TIPS FOR HOMEBUYERS
Buying or building a new house is a minefield full of “I didn’t know that’s.” From choosing the right home plan to qualifying for the best mortgage, you want to minimize the things you don’t know.
So let’s lower your “didn’t-know” ratio. With a shifting landscape of mortgage rates, variable down-payment priorities based on your local market, here’s what you’ll need to know about buying a home…
How much house can I afford?
‘How much house can I afford?’ should be the first question you ask yourself when starting the process.
A great rule of thumb that simplifies debt-to-ratio type calculations, is to consider three times your household income as a starting point.
So, if you and your spouse have a combined annual income of $110,000, most likely $330,000 is your price range, plus or minus a couple of percent. It’s a quick and easy way to determine what you should be able to afford.
But rather than guessing, you can simply take the first step — talking to a lender. This is why you get the mortgage first, and buy the home second.
What are current interest rates and how do I qualify?
Right now interest rates are fairly volatile. Many experts predicted rates to steadily rise throughout 2019 and 2020, yet so far 30-year mortgage rates aren’t far from where they were a year ago. At this point, it’s not completely clear where they’re headed over the next couple years but experts indicate that rates should remain steady at least through 2020.
For the time-being, it’s a buyer-friendly market with more of a “let’s do this sooner rather than later” type of feel to it.
What credit score do I need to buy a home?
A credit score of 620 is typically the minimum that mortgage lenders are looking for. However, some lenders will go as low as 580 or below.
An average credit score for today’s homebuyer is 620 to 680. Very good credit is 680 to 740, and if you’re over 740, you’re spotless!
How much money should I put down on a home?
While most people still think they need 20% down, the reality is that 3% down, 5% down are the ways people are buying homes nowadays. Ten percent down is the average in the nation right now. You don’t need 20% down to buy a home. It’s the biggest myth out there.
One exception might be if you’re in a very competitive real estate market. Offering more money down if you’re able to can make you more attractive as a buyer. Or if you’re able to cover the seller’s closing costs that’s a major feather in your cap in the eyes of the seller too. If somebody else has 10% and you’ve got 20, that’s going to be a factor. Listing agents will usually advise sellers to go with the buyer who has the most cash on the table.
If there’s a lot of homes for sale in the area and inventory is relatively high, you’re usually safe at 10% down or less, depending on your type of loan.
How long does it take to buy a home from start to finish?
The speed of the closing process has greatly improved in recent years.
Application-to-closing times are definitely shrinking and for the 12-month period ending in January 2019, average closing times for purchase and refinance loans combined were about 43 days on average. That’s according to Ellie Mae, a mortgage industry technology provider.
Once you have a house…
There are a lot of questions raised and things you need to know.
Electrical – What do I do when an electrical break has been tripped?
There are separate electric breakers inside the main circuit panel which control different sections of the home. Each of these breakers is labeled, showing you the part of the house each break controls. The breaker that has been tripped will be switched in a different position than all the others. This “tripped” breaker needs to be completely switched off and then switched back on to reset. If that for some reason does not work and the break will not stay in the on position, the breaker itself may need to be replaced.
Electrical – What if my outside outlets are not working?
The Ground Fault Circuit Interrupter (GFCI) has most likely been tripped. To reset it, locate the GFCI in nearest to the outlet, (usually found in the garage in newer homes), and push the reset button.
HVAC – Leaky drain line above a window dripping?
The drain line is the secondary drain line for your home’s air conditioning system. If the drain line is dripping, this usually means the primary drain line is clogged and it’s a signal to contact the air conditioning / HVAC company to come out and take a look.
House “Settling” – Why are there cracks in my walls and trim work?
Small cracks and separations are common signs of slight settlement of the framing and construction materials and are normal/expected with every new home. These cracks are commonly caused by expansion and contraction of building materials due to changes in moisture content and temperature. These types of cracks do not indicate a structural concern. Think about the land and dirt that was just bare months ago before your new home was built… now it has a big heavy house sitting on top of it. There’s going to be some settling for a period of time that MAY result in a few very small cracks here and there.
Smoke Detectors – Why are my smoke detectors beeping?
If there is no smoke or fire, it’s just time to replace the batteries. About every 24 months your smoke detector will let you know its batteries need to be replaced. The beeping is a reminder. Ideally you should replace smoke detector batteries every 12 months if you can.
Windows – My windows often have condensation on them.
Window condensation occurs when there is humidity in the home and the humidity comes in contact with the coldest area of the wall (usually the windows) and pulls moisture out of the air, causing the air to condense, trapping moisture between panes or on the inside (coldest side) of the window pane. This is a common occurrence in humid climates but newer grade windows have stronger moisture barriers and should hopefully decrease your odds of window condensation.