Home Buying: A How to Guide

Buying a home is one of the biggest decisions you will make in your life. I’m not saying that to stress you out or dissuade you, but to level with you. It’s a big deal, and if you are at the point in your life where you are considering buying a home, then there are a few steps you should know before you buy. 

Let me be the first to say congratulations on this new chapter of your life, but I assume if you’re reading this article, then that means you may have some questions, and today I hope to answer a few of them. If you are interested in buying real estate in Mexico, please visit us on our website.

Find the Right Real Estate for you

First, you must decide if you are ready to own and not rent, next step is very simple: you have to find where you want to live. The right location is important on a number of levels. First, if this is an investment, you’re going to want to buy in a place with the biggest potential for appreciation. Moreover, you are going to want to live in this place for a long time, mortgages can be a 30-year contract you sign. It’s a big commitment. 

More important is finding a home you can afford. It’s a simple enough idea, but making sure is within your budget is very important, a good rule of thumb is that your total debt-to-income ratio should be between 20%-33%. This graph is a helpful guide.

Save for Closing Costs and Down Payment

Saving 20% for a down payment isn’t commonplace anymore, a lot of people don’t have that much liquid assets hanging around these days, so banks usually only expect a 5% down payment. Closing costs also usually run you about 2%-5% of the purchase price of the home. This can still be a very large sum, so it is important to start saving as early as you can.

Get Preapproved for a Loan

Once you have saved enough, it is time to start looking to get preapproved for a loan. They say it is good to make this step at least a year before you start house hunting, but it is never too early to start this process.

This will come in the form of a letter from your lender stating how much you are approved to spend on your home, depending on your income, debt, and credit score.

Obtain a Loan

Assuming you can’t buy your home purely out of pocket, you’ll need to get a loan from a bank or a different lending entity. Depending on your situation and what you qualify for, there are a number of different loans you can seek.

Conventional Loan

Conventional Loans are mortgages loaned out by private companies and not governmental agencies. Companies like Fanny May and Freddy Mac will loan you mortgages. This is the most common form of loan, and you can put as little as 3% down for this type of loan. This type of loan will require a very good credit score.

FHA Loan

FHA loans are backed by the Federal Housing Administration, which is under the jurisdiction of the Department of Housing and Urban Development. This agency essentially protects your lender in the event that you default on your loan. You will not need as high of a credit score to qualify for this type of loan, and the closing costs will be rolled into your loan rather than paying for it out of pocket.

VA Loan

VA loans for housing are the most popular type of loan for veterans and active military members. Much like the FHA loan, this type of loan is backed by the Veterans Affairs Department of our government which insures the lender. You must be a veteran, active military member, or a spouse/widow of a military member in order to qualify.

USDA Loan

USDA loans are backed by the Department of Agriculture. These loans are harder to qualify for, but if you fit the list of criteria, then you can put as little as 0% down on your house. In order to qualify for this loan, you must be a part of a low-income family, and the home you’re buying must be within a designated rural or suburban area. 

Find a Real Estate Agent

When buying a home, your real estate agent is a proxy for you in the home-buying process. They represent you and find homes that best highlight the things you want in real estate. It is not recommended to try and buy a home without one, especially if you are a first-time buyer. A real estate agent can keep you from overpaying for a property and help you submit a legally sound offer.

Find the Right Home

Once you have reached your budget and found the person who will help you find and buy a home, it’s time to go house hunting. It’s hard to know what the right house will be for you until you step foot in the right home. You open the door and see an empty room, but you get flooded with emotion as you envision your life in this room, the furniture, the parties, the family. Once you see it, you’ll know. Let us help by visiting our website.

How Does an Escrow Agent Help You Throughout this Process?

Similar to brokerage firms in that both are third-party entities that hold the funds, such as a deposit, and contracts until the offer for the home has been finalized and closed. It keeps both the buyer and seller from committing any fraud or shady dealings. 

Finally, Make an Offer

You did it, once you’ve gone through this long and arduous process, it’s time to make an offer to the seller. The offer letter must be submitted in writing and must include how much you’re willing to pay for the property and some personal details about yourself.
The seller can respond by rejecting the offer, giving a counteroffer, or accepting the offer. Negotiations may go on for a while, but this is where your real estate agent can really step in to help, so let them. Once they have accepted your offer, the home is yours, now it’s time to appraise, and hopefully, in the coming years, your house will only appreciate in value.