Table of Contents Hide
- How Can a Beginner Buy a House?
- How Much Do You Need to Earn Before Buying a House?
- What Credit Score Do I Need to Buy a House in 2021?
- Can You Buy a House with a Credit Score of 500?
- Step by Step Guide on How to Buy a House in 2021
- Step 1: Find your Dream House
- Step 2: Figure Out What You Can Afford
- Step 3: Choose a Mortgage Lender
- Step 4: Get Pre-approved for a Mortgage
- Step 5: Create a List of Pros and Cons
- Step 6: Pros of Buying a Home
- Step 7: Cons of Buying a Home
- Step 8: Make an Offer
- Step 9: Work with an Expert Real Estate Agent
Buying a house is one of the biggest decisions you will make. And it can be nerve-wracking to figure out all the steps.
You might not know what to do first, how to find a home inspector, or how much you should offer on your dream house. So where do you start?
You want to make sure that you are doing everything correctly because the process of buying a house is complex and time-consuming.
From understanding your mortgage options to understand down payments to setting up an effective staging process.
How Can a Beginner Buy a House?
Most people say that if you love a home and you will make an offer, you should get it.
Here are the steps you will need to follow to purchase a home. Start by contacting your Realtor or looking at the listings in your area.
You might be familiar with some people who work for your Realtor. Or you could ask your friends and family for help. But having a Realtor will be essential for making an excellent offer.
Many agents get paid only if their clients get the homes they are listing. They have to make sure the offer is fair.
What is a reasonable offer?
For your next home, you may have several options. You can buy a house or an apartment. You can pay with cash, or put down a larger percentage of the price of the home.
How Much Do You Need to Earn Before Buying a House?
Understanding the mortgage options There are two main types of mortgage: fixed rate and variable rate.
A fixed-rate mortgage has a set interest rate, which means your payments will not change regardless of interest rates.
However, with a variable-rate mortgage, you’ll have the option to switch your loan at any time.
A mortgage broker can help you determine the most cost-effective way for you to buy a home and explain your options for either fixed or variable rates. (Note: Not all mortgage brokers offer free mortgage advice).
Setting up an effective staging process Staging a home is part of the home buying process that helps you determine if you are buying the right house or not.
A good staging professional can help you with this process and more.
What Credit Score Do I Need to Buy a House in 2021?
You don’t need perfect credit to get approved for a home loan. In fact, it’s more important to be financially stable with your income than to have perfect credit.
With that said, there are certain credit score requirements that you should be aware of when applying for a mortgage.
The following explains the factors that lenders use to evaluate applicants. Borrowers need good credit scores to qualify for a mortgage, you’ll need to show that you have a certain credit score.
We can calculate this score based on your credit history, payment history, and debt load.
If you are applying for a loan through a bank, the lender will typically look at your FICO score. The FICO score is an “industry standard” score that most lenders use.
Can You Buy a House with a Credit Score of 500?
The first thing you should do is use a credit score checker to see how well you are doing on your credit report.
It’s important to pay your bills on time, and always try to keep credit card balances under 35% of your credit limit.
After using a credit score checker, you should sit down with a copy of your credit report. You can get one free copy of your credit report annually from each of the three credit bureaus.
Under the summary, you should see your open credit card accounts, new credit lines, and debt and current credit balances.
The key point to pay attention to are Your credit utilization ratio. When your credit utilization ratio is over 30% or below 30%, it means that you are using more of your credit than you have available to you.
Step by Step Guide on How to Buy a House in 2021
To buy a house is not a very simple procedure, you need to follow steps to avoid being lost in the process.
Below are 9 steps that you would want to consider before buying a house.
Step 1: Find your Dream House
Buyers usually cannot discover their dream home by simply driving around the block and seeing it in person. If that’s the case, then you need to act fast.
Your first step is to check the latest housing prices in your area. Then, you can explore different avenues for getting an accurate idea of the property.
For instance, you could make an appointment with a realtor and see which houses have sold recently. Or you could schedule an open house yourself, where potential buyers will see the house for themselves.
Before you go out and start house hunting, however, you need to find out the percentage of time you’re willing to spend on the house hunt.
Some people can’t wait for an answer on their housing situation, while others take their time.
Step 2: Figure Out What You Can Afford
One of the best things you can do is figure out what your budget looks like. Although no two buyers are exactly the same, we can help you determine how much you can afford.
In order to do that, you will need to list all your assets and financial information, including cash, your IRA, your 401(k), and any other accounts you have access to.
You should also find out how much of a down payment you are comfortable with. Most lenders will require at least 5% of the purchase price to be put down.
If you have savings, you might qualify for a 3% down payment. If not, you will want to see if there are any co-signers on the loan that will help make up the difference.
