by Morgan G
Although we all wish we could escape the real world, at some point in our lives, most likely, we will be purchasing a home. Whether that’s buying a house, renting an apartment, leasing a condo, etc. Before purchasing a home, there are many things necessary to know in order to be financially prepared.
The first step to purchasing a home is deciding what type of housing best fits your lifestyle and what is most practical financially. Buying a home is an extremely large commitment. Before you are ready to purchase a home it is important you think about whether or not it's affordable and compatible with your lifestyle. Most of the time, buying a house will pay off financially, only if you live in it for five plus years. If you don’t think this is the right fit for you, there is nothing wrong with leasing or renting a home. A common misconception is the difference between leasing and renting. Generally, when you lease something it lasts for roughly 12 months, but when you rent something it is every month/30 day payments. It is important to be feasible financially as well. Buy a home that you can afford now, not that you can afford in a few years because money being made is not guaranteed. In order to do this, you could start by taking a look at your DTI ratio. This is your Debt-to-mortgage income. According to Investopida, “Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances. You need to be prepared for both the purchase and the ongoing expenses of a home.” Taking into consideration the affordability and proper living space is an essential part of picking out your first home.
Another important factor in purchasing a home is getting an approval for a mortgage. A mortgage is a “secured loan” used while financing property. A tip that isn’t necessary, but that would be helpful is to try and save 20% down payment for the mortgage. This would mean you don’t have to pay PMI insurance (mortgage insurance). You only need a mortgage when buying a house, not renting or leasing. That being said if you are renting or leasing an apartment, condominium, house, etc this step is not needed.
The next step while your mortgage is processing is finding the perfect home. Knowing location, price, space, etc are all extremely important factors. One thing you should do is find a real estate agent. These agents are trained professionals and help you buy rent and sell properties. They do this by becoming knowledgeable about their client’s wants and needs and with that, conducting walkthroughs, and providing assistance during the buying, renting, and leasing process. They will help you find a perfect home for your specific needs.
The final step of renting or leasing a home is signing your lease. Your lease is the contract between you and the landlord. It takes you through the certain conditions that have to be agreed upon in order to live on their property. This includes anything from the length of the tenants stay, and the regular amount due, to conditions of no pets. When you sign the lease that means you will abide by the rules and regulations. If this is broken, you can face immense penalties depending on the severity of the offense. When both parties (the tenant and landlord) sign the lease that means that the contract is considered bound and you are good to move in.
There are a few different final steps to purchasing a house depending on your specific process (because each one is different). Making an offer is the first step. Before this the lender will want to see a few different things. According to Rocket Mortgage, “Your lender won’t just want to see how much money you make. They’ll also want to see a work history (usually about 2 years) to make sure your income source is stable and reliable.” Just as we have been talking in class, they will also want to see your credit score. That being said, if your offer is accepted, you can move on. If your offer is rejected you can choose to make a different offer or move on to another house. The seller can also come up with a counter offer. They could change the purchase price or terms of the offer. You may negotiate for a long time. It all is dependent upon the seller. A non necessary step, but a great tip once your offer is accepted is to get a home inspection. This is where there will be a walkthrough of the home to check if there are any problems. Whether it’s a simple clogged sink, or a more serious electrical issue.
The last couple steps of purchasing a home is getting a home appraisal and closing on your new house. Starting off with a home appraisal. A home appraisal is an evaluation of the current price and value of the property you are buying. The reason lenders have to do this is because they aren’t allowed to lend out more money than the home is worth. Roughly three days before your specific closing date, your lender will give you a closing disclosure. This outlines the final terms, conditions, and final cost of the mortgage. After you go to one final meeting with your lender you’ll sign a final settlement statement, and the house is all yours.
Every process of buying, leasing, and renting a home is different. Therefore all of the information I provided isn’t all that you need to know while figuring out a home, but it is a great baseline. I hope this helped you to gain an understanding of information that will be useful in your future home buying.
Works Cited
“Buying A House In 2021: A Step-By-Step How-To.” Rocket Mortgage, www.rocketmortgage.com/learn/how-to-buy-a-house.
Fontinelle, Amy. “First-Time Homebuyer's Guide.” Investopedia, Investopedia, 21 Mar. 2021, www.investopedia.com/updates/first-time-home-buyer/.
Marie, Jenna. “The Advantages of Leasing a House.” Home Guides | SF Gate, 17 Nov. 2020, homeguides.sfgate.com/advantages-leasing-house-55647.html#:~:text=Leasing a home requires only,requires a substantial down payment.
Payne, Kevin. “What Does A Real Estate Agent Do?” Rocket Homes, Rocket Homes, 17 Mar. 2021, www.rockethomes.com/blog/home-buying/real-estate-agent-do.
“What Is A Mortgage? The Basics For Beginners.” What Is A Mortgage? The Basics For Beginners | Rocket Mortgage, www.rocketmortgage.com/learn/what-is-a-mortgage#:~:text=A mortgage is a type of loan that's used to,that they stop making payments.
