Buying a house is very exciting but potentially one of the most stressful things you can do. It is a huge undertaking that requires commitment, knowledge, patience, and money from start to finish. Whether you are a first-time buyer or buying your fifth property, something will always surprise you, and you will learn something new. To help you get to grips with some of the important aspects of buying a house, here are some great tips to help guide you through the process.
Know your terminology
When going through the process, you may start to feel that everyone else is speaking another language. There are some very specific terms that are used in real estate, and to help your transaction run smoothly, you should clue up on some of the key vocabularies. At the very least, you will avoid looking clueless. Here are some of the essential terms you will want to know;
Appraisal - before you can get a loan from a bank to buy a house, the property must be appraised. This ensures the bank is lending you the right sum of money and the valuation of the house is correct.
Buyer’s agents - this is the agent who represents you, the buyer, in the process. They can help find you the best property for your budget.
Listing agent - this is the agent who represents the seller.
Real estate broker - to be a real estate broker, you have to have passed a certain number of exams and met a minimum number of transactions. Brokers can work autonomously and are able to employ staff.
Real estate agent is someone who holds a license and works under a broker to assist buyers and sellers. They can also be known as the listing agent or buyer’s agent.
Under contract - when someone is under contract on a house, there is a contract in place to buy the house or that the home is listed as contingent. See the next point.
Contingencies - these are conditions that need to be met before the sale can go ahead. For example, a buyer may require certain repairs to be undertaken before the sale to complete.
Escrow - this is an account set up by the lender that then receives monthly payments from the buyer.
Closing - this is when the sale of the property is finalized. The final sums are paid and final documents signed.
Do your research
Once familiar with the terminology, research the market. Housing markets are notoriously buoyant, and you want to make sure you are on the right side of any price fluctuations. Research areas you might want to live in, are they near schools? Transport links? Are the roads busy? Check out the average price for houses in that area. Can you get better value for money if you lived 10 minutes further away? If you can, be sure that you are happy to make that compromise and be 10 minutes further away. Some houses have their previous sale value listed online; if you dig deep enough, you will be amazed at what you can find out. Knowledge is power, and real estate is no exception to this.
You want to research what is available, but also, a little internal research is a good idea. Think about why you want to buy a house and what you want from it. Can you really afford what you want right now, or are you better waiting a year or two when your budget has increased?
Once you think you have found your dream home, the research doesn’t stop there. Arrange for multiple viewings and then view more properties. Your gut may tell you it’s the one, but until you know what is out there, you won’t know for sure.
Get on top of your finances.
Closely linked with research, having your financial affairs in order is an absolute must. It is all very well researching your dream property, but research is futile if it is out of budget. You want to list all of the associated costs with buying a house, everything - the price, the mortgage costs, insurances, realtor costs. Once you have covered everything, you will be able to plan your budget better and determine what properties you can afford. To help you do this you can use online tools such as home affordability calculators. This will help you plan your budget and, importantly, indicate the price bracket you should be looking in.
You will be required to provide a downpayment, usually 20% of the property value. You may be able to down-pay less, but expect your mortgage rate to be higher if you do. The more money you can save to put down on your new property, the more advantageous your mortgage terms will be and the less monthly commitment you will have to make. If you can, save, save, and save some more.
Another financial must is to check, and where necessary, strengthen your credit score. Your credit score is essentially what will determine if a mortgage provider will lend you money, how much, and on what terms. There are many free credit checks you can do online - just be careful to choose the right one and not do too many checks as this may adversely affect your credit score. To help keep your credit score strong and make you a desirable candidate be sure to pay your bills on time, keep credit and finance options low but be sure to keep those credit cards open even if they are used sparingly.
Once you have agreed on a sale, you will need to secure the financing for the purchase. If you want to avoid lengthy delays and avoid frustrating your seller, be sure to have all of your financial documents in order. The types of documents you will need are bank statements, tax returns, any additional proof of income, and ID.
Use a real estate agent.
Using a real estate agent will save you a lot of time. Agents know the market better than anyone, and once they have a clear picture of what you want, they will be the best person to find it for you. Again research the agents, meet with a few to discuss your needs, budgets, and expectations. Look into their track record and their knowledge of the housing market in the area or areas you are looking at. You also want to make sure they are confident and a good negotiator; after all, they will be the ones negotiating that purchase price on your behalf.
Shop around for a mortgage
It is a great idea to get a pre-approved mortgage before you make an offer on the house. Having your mortgage in place in principle puts you in a stronger position to move faster should there be competing interest in the property you want to buy.
A mortgage is likely to be one of the most significant financial commitments you will make. You are liable for it every month and failure to pay could result in repossession. You want to make sure that you get the best deal available. Speak with at least three lenders or brokers when trying to obtain a mortgage to ensure you can get the best possible deal and lowest rates on the market. It is always a great idea to consider using a qualified mortgage broker. Brokers spend their days working with lenders, learning their products, how they work, and what they can offer. They are likely to have the inside scoop on what is available and what will suit your needs best. Using a professional mortgage broker could potentially save you hours of stress and worry and, of course, money.
Don’t be afraid to ask for an inspection.
Inspections can often be conditions that lenders will impose. Undertaking an inspection of a property will provide you with a detailed picture of the structural and mechanical issues if there are any. It may also highlight any repairs you want the vendor to make before closing on a property - a contingency of sale, or it may even alert you to deal-breaking issues that result in you walking away from the purchase. When undertaking an inspection be sure to use an experienced inspector. Recommendations can be a great way to find the right person for the job. Don’t forget that inspections do not cover everything. Make sure you familiarize yourself with what is included in the inspection and what isn’t.
Home insurance.
Taking out home insurance will most likely be a requirement that your lender imposes before granting you any monies. Homeowner insurance will cover the costs of repairs or replacements to your home and its contents. Homeowner insurance policies can vary widely and offer many additional extras you may not have anticipated. Be sure to research all the different products available, compare their terms and conditions, what is and is not included, and of course the price, to ensure you are getting the best cover for your money. Remember, don’t skimp on insurance, you want to protect your home.
While it might seem like there is a lot involved in buying a house (and there is), don’t forget that the whole process can be completed in as little as three months, especially if you have everything ready to go and are fully prepared. It might be stressful and time-consuming, but it will be worth it in the long run.
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