Ask anyone who has ever spent a block of their time renting a room or an apartment, and they’ll tell you how frustrating it can be. Dealing with horrible landlords, roommates, and other tenants is never fun. If you’re one of the numerous renters who are wondering how to take the next step in life by becoming a homeowner, you may not have any idea how to get started.
Here are the top seven questions renters ask while considering if they’re ready to purchase a home:
1) What is my first step?
Before you even start looking, you need to have a good understanding of your financial situation. Unless you have the money upfront, you’ll have to work with a licensed loan officer to determine if you even qualify and how much you qualify for. If there’s a black mark on your record, they can create a plan to help address those issues and get your credit in a bit better shape.
2) Does my credit score affect the interest rate?
Your credit score is a good indication of how well you’ve borrowed and paid back money in the past. This is why lenders use it as a benchmark to determine whether or not they want to offer you a home loan. If you have a poor credit score, lenders might not be so willing to trust you.
Imagine having a friend who asks to borrow $20 from different people in the neighborhood, but never pays anyone back. Eventually he’ll run out of people willing to help him, because word will get out he’s not good with the money previously lent to him. That’s how a credit report works.
Now, even if you have a great credit score, that doesn’t necessarily mean you’ll get a better interest rate, but you will likely be presented with many more options at your disposal than someone with a poor credit score. If you have a good score and some money to use as a down payment, you will have more loan options and be trusted with better offers.
3) Do I need to make a down payment?
The more a person is willing to put down on a house, the better their loan and rates will be in the future. But there is an option available for people who want 100% home financing. 100% home financing means a buyer won’t have to spend a single dollar of their own money on a down payment. The issuing bank will loan you the whole price of the house.
Other programs, like the USDA and/or VA, exist to assist buyers in getting approved for a 100% home loan. Speak with a local mortgage professional for more information.
4) How do I find a house to buy?
Once you have all your financial situation ready, it’s time to start shopping for your new home. To begin that process, it’s highly recommended to hire a local realtor to represent you. When you sit down with a realtor, be prepared with a list of all the amenities you want your home to have. Do you want extra land? A swimming pool? Is there a certain neighborhood or school district you want to stay in? Are there ones you want to avoid? A realtor will help you narrow down your options.
5) Can I find homes for sale only in my area?
When you hire a realtor, they will have access to all the homes for sale in the area through a database called the Multiple Listing Service, or MLS. Every real estate agent in the state lists their homes, photos, and relevant details in that database, making it easier to find exactly what you’re looking for. Only license realtors have access to it as well, so they will have more information about each listing than you’d find on a national real estate website.
6) When do I make my offer?
Once you find the house that suits your needs and fits the general price you can afford, then you can put up your offer. While it can seem like a good idea to take as much time as possible before making a decision, it’s imperative to make a fast offer. A lot of buyers who wait find themselves in a multi-offer situation where other buyers are interested and making higher offers, ultimately costing you thousands of extra dollars if you decide to up your offer.
7) What’s my next step?
Once you have everything situated, it’s a great time to review their current auto, home, and life insurance policies. With this new journey in life, you will want to be as responsible as possible by protecting the ones you love in case the worst happens. It’s the only way to be 100% protected. You may think affording insurance is difficult, but most places will offer bundled savings.
