period while the house is under contract to be purchased, it is a good practice to have at least $2,000 saved. $1,000 to be used as earnest money and the other $1,000 for inspections. You may need more for the home buying process however, $2,000 would be a safe estimate to start off with.
It is possible that you will need to bring additional funds to the final signing or “closing” but this amount is usually known at the beginning when you contact your lender (the bank you will be using to finance your new home). For more information please feel free to contact me and I can get you in touch with a home loan specialist.
How long does the home buying process take?
This can vary wildly depending on special circumstances however, a good timeframe someone could expect from start to finish would be about 2-3 months. The search for a home depends on how the market is in the area you are looking at and your specific needs. If you are looking for a home with very specific features in a particular part of town, it may take some time until one comes up for sale that meets all of your criteria. For most people you could expect anywhere from 2-4 weeks to search for a home. People can sometimes get lucky and get the first home they tour but most often it takes a few homes to find the one for you.
The rest of the time is when the contract is in “Escrow”. Escrow is the period when the person buying the home is getting everything prepared for them by the bank and the title company. Banks and title companies will often want to verify as much information as possible to protect both the seller and the person buying the home.
What should your credit score be to qualify for a home loan?
If you need a loan to purchase your home, I recommended to have a credit score of at least 630. This will vary from bank to bank however, that is a good starting point. Of course the lower your credit score the higher your interest rate and your payments will be. This is the same concept as buying a car, if you have a high credit score your payments will be lower and you may qualify for bigger discounts because your less of a risk to the credit companies. If you do not know your credit score I recommend checking www.creditkarma.com or getting your credit report directly from www.Equifax.com or www.Transunion.com.
Things you should not do while looking for a new home.
If you are getting a loan to purchase a home you will want to make sure there are no changes to your credit report. This means no new car purchases, no closing credit card accounts, no new credit card accounts, and no big purchases on your credit cards that could affect your credit score. If your credit score goes lower because of what I have mentioned it may affect your chances of actually getting the loan or getting the payments that you agreed upon with the bank. Remember, just because you are in process of buying a home it doesn’t mean it is yours until you have signed for everything and you have the keys in your hands. This does happen sometimes where people are no longer eligible to purchase their homes, so be careful and plan your finances accordingly.
What does a person that is ready to buy a home look like?
A person that is ready to go will have a credit score of at least 630. They will have contacted a bank to see how much they qualify for. They will have at least $2,000 in their checking or savings accounts as well as other funds needed to close. Lastly, they will need to contact their real estate agent to schedule times to look at the homes that peak their interest. After that it’s happy hunting. Purchasing a new home can often times feel overwhelming. Even Though there are many things that have to come together to finalise your purchase, you should not let it take away the fun and excitement that comes when searching for a place to call home. Once you have everything done and you turn the key for the first time, you can feel excited because you have a new place to hang your hat and you now have an investment. If you need more information feel free to reach out to me, I’d love to help you out.
Creditkarma.com –gets credit info from both equifax and transunion
Equifax.com –a credit reporting company
Transunion.com – another credit reporting company
Downpayment assistance programs – information on assistance programs for first time home buyers