Everything you need to know when buying a home for your family.
Buying a new home is an exciting but highly demanding adventure. You will need to make many important decisions about the location, type of home, the source of financing, future loan repayments and how to move your family into your new home. Here are some valuable tips that will make the home buying process easier and more rewarding.
Increase your savings
While it may be possible for people to buy a home with cash, the majority of home buyers generally need to apply for a home loan. This means you will need to save a substantial amount of money for your down payment. The down payment required by most lenders varies from 20 percent to as low as 3 percent. Some years back, it was difficult to get a lender that will offer a home loan without an initial deposit of 15 to 20 percent.
Today, however, you and your family can find lenders who are ready to take as low as 3 percent as initial deposit for your loan. However, you will need to pay higher loan fees and lenders mortgage insurance if you opt for a small down payment. The best way to get a good loan at a lower interest rate is to start increasing your savings now. To increase your monthly savings, you should:
- Cut out all unnecessary expenses like eating out and avoid all forms of impulse buying.
- Set a monthly budget and stick to it.
- Plan ahead to save tax bonuses and any wage increase you get at work.
- Open an account specifically for your down payment savings.
- Set up an automatic monthly savings deposit at your bank.
Focus on affordable financing
With a large number of home financing options out there, it can be difficult to choose one that will give you the best deal. Take time to research different mortgage lenders. As you compare their offerings, look out for:
- Flexible terms and payment options
- Low-interest rates
- Penalties for paying up your principal or interest ahead of schedule
- The total cost of fees, insurance and other charges
- Willingness to provide a full explanation of all terms and conditions in the loan contract.
Get pre-approved for your mortgage
These days, with an ever-growing number of lenders and brokers offering their services and tools online to aid the home buying process, you can get a potential lender to pre-qualify you for your mortgage. Thanks to the availability of free online calculation tools that anyone with an internet connection can access, you can now work out how much you can borrow.
This is usually calculated based on your debts, current income and the amount of interest charged on the loan. But when you are set to actually contact sellers and make an offer, you should get a loan pre-approval. The lender will examine your finances carefully and write a letter stating how much they are willing to provide as a home loan. With this letter, you can show any home seller that you are serious about your intention and you will be considered ahead of others who don’t have a pre-approval letter.
Enhance your credit score
When you apply for a home loan, lenders will take a close look at your credit history. They don’t just want to have a glance at your credit score, they want to focus on your recent financial activities, too. These are some of the questions that can be expected:
Have you been paying your debts regularly?
Do you have any major outstanding debts like a car loan to be repaid?
How much credit card debt are you carrying?
To improve your credit rating, request a free credit report and study it carefully. Avoid setting up new credit accounts, and dispute any errors that can drag your credit score down.
Work with a reliable estate agent
A competent real estate agent will help you to avoid many of the pitfalls that new home buyers make. Your agent will:
- Represent you alone at open house events and protect your interests
- Help you to negotiate the best price for your new home
- Understand all the important features you need for your family and find a property that will meet all your needs
- Provide guidance and professional advice on inspections, appraisals, negotiations and closing procedures.
Working with an agent is very cost effective because the seller pays the commission and fees of your agent.
Choose the right location
Choosing a nice house in the wrong neighborhood can be a nightmare. To select a suitable location, you need to:
- Choose a location that is not very far from your place of work.
- Do research on the school district. This is critical if you have school-age children and it will also affect the rate at which your home increases in value.
- Consider the crime statistics and look out for data on safety for your proposed neighborhood.
- Cruise through the area at different times of the day and on weekends to have a feel of the type of traffic you will grapple with every day.
- Study an online map of the area and observe the distance to important amenities like pharmacies, hospitals, spas, grocery stores and any others that are important to you.
Know your space requirements
It’s quite easy to focus on your immediate needs when estimating your space requirements. But you should also think about the needs of each family member. For instance, if you have kids, you should choose a home that has enough bedrooms and space for your kids to sleep, play and study. Your master bedroom should also be accessible to your kids if they have to leave their room and come over to your room in the middle of the night. Consider both the present and future needs of each family member when you are looking at homes with different floor plans.
To buy your ideal home, you need to make vital financial decisions, pick a home that will meet the needs of all family members, in a desirable location, and get a home loan at a fairly low-interest rate. If you apply the tips provided here, you should have a stress-free home buying experience.
Sofia is a passionate writer from Sydney. She also enjoys decorating houses and engaging in home renovation projects. That is why she loves sharing her experience and advice with other people through her writing. Besides this, she loves technology and gadgets which can help us get through a busy workday.