With mortgage rates at an all time high and house prices on the rise, many Americans are interested in buying a home in 2021. However, the process of buying a home can seem quite daunting – lenders will check. your credit score, you will need a pre-approval letter, a lot of your personal information will be disclosed, and you will be making extremely important financial decisions.
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Think of the points below as a buying guide for homes in 2021. If you’re a first-time buyer ready to own a home, here are eight steps you’ll need to take if you’re just getting started.
8 steps to buying a house in 2021:
1. Save for a down payment
When you get ready to buy a home, most lenders will ask you to put down a 20% down payment. If you are not able to save that much money, it is still possible to buy a house. For example, FHA loans allow you to buy a house with only a 3.5% down payment.
But if you can’t save 20% of the funds, you will likely need to purchase private mortgage insurance (PMI), which protects your lender if you stop making your payments. So it’s a good idea to spend some time saving for your down payment.
2. Get your credit score to at least 620
It is common knowledge that you must have a good credit rating if you are to qualify for the best rates on a mortgage loan. However, a perfect credit score is not a requirement for buying a home.
If you’ve had trouble with your credit in the past, try to get a score of at least 620. You can do this by paying your bills on time, lowering your debt ratio, and avoiding taking on new ones. lines of credit. waiting.
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If you are unsure of your credit score, visit Credible to check your score without affecting it negatively.
3. Determine how much you are willing to spend
Before you start looking for a home, it’s important to determine how much you can afford. You can use this online mortgage calculator to determine your potential monthly payments.
However, buying a home isn’t just about your monthly mortgage payments. You should also factor in homeowner association dues, maintenance costs, and utilities.
4. Shop around for homes in your price range
Now that you know the type of home you can afford, you can start looking for homes that match your price range. Spend some time thinking about what must-have features you want the house to have. That way, you’ll be ready to act quickly once you find your perfect home.
5. Get pre-approved for a mortgage and lock in your rate
Shopping for the house itself is the fun part, but shopping for your mortgage lender is arguably the most important. Your lender will determine the type of rate and repayment terms you will receive on your mortgage.
It’s a good idea to apply to multiple lenders so you can see who is offering you the best rates. If you use a mortgage broker like Credible, you can get personalized offers from multiple lenders without affecting your credit score.
6. Make an offer on the house you want
Once you’ve found a home you want to buy, it’s time to make an offer. You need to work closely with your real estate agent throughout this process to ensure that your offer is competitive and has the best chance of being accepted in a bidding war.
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After the seller accepts your offer, you may need to make a deposit. This is a down payment you put on the house, and you may be able to apply that money towards your final closing costs.
7. Get your home inspected and assessed.
Before you can buy the home, you need to have it inspected and appraised by a real estate appraiser to make sure there are no issues with the property. A professional home inspector will check the foundation and be on the lookout for any mechanical or structural issues that may require home improvements.
An appraisal verifies that the house is worth the price the seller is asking for. The appraiser will check the house and compare it to similar houses on the market.
8. Close your house
The day you’ve been waiting for has finally arrived – it’s time to close your new home. Before closing your home, take the time to review your closing statement and review your closing costs.
On the day of closing, you will take a final guided tour of the property, sign the documents and pay your closing costs. From there you will receive the keys to your new home.
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The bottom line
The more informed you are about the home buying process once you are ready to buy, the less stressful it will be overall. From pre-approval of the mortgage loan to determining your loan amount to home insurance, various steps are required, from the simplest to the most complex.
Working with a real estate agent and qualified mortgage lender will help you feel more confident in your buying decisions. Be sure to visit Credible to get in touch with experienced loan officers who can answer all of your questions.
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.