You have taken the time to enter the market after saving up the money, spending time making a list of all the features and amenities that you want in your new home, and finding the right realtor and a great mortgage lender. This is an exciting time to look for your new house.
Some people may find buying a house to be intimidating. There are fees to pay, legal papers to sign, and so much that is going on at the same time. Before you jump right into the house searching process, make sure that you understand everything that has to happen ahead of time to help you be prepared.
You Need a Down Payment
You will need to put down some sort of down payment before you decide to purchase a home. There are a few programs like First Time Homebuyers programs that will allow for a 0% down, but these have extra hoops to jump through, and only a few select borrowers will be able to get these.
The ideal amount that you should put down is 20% of the home sale price. This shows the banks that you are serious about purchasing the home and have the funds to do it. When you can put that much down, you will be able to get away without PMI, which can be $100 or more a month on your monthly payment, and will owe less on the total amount of the home.
Not everyone is able to come up with the 20% down, especially in the modern market that we have. There are other programs out there that allow the home buyer to put down 3, 5, or 10% as well. Compare your options to find the one that best fits your needs. The higher the down payment, the easier it is to get the mortgage.
There are Closing Fees
Once you have had your offer accepted, the closing date will be set up as well. You will need to work with your bank to determine what fees you are going to need to pay to get the loan closed. The down payment is only one part of the closing fees.
The fees will vary based on the bank you go with. You will often need to put money down for an earnest deposit and money to pay your taxes ahead of time for a certain number of months and the homeowner’s insurance. You will need to pay for the inspection and appraiser ahead of time.
Check with your bank to get an estimate on how much you’ll need in closing costs. This will help you know how much you need to spend ahead of time and can help you save up that amount before the closing date.
Pick Out Home Insurance
The bank will want you to have insurance on the house in case something happens to the property. You can shop around to find the right policy, and it can depend on the size of the property and other distinguishing features of it as well. In some areas, you may need flood insurance or hurricane insurance, too, so check with your mortgage lender.
The typical amount that you will need to pay for this insurance is between $400 to $1000 per year. You may need to pay for a few months up to a year of the insurance ahead of time with your closing costs. Make sure to shop around to find the best rate for your mortgage insurance.
You Will Need to Pay Your Property Taxes
As a homeowner, you will need to pay for the taxes on the property. The amount that you are able to pay for this will depend on the area that you live in, with some more desirable areas costing more than those that don’t fit this mold.
For most homes, the amount that you pay will be between 1 to 3% of the market value of the home, based on its current worth. If you bought a home for $200,000, then you can expect that your tax bill will be between $2,000 to $6,000 a year.
Because the market value of your home is going to go up over time, your property taxes and even the insurance will get higher as time goes on. You will need to factor in the increase each year to your budget each year. Whether you pay these separately or in the mortgage, be prepared for these amounts to change over time.
Selling a Home Takes Time
Once you purchase the home, it is hard to figure out how long you will have to wait to sell the home. In some markets, it can go quickly, and in others, you may be stuck with it for a long time. This means that you will need to think carefully before you purchase a new home.
Never plan on getting a home and then selling it for a large profit right after the closing is done. At a minimum, you will need to wait six months before you sell your home. And the longer you have it on the market, the less you will have to take.
Make sure that you pick the right home for your needs. The longer that you will stay in the property, the more value it can incur and the better profits you can make on the property when you do sell. It is never a good idea to rush into house buying because you are left with the property when the closing is done.
Buying Your New Home
Buying your new home is going to be a very exciting time in your life. The more preparation you take ahead of time, the easier this process can be. Take a look at some of the items above and see how you can get ready to purchase your new home.
Provided by 9 Reasons Buying a House Will Be 100% Worth It