Step 3: Choose a Mortgage Lender
If you have never bought a home before, you will need to find a mortgage lender.
The easiest way to find a good one is to start by finding your broker, if you are working with a real estate agent. Find your broker and take him or her to lunch and ask him or her to recommend a lender.
Many mortgage lenders don’t need to do any paperwork upfront, which will simplify things. Some real estate agents also will have a mortgage broker that you can talk to.
Find the right property. Many people don’t realize that you need to find a house with at least three bedrooms, on a decent-sized lot, and in a good school district.
This might sound simple, but keep in mind that the more bedrooms you have, the more furniture you have to buy.
Step 4: Get Pre-approved for a Mortgage
Start by first visiting with your lender. Visit with a lender to gather all the required paperwork. The lender will ask you to fill out the application and it may ask you to get some money together before you can get approved.
All money you have or save will be accounted for during the mortgage process.
Get pre-approved for a mortgage. You can usually get pre-approved for a mortgage with a couple of days, or so you can make an offer.
Get a home inspection. Before you put a bid on a house, you should have an inspection done. You want to know about any potential problems before you put in an offer.
If your credit score is low and you want to take out a loan for the down payment, you may have to qualify for a loan that is fixed at the current rate of interest.
Step 5: Create a List of Pros and Cons
To get a clearer picture of what you should do, it is a good idea to take the time to discuss your dreams and concerns.
Do you want to have an urban home, a suburban home or a farmhouse? Which bedroom and which bathroom are you going to use the most?
Decide on your first steps.
Once you have chosen your first step, think about the questions you should ask a real estate agent when you are first talking to them about buying a house.
Here are a few of the questions you should think about: How can we make our first meeting less awkward? What kind of home do you recommend we look at?
Will you show me one of these homes this week? Do you have a particular budget in mind? How do you suggest I set up a budget? Who can I ask for any extra help?
Step 6: Pros of Buying a Home
There are several reasons homeownership is an ideal financial and lifestyle move.
Let’s look at a few of the reasons homeownership might be an excellent choice for you:
You don’t need to pay rent.
The average rent for a two-bedroom apartment in America is approximately $1,300 a month. That’s a pretty sizeable chunk of your cash that’s not being invested into your future.
A mortgage can help you create an emergency fund, and you can use a portion of your monthly income to pay off your loan.
You can control the pace of home price appreciation and you might even be able to keep your house for years. As interest rates rise, your home equity will earn more money.
Keep your home if you buy it with a mortgage. So, owning a home allows you to live in your dream home for as long as you would like.
Step 7: Cons of Buying a Home
One of the most significant disadvantages of buying a home is the expense and time to get one. Most prospective homebuyers spend a lot of time researching homes online and checking out neighborhoods.
Pros of buying a home.
Buying a home is the only option to buy a home. Your decision might be difficult, but it will be rewarding to know that you have a place to call your own.
You will have a space that you can decorate with a personal touch. It will also offer you a way to keep a lifelong connection with your parents and friends.
In the beginning, your family will support you and will work with you to get you a mortgage.
You will have the freedom to set up rules and other aspects of your home and you can enjoy the knowledge that you made a sound decision.
Step 8: Make an Offer
First, make an offer. This step is often a last resort. The lender might not accept your offer and you could miss out on the house of your dreams.
After you make an offer, it is important to know what you can afford. If you have all the cash for the purchase, you can do this the way most people do. If you have some obstacles, it’s not the best idea to rely on cash alone.
Use a mortgage calculator to calculate what your monthly payment would be if you have the income of an average employee.
Then, you need to understand the mortgage option that works best for your budget. Asking for a price reduction or renegotiating your offer if it’s too high might be a good option.
Step 9: Work with an Expert Real Estate Agent
Purchasing a home is not as easy as buying a used car and calling it good. That means, you want to hire someone who will make sure that you understand all of your options and what to expect as a new homeowner.
Here are a few tips from the experts that will help you find a great real estate agent:
Set expectations upfront
One of the first things you should do as a homeowner is sit down with your real estate agent and get a real estate agent agreement.
This document sets expectations, like how much you should pay for a home and how many inspections you will need. Make sure that you have a detailed list of questions about the neighbourhood, school district, and local crime rate.
And, make sure that you and your real estate agent agree about a realistic timeframe for purchasing a home.
Whether you are purchasing a home for the first time or refinancing, an experienced agent can help you make a good decision.
Sign up for The Payoff — your weekly crash course on how to live your best financial life.
Additionally, for all your burning money questions, check out Mic’s credit, savings, career, investing and health care hubs for more information — that pays off.
You need to have a credit score of 600 or higher.
It will definitely be hard but not impossible
To get a house of that amount, you should be able to earn 250 000 dollars a year.
It does help to increase to credit score after a month or two
Getting such a credit score might take some months or even years.