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Guide to Buying A New Home

Few things in life bring on more excitement or more stressful than buying a home. We all fantasize about our perfect home, whether it's the chef's kitchen, the master bedroom oasis or the fenced in yard for Fido, we all have a vision of our future home. It is easy to get swept up in to the fantasy of home buying, but the reality is that buying a home is a huge financial investment that should not be taken lightly or without doing your homework in advance.


Before you Buy 

1. Get Your Credit Right: Your credit score plays an important role in your ability to get approved for a loan and your interest rate.

    • 620 is usually the minimum lenders will accept
    • 620-680 - average
    • 680-740- very good
    • 740+ excellent

If your credit score is not in this range, take some time to get your credit score up.

2. Leave Your Money Alone: In the 3-6 months before you think about purchasing a home, do not make any big purchases or move large sums of money around. Lenders look for reliability.

3. Save, Save, Save: Save as much as you can, you want to erase as much of your debt (if not all of it) as possible which will put you in a better financial position and boost your credit score. You also want to save for your down payment and build an emergency fund. Experts recommend having 3 to 6 months of home costs as an emergency fund. Remember home costs include mortgage payments, property tax, homeowners insurance, etc.

4. Speaking of Down Payments…One of the biggest myths of purchasing a home is that you need to put down 20%, it is not a requirement. However, if you able to put 20% down you can avoid having to pay for private mortgage insurance (PMI). There are programs available to help you such as VA loans or for first time homebuyers. The average down payment is 10%.


Figure Out How Much You Can Afford

1. Your Budget: There are many sites online that will help you calculate how much you can spend on a home, but according to the experts, the standard calculation is based on calculating 36% of your gross income and that is the amount you can spend on housing.

2. Get Preapproved​: Purchasing a house is a huge financial investment and unless you are able to pay cash you are going to need a mortgage. A preapproval letter states that you are eligible to receive a loan, it is not a guarantee. Having a preapproval letter can put you head and shoulders above other potential buyers. Your offer will be looked at more favorably than one with financing contingencies.

3. Shop for a home: What neighborhood do you want to live in? Single family home or is a semi-detached home, okay? How many bedrooms? What style house? Ideally, we would all find our dream home in our dream neighborhood at a price we could afford, but unfortunately that is usually not the case. Go through your list and prioritize the things that are most important to you, so when you have to make sacrifices they won't feel as major and you will still be getting what is really important to you.

4. Find the Best Mortgage Rate: When applying for a mortgage remember that you are going to be paying it off for 15, 20, or 30 years. It is in your best interest to spend some time looking for the best rate that you can get. Even a few fractions of a percentage can make huge differences in terms of how much interest you are actually paying.

5. Prepare for Closing​: According to the experts, he average time it takes from making an offer to possession of the home is 43 days. At this time, you need to be prepared for closing costs which are on average 3%-5% of the home cost. Many people who have spent their savings on their down payment, will tend to use lender's points to finance their closing costs.


Tips

1. House-Hunting: Visit any home you are seriously considering at different days of the week and different times of the day. Check how things function in the home – how is it with the heat on?How do the showers run? Does the gas fireplace work? Take pictures and make notes of anything you notice that might not be as it should so you can discuss it with your realtor or the seller during the purchase process.The more time you spend vetting your future home, the more likely you are to know exactly what you are getting on closing day. 

2. Check Out the Neighborhood: Once you find the home that you like, check out the neighborhood at different times of the day and on different days so you can get a good idea of what the neighborhood is like. You might notice that a seemingly quiet neighborhood on a Sunday is preceded by a wild Saturday night!

3. Commute: Before you commit to a home, try your commute and decide if it is manageable.

4. Don't Just Buy with Your Heart: We want you to love your new home but remember this is a major financial commitment. Don't be blinded by upgraded appliances and pretty features. 

5. Get a Home Inspection

A home inspection might cost you a few hundred dollars, but it can reveal some major issues.These issues might cause you to change your mind about purchasing the home or allow you to get the purchase price down to cover repair costs.

6. Budget: If you are currently renting, you might be in for a bit of sticker shock for all the added costs that come with purchasing a home. Remember to budget for property tax, utilities, repairs, maintenance, HOA fees, and homeowners insurance. We recommend that you budget 1.5% of your total home's total purchase price for maintenance annually.

7. Join vipHomeLink: vipHomeLink helps make the overwhelming task of homeownership a whole lot easier and allows you to be the best homeowner you can be.

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