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Things to do before buying a house

Lining up all the ducks in row, August, 2017

Buying a house is one of the major financial decisions you would take in your life. Taking a informed decision is of utmost importance. Following tips will definitely help you line up your ducks in row for buying a house. One note of caution: Buying a house is NOT an investment but will help you in getting tax breaks.

  1. Decide on the area/school district:
  2. There are various factors you would need to consider before finalizing the area in which you would buy the house:

    • Which school district will the new house come under? This is important if you have/are planning to have children.
    • How accessible is the new house by public transport? Houses near train stations usually do not depreciate in price much.
    • How long will the commute be to work from the new place? Initially an hour's commute might sound ok when compared to the gorgeous house you buy; but later on it will be a big pain point.
    • Do you have family/friends around the new place? Having friends and family living around the area helps a lot. May it be get togethers, baby sitting help, help shovelling when you are on vacation etc.
    • Be sure to check the area stats and the crime rates in and around the area too. City-data offers a treasure trove of data related to this and more.(Link to crime rates website http://www.city-data.com/)

  3. Type of the house
  4. Next up, decide on the type of house you want to buy. It's a personal choice between independent houses, town houses, condos, co-ops etc. Make sure if the new house is a part of a home owner's association or has a monthly maintainence fees. These associated fees need to be considered as additional expenses on top of your mortgage payment.

  5. Attend open houses
  6. Always start your house search by attending open houses in the area of interest. You can find open houses on realty websites like Zillow, Trulia etc. You do not need to have a buyer's real estate agent to visit open houses. Attending open houses give you a feel about what you really want in the house. You can come up with a list of must haves and have nots in your future house. After attending a couple of open houses you will definitely have a good idea about the house price ranges in the desired neighborhood.

  7. Check that credit score
  8. Get a free credit report online ( link https://www.annualcreditreport.com) to get an idea about your current credit score. Your credit score will determine the interest rate you will get on your mortgage loan for buying a house. Try to repair your score if it's low. A good credit score will save you thousands of dollars over the life of the loan. See how to raise your credit score (internal link to another article) for better loan rates.

  9. Boost your savings:
  10. Make sure you have saved up enough cash to cover your downpayment and closing costs for buying a house. Higher the downpayment, better are your chances of getting a home loan from the bank. If you are planning to put down 20% of your house price as downpayment, roughly 5% of the house price is the associated closing cost. So your savings balance should be greater than 25% of the house price plus any emergency money. This is obviously if you are in better financial shape and want to save money on interest payments. You can still buy a house with lesser downpayment and closing costs enrolled into your mortgage if you do not have much savings. Remeber, amount loaned by the bank plus your downpayment(link to downpayment) should cover the house price plus associated closing costs(link to closing costs).

  11. Get a mortgage pre-approval:
  12. Once you get a fair idea about the houses and the price ranges in the desired neighborhood, it's time to get a pre-approval from a mortgage broker. We at lean mean mortgage (link to lean mean mortgage) can help you with this process and we do offer best mortgage rates in town. Getting pre-approved will help you know what amount the bank is willing to lend you to buy a house. It's always a good idea to submit an offer on a house with a pre-approval letter. A pre-approval letter also helps when you want to compete with another buyer for a home you love. One of the first things most sellers are going to ask their agent when receiving an offer is how qualified the buyer is to purchase. Sellers want to feel comfortable knowing the buyer is not going to get turned down for the loan.

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