Working toward home ownership
Owning your first home is probably one of the most exciting things you can do. Working toward home ownership however, is hard work. Qualifying for a loan in and of itself, in this economy is probably one of the hardest things to do. So what are the steps toward home ownership and is it worth the effort?
Step 1: Determine Affordability
The first thing you have to do before even being pre-qualified to buy is to determine what you can afford to pay. There are several loan officers out there that can get you pre-qualified for a home that is way over your budget so it's important to sit down with a financial consultant or mortgage broker so you can weigh your current debt against your income and savings. Things such as how much you can use as a down payment, closing costs, and other expenses will all come into play when working toward home ownership. Generally speaking, lenders are looking for a down payment of at least five to twenty percent of the purchase price.
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Step 2: Pre-approval
Many potential home buyers will wait until they have found a house to buy before they apply for the loan. While this is ok, it is actually in your best interest to apply for the loan ahead of time to see how much you will qualify for. Pre-approval means that you will meet with a lender and go over your credit history, which can then help them qualify you for a certain amount of money. While this is not your "final loan commitment" it demonstrates your borrowing power and helps the home owner know that you are ready to get the ball rolling.
Step 3: Find a home
After you have been pre-approved for a loan you can go out and start looking for homes that will fit you and your family's lifestyle. In fact you may already be looking at some potential homes that fit with you. Some things to look for when looking at so many homes are:
- Square footage inside the home and the lot size
- How many bedrooms and bathrooms you need
- Whether or not you want to buy an old or new home. Older homes will most likely require some remodeling while new ones can usually be "live in" ready.
- The neighborhood. If you have children this is especially important. What is the crime rate, how are the schools, etc.
Step 4: Make an offer & close
Most offers, whether you are working with a realtor of if you're buying through the owners will require a written contract. You will usually make an offer to the seller and they will counter offer your offer. This process continues until an agreement is made on the price of the home. Once an agreement is made you will then work through the closing procedures; escrow fees, down payments, origination fees, title insurance, and many other documents.
Is it worth it?
There are several benefits of owning a home. For most the biggest benefit is peace of mind. When you buy a home you are usually planning to live in it for at least 5 years or more. There is a sense of stability. There is also a sense of pride as owning your own home provides you with options not available to rental and lease options. More and more people are working toward home ownership because of the prospects for the future. You will have to decide for yourself.
