Buying House
A Property is probably the largest purchase you'll make in your lifetime
, so it's important to do it with full prudence. The purpose of this section is to walk you through the steps so you can be confident that you made the right decisions.
By following the steps outlined below, you'll be on your way to making a sound financial decision.
1.Decide whether to rent or buy your house
There are a few quick rules of thumb to consider before purchasing a house. The first is that if paying rent saves at least 35% over the costs of owning (mortgage, taxes, repairs, insurance, etc.), renting is usually the better option. The second is that it is usually not a good idea to buy a house that will be owned for less than about four years because the transaction costs of buying and selling are high. If the value of the house does not appreciate sufficiently between the purchase and the sale, the result will usually be a net loss (When calculating the costs of owning, you should also take note that the interest paid on a mortgage is tax-deductible; so be sure to calculate the after-tax costs of buying a home versus the after-tax costs of renting a home. If you have had credit problems in the past, it may be advisable to rent until your record is cleaned up before seeking a mortgage in order to keep rates down and increase the amount you can borrow.
Decide how much you want to spend
Another consideration is to make before purchasing a house is that most people can afford a house valued at roughly two and a half times their gross annual salary. Of course, this number varies widely depending on individual circumstances, and, of course, it is never a requirement to buy more house than you need. The estimate simply serves as a rough ceiling and should not be substituted for a careful analysis of income, expenses and investments. Many circumstances can push this estimate in either direction. If you have more money available for a down payment, you can afford a more expensive house because your mortgage will be smaller. Interest rates may also affect your decision. Low interest rates may encourage you to spend more on a house while high interest rates may limit the total that you can afford. Your lender will probably allow you to pay at most -25-30% of your gross salary toward your mortgage. At the same time, your monthly debt payments (car loan, credit cards, etc.) should not exceed 35-40% of your gross income.
2. Arrange for financing
The process of arranging for and receiving financing for home purchase is an ongoing one. It will continue simultaneously with many of the other steps listed here until the sale is closed .
3. Find houses that meet your criteria
There are many options available for finding a house to buy. The web can be a helpful resource, providing listings, search tools and photos, but, in the end, the internet will probably only supplement traditional methods like newspaper listings, agents and simply driving around potential neighbourhoods. One way to save some money is to find a home that is "for sale by owner" - provided that the asking price is reasonable. A lawyer will still be necessary to lay out the process and insure that nothing is overlooked, but many of the costs associated with working with a seller's agent will be eliminated.
4. Negotiate
When it comes time to make an offer, the goal is to determine the smallest amount that the seller will accept for the house. Buyers should begin the negotiating below this number so they can end up near it. However, initial offers should be high enough to be considered respectable so as not to frustrate the seller into moving on to other potential buyers. This process entails finding out if there are other interested buyers and learning how much similar houses in the area are worth based on recent sales. The current housing market will have a significant impact on the price because, in a market with high demand, a seller will be able to command a higher price. Negotiating an offer can also include concessions for repairs and other contingencies that may complicate the process. The details of making an offer can be left to an agent, but it is often in the buyer's best interest to stay as informed as possible to make sure that his or her interests are well-represented.
5. Buy it
Once the price has been agreed upon with the seller, an offer to purchase is drawn up. This offer is contingent upon the buyer obtaining a mortgage; it also grants the right to a home inspection and a walk-through inspection in the 24 hours before the closing. Any damage or other problems with the home that you discover during the inspection can usually be used to further negotiation on the price, or the seller can be asked to cover the costs of specific repairs..
The final step is the closing. After you complete the final walk-through inspection to make sure that everything is in working order, you will pay settlement charges and formally agree to repay the loan. The mortgage is signed, and a check is issued and then immediately exchanged for the deed to the house.
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by: JKG
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