You can get approved for a home loan by completing a mortgage application. Be prepared to provide proof of your financial data, such as your monthly income, total debt payments, and your credit score. Also, have an idea of how much house you can afford, as well as how much cash you have available for a down payment. Meeting with a mortgage lender before you are ready to purchase a home can also help you set financial goals, such as knowing how much to save up for a down payment, or improving your credit score.
Property tax is the amount of money that you are required to pay based on the property’s assessed value. Property tax can be very costly, depending on where you live. This is something you’ll want to consider when calculating how much you plan on spending on your overall homeownership expenses. Property tax payments are usually due annually, but more often than not, they are divided into and included in your monthly escrow payment.
Now that you have a budget, you’re in a better position to meet with a lender and discuss loan options, current interest rates and how much you can borrow. Once you find a loan that fits your needs, get a prequalification letter, which estimates your borrowing power based on your financial information. Keep in mind prequalification is not a commitment to lend. You will need to submit additional information for review and approval. Still, having this letter in hand when you make an offer shows sellers you are serious and gives you some negotiating leverage.
If you already own a home, simply call your insurance agent and let them know you’re buying a new home. They will handle writing a new policy. If you don’t have an insurance agent, now’s the time to find one because your lender will require homeowners insurance. Even if you don’t have a mortgage, insurance is a critical part of protecting your investment. You’ll also want to give utility companies your move-in date to establish service. There’s nothing like moving into a cold, dark house because you didn’t get an account with the power company!
Homeowners insurance and property taxes very based on your geographic location. Florida has notoriously high homeowner's insurance rates, where they average $161.08 per month. In Idaho and Wisconsin, rates are a bit lower, averaging below $50 per month, according to Value Penguin. Property taxes average higher in New Jersey, New Hampshire, Texas and Wisconsin and they're lower in Louisiana, Hawaii, and Alabama.
I’m a big proponent of the Dave Ramsey line of thinking when it comes to home ownership – buying a house costs you money in the short term but is an asset in the long term. What does this mean? It means that you need to have money to buy a house. Comparing rent to a mortgage payment is not how you decide whether you should buy a home. In fact, most pros suggest that you have an emergency fund of at least 3-6 months in place and put between 10-20% down when you buy a home.
Your agent will send listings to your cellphone. You'll also pick up House For Sale magazines and read classified ads in your local newspapers. You'll probably spend an inordinate amount of time surfing the Internet for homes. You might even plan afternoon drives to preview neighborhoods. Those are all excellent ways to see what's available. Here are some tools to help you narrow your home buying search.
“Realtors do a lot of your groundwork up front for you by contacting listing agents to set up showings and help you negotiate the purchase,” says Brandon Gentile, CEO of the Legacy Group Real Estate Team in Clarkston, Mich. “The best part is, a buyer doesn’t pay for working with a realtor. The service is free for a buyer, as sellers pay all the commission.” For more, see How to Find the Best Real Estate Agent.
Find out how familiar the agent is with the areas you want to look at. If they have little expertise and no network in the neighborhood, then you won’t get the agent advantage of being the first to see a house (sometimes even before it’s listed) or getting expert advice on price. Plus, neighborhood knowledge saves the buyer time because an agent will likely know exactly where to look and what houses to show based on your needs.