By far, the biggest purchase most people will ever make in their lives is buying a house. The process is daunting to say the least, particularly for first time buyers. Here are some things to consider when buying a home to make the process easier. This is your checklist for buying a home.
- Have Your Credit Score in Order
The most important factor in determining whether or not you’re ready to buy a house is your credit score. Your FICO score will be the defining factor unless you are able to purchase the home with cash, which most people won’t be able to do.
Lenders generally won’t consider giving money to people with a credit score of less than 620. You certainly couldn’t buy luxury houses for sale in Los Angeles with a low credit score. Having a high credit score means that you have to pay less interest on the mortgage in the long run. Waiting until your credit score is above 760 could mean that you save thousands of dollars in repayments.
If you don’t have the best credit score right now you may want to wait and focus on building credit before buying a house.
- Assess Your Budget and Finances
If you’re looking to buy house Los Angeles then now would be the time to take a good look at your financial situation and budget. If you currently rent your home, then you should understand that owning a home will mean having to pay the costs currently covered by your landlord. You’ll have to pay for maintenance, property taxes, and Homeowner Association fees.
You should be conservative when looking for Los Angeles homes for sales. Lenders will encourage you to go above your means so that they make more money. Buy something below what you think you can afford to be on the safe side.
- Choose the Right Mortgage
You need to get the right mortgage before you can think about getting the right house. What kind of mortgage you get can change the size of your down-payment and overall interest rate. What mortgage you qualify for can change depending on the condition and location of the home and our own personal financial history.
Most people go with conventional loans. These loans call for a down payment of up to 20% of the value of the home. Some people may also qualify for federally-insured loans. These loans have smaller down payments and interest rates. If you’re an active or former member of the military you may be able to qualify for a VA loan.
- Understand How Much Money You Need
Down payments are just one part of the equation when it comes to how much cash you need to purchase a house. There’s also the closing costs to consider. These can cost between 1% and 3% of the value of the home.
Some places will also require you to pay prorated property taxes. Lenders may also ask you to provide proof that you can pay off the first few months of your mortgage ahead of time.
These extra costs are one reason why negotiation is so important. You may be able to negotiate with the seller that they cover some of the costs or make other concessions elsewhere. Don’t rely on that though. Be prepared to have to meet the financial demands no matter what. Don’t buy a home unless you know you can afford it.
- Get Pre-Approved For a Mortgage
The best thing to have on your side when buying Los Angeles homes for sale is a pre-approval letter. A lender will give you this as proof of how much money they are willing to lend you. It tells a buyer that you are serious about buying their home and also gives you an idea of how much home you can afford.
Having your finances in order before even starting to hunt for a home is worth it because that’s how you get pre-approved. The lender will assess your past, present, and future financial situation. You may even be able to borrow more than is outlined in the pre-approval letter in the end.
- Final Thoughts
There’s a lot that goes into the home buying process. It’s easy to be overwhelmed. Just take it all one step at a time and you’ll come out of it with the home you’ve always dreamed of having.