In your life, you will embark on many journeys. However, when it comes to financing your home, you will find yourself in unfamiliar territory. If you want to avoid getting yourself in a bad financial situation, pull over and check out this home finance roadmap. It will offer you easy tips to help you navigate safely through your home financing journey.
Determine Whether You Should or Rent
Before you start shopping for a home, you need to understand whether you should buy or rent a house. Purchasing a home is a huge decision that will come with big financial commitments. When trying to decide whether you should buy or rent, take into account your plans as well as the state of your finances.
Get Your Finances in Order
If you decide that buying is right for you, it is important to get your finances in order. For one, you should begin saving for the down payment. If you do not have any funds, start saving at least 20% down payment for the full mortgage. Even if you are able to acquire federal assistance, you still need to have about 5% down payment.
Besides that, you need to look at your credit report. When a bank is deciding whether they will give you money, one of the things they check is your credit history. They want to ensure that you can pay back your loan. Before this happens, it is a good idea to check it for any errors. Ensure everything is ironed out before you apply for a loan. If there are no errors, but you have a poor credit, start working towards improving it like paying bills on time and reducing the debt you owe.
Start Looking for a Good Mortgage
While you may be prequalified to get a loan, that does not mean you will automatically get a good mortgage. You need to start shopping for a mortgage even before you find a home. It increases your chances of finding a good one. Besides that, you will have more time to negotiate for better terms.
The first place to find a mortgage should be at your bank or credit union. There you are likely to find good rates, especially if you are a long-time customer. Besides that, you can use the internet to find a good mortgage.
When you find the mortgage you like, you should now work towards becoming preapproved for the loan. This is a step above becoming prequalified. To achieve loan preapproval, you will need to provide the lender with W2s and paystubs. Besides that, you need at least three months of bank statements.
The bank will provide you with a letter that you can show the seller during negotiations. Preapproval does not mean you will eventually get the loan; there is a chance that something odd may pop up which will cause the lender to revoke the letter.
Start Shopping for Houses
One way you can do that is by watching home buying shows. This will help you get an idea of what kind of home you want to buy. It will also assist you to get a grasp of the home buying process.
You should also begin attending open houses. Browse through the local newspapers and other popular real estate sites. You will get to see all kinds of houses with features you did not even know the houses had.
With this information, you can start creating a list of features that you think your house should have. If you are a couple, sit down and decide on some of the features you think the home should have and which ones it should not.
You should also decide whether you need a realtor. Going through all the homes on your own can consume a lot of time. On the other hand, a realtor will have information on thousands of homes; they will also have an easier time setting up appointments to go view houses.
Choose a Home and Make an Offer
Once you find a home that meets your needs, it is time to make an offer. You need to have a price at which you will walk away if the realtor does not agree. Some of the factors that can help you get a home include being flexible on the closing date. Sometimes, homeowners will not have moved out, and they need some extra time to move out.
Get the Contract
After you verbally agree on the price, you now need to sign the purchase contract. It will include things such as the purchase price, down payment, the future payment structure, the closing date, commissions, and much more.
Conduct a Home Inspection and Appraisal
After signing the contract, you need to have it inspected and appraised. The mortgage broker wants to ensure that the home is worth what they are giving you. If the home is worth less, your loan request will not be approved.
Look for Homeowner Insurance
If the appraisal comes out okay, you will now want to get homeowner insurance. This is a requirement by the mortgage lender before they can approve your loan.
Closing can take weeks or months depending on the complexity of the deal. Since you are the buyer, you will need to sign a huge stack of papers. Ensure that you have proof of insurance and agent or attorney with you.
Now you are a Home Owner
After signing the last document, the closing agent will drop the keys into your hands, and the home is now yours. Now you can start thinking about moving in.
Upgrade the Home for Seismic Resistance
If you live in an earthquake-prone area, the home may need to be upgraded to make it resistant to seismic events. However, doing that can be quite costly. That is why you need to consider a seismic financing loan. You will receive 100% financing, with no upfront costs. The money is incorporated into your property taxes and is payable over a 30-year period.