Thank you for the wonderful advice. I particularly liked what you said about considering the mortgage fees, and all other things that you will have to pay for when getting a house, to ensure you know what you can afford. My brother is in the market for a home, and was wondering what he should know. If he were to consider these things into his budget, he could know what house he could afford, and move forward with peace of mind.
I believe some of the best advice is to PREPARE! I hear so many people say “Ok, we wanna buy a house now” and it’s like…WOAH WOAH WOAH…you can’t just go out & get one! There’s several things that need to happen beforehand. Unfortunately, money management is not a strong point for many of us young folks, but I’m getting better at it (and helping my husband do the same!). Thank you! 🙂
A mortgage is defined as a secured loan that uses your home as collateral. The key here is to identify what monthly mortgage payment you can afford without losing any sleep at night. Expect that figure to be around 15%-to-30% of your monthly income (depending on your local tax rates and the amount of your homeowner insurance). This step ties into step one -- the more money you save, the less you'll have to pay on your mortgage loan interest (see next step below.)
"Building equity in a home can be a good way to grow your wealth, but it's important that you do so in a way that doesn't stretch your finances too thin," he cautions. "Things can get really ugly when the housing market declines, so it may be a good idea to take out a 30-year mortgage but accelerate your monthly payments as if you had a 15-year mortgage. If you ever need to lower your payment in the future, you'll still have that option."
Try also to get an idea about the real estate market in the area. For example, if homes are selling close to or even above the asking price, that shows the area is desirable. If you have the flexibility, consider doing your house hunt in the off-season -- meaning, generally, the colder months of the year. You'll have less competition and sellers may be more willing to negotiate.
Many first-time buyers wait until they’ve found a home they want to buy before taking to a lender, but there are many benefits to getting pre-qualified early. Pre-qualification can help you shop in your price range, act fast when you find a house you want to make an offer on, and catch — and correct — any errors on your credit report before they cause a problem with your loan. This could help save you thousands in the long run because an error on your credit report could result in a lower credit score, leading to a higher interest rate.
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Your mortgage loan provider will want you to get your home fully appraised by a professional home appraiser. That's because the mortgage provider wants to make sure the home is valued near or above the sale price, thus ensuring a better chance that the loan will be repaid. You'll also want to get a home inspection, to ensure there are no defects like a leaky roof, mold in the home, or cracks in the infrastructure, among other cost-prohibitive issues.
“Transfer documents” refers to the documents relating to the transfer of ownership from the seller to the buyer. Most documents will be signed by the seller and delivered to the buyer for your review. Documents include: 1) deed, 2) bill of sale, 3) affidavit of title (or seller’s affidavit), 4) transfer tax declaration, 5) transfer tax declaration, and 6) buyer / seller settlement statement. It’s important that you do your due diligence and read through the transfer documents to make sure everything says what it should say.
Even for the millennial generation, which has been slower to become a major part of the homeowner pool than previous generations, buying a house remains a key goal in life. In a study released earlier this year on expectations for aging, skilled nursing and assisted living company Aperion Care surveyed 2,000 millennials, of which 85 percent say they expect to own a home in their lifetime.
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18 percent to 22 percent. Equity loan interest is often much less and it is deductible. For many homeowners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.
Common contingency clauses include appraisal, financing and home inspection. For example, if the appraisal comes in lower than the sale price, the appraisal contingency allows the buyer to back out of the contract. The same goes for financing and home appraisal. In the event the buyer’s loan doesn’t go through or the inspection report shows significant problems, the buyer can get out of the contract without losing their earnest money.