Top Tips For Buying A Home

Buying a new home can be tough. Luckily, here are some tips to help you get that new home with relatively little stress.

Build A Good Credit Profile

Before house hunting, get a copy of your credit report from the three major credit reporting agencies. Check for errors and report them to the agencies. There are ways to increase your credit score. You should pay down credit card debt. Keep your old accounts open if you have paid them off in a timely manner. It is a good idea not to apply for new credit before buying a house. Try to avoid buying expensive items on credit such as a major appliance or car. 

Determine How Much You Can Afford

A buyer can, usually, afford a home that is two and a half times their annual salary. Using an online mortgage calculator will help to determine how other debts affect what a buyer can afford. 

Some mortgages require 20% down. If a qualified buyer doesn't have the 20% down payment, there are lenders and programs that will finance a home with a much smaller down payment.

Budget For The Added Costs Of Home Ownership

The costs associated with home ownership include closing costs, monthly mortgage payments, taxes, homeowner association fees, insurance, utilities, repair and future remodeling costs. Home buyers should consider these expenses when determining the affordability of a home.

Shop For A Loan

Before applying for a loan, borrowers should contact several lenders. Home loans are available from different types of lenders such as mortgage companies, commercial banks, and credit unions. The buyer should ask each lender for a list of its current mortgage interest rates and whether the quoted rate is fixed or adjustable. The APR—annual percentage rate of a loan will include the interest rate, points, and fees.

For loans that require less than 20% down, the borrower may have to purchase PMI (private mortgage insurance).

Purchase Home Insurance

In the event of a catastrophe, real estate insurance will protect the home buyer. Homeowners insurance is required by lenders. It covers liability, theft and fire damage. Should any of these disasters strike, home insurance will make sure that you are not held responsible for any of these damages to your home.

Title insurance can also protect the buyer in case the deed is declared invalid. The one-time fee for title insurance is paid at closing.

Be Prepared To Live In The House For Several Years

Because of the costs associated with buying and selling a home, it may take a minimum of three to five years of home ownership to recoup the costs in a rising market. In a slower market, it may take more than five years to build equity in your home. Before buying a home, you may want to consider if you are able to commit to living in the home for several years.