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A house is a big-ticket purchase, and it’s understandable why many need to prepare themselves before acquiring one. You can’t just buy a home without a thorough inspection since you will want to get the home of your dreams at a lower price. While the supply of cheap houses is hardly abundant, you still have a chance to get lower closing costs and down payment. And so, in this article, we will tackle some tips so you can afford the home you want.
#1. Choose a low-down-payment mortgage.
Government-backed housing loans such as (the Department of Veteran Affairs) VA and (the Department of Agriculture) USDA can help you get your dream home but come with requirements that you may not qualify for. But even if you’re not eligible for these, you can still get a home with the lowest down payment of 3%.
Unlike the first two loan variants mentioned, the (Federal Housing Administration) FHA loan option can be given to individuals with lower credit scores. With this loan, you can qualify for a 3.5% down payment if you have a credit score of 580 and above, but it would be even better if you have a favorable FICO score.
Loans from Freddie Mac and Fannie Mae and those with as low as 3% are available for credit scores 620 and more. Lenders offering these loans are not looking for a minimum contribution from the borrowers, so you don’t have to pay closing costs or the down payment out of pocket.
Also, if you qualify for financial assistance, you can use it to pay upfront fees.
#2. Learn About The VA OTC Loans
Veterans can afford housing through the United States Department of Veterans Affairs. This agency is also offering the VA One-Time Close Construction Loan which gives veterans access to cash so they may purchase land and build their property. Lenders can approve the loan even with a low credit score, they don’t require a down payment, and borrowers are exempt from paying private mortgage insurance. You can learn more about VA OTC loans from lenders like Security America Mortgage.
#3. Get Loan Approval First
Before looking for your ideal home, you can get preapproved for mortgages first. It allows the lender to see if you can afford to repay it. It gives them confidence that a preapproval process will allow them a glimpse if you will be a good borrower or not.
Preapproval also allows the lender to view your credit score and check to see if there are no errors. That could mean getting a more favorable interest rate. Check out securityamericamortgage.com to inquire about its requirements and be approved for a loan.
#4. Beware Of The Salespeople’s Motives
While buying a home, you will likely deal with a mortgage banker and a realtor. These are the salespeople that you should be wary of. Paying less money for a house means they won’t make money. They could get you to break the secret rule, which means a quarter of your income should be prepared for housing every month. It is a fact from an expert, but salespeople would say that only a third of your income should go to housing costs.
Also, be wary of your calculations because you might be paying for other loans such as medical bills and car payments. And if you have a specific number of dependents, you need to be sure that about 70% of your income will cover your expenses. Consider all of these and your emergency expenses when budgeting your home buying costs.
#5. Look Into The Age And The Condition Of Appliances
If you’re a first-time homebuyer, your considerations should also include the expense of making replacements and repairs in the home, especially if the homeowner is selling their home as-is. These may include major appliances, electrical connections, flooring, HVAC systems, etc. The costs of moving for the first year can likely reach around USD$12,000.
It’s essential to learn everything about real estate transactions before agreeing to come along for a property tour. To avoid becoming blinded by impractical things that might entice you to a potential home, keep your finances in check and be realistic. If you can, develop a financial strategy before setting up a meeting with a real estate agent.
Also, be realistic about finding a perfect home because there may only be a few or none like those. Older homes rarely have everything new in them as well. So, if you are thinking about buying a dream home, you need to realize that lowering expectations could save you more trouble.
#6. Offer More Earnest Money
Earnest money is also known as a good faith deposit. Sellers usually require buyers to give earnest money to begin the escrow process – a procedure where a third party holds the money in a dedicated account for a certain period until the fulfillment of the purchase agreement. It is to show the seller that they are interested in the house. The funds are then added to your down payment once the escrow ends. You can also use it for the closing costs or get the money back instead.
The earnest money can amount to up to 3% of the property’s purchase price. Sellers would sometimes ask for earnest money up to 10% of the property price when many buyers are interested in the home.
But you can also offer more good faith deposits if it is necessary. It can help your offer stand out among the other buyers. But don’t force your way in if you don’t have enough money to do this. You can stop your search in the meantime and wait until you have enough.
Buying a home is a large purchase that you should carefully consider. Fortunately, the mentioned ways can save you thousands of dollars. Think of the above considerations before saying yes to a property. Even if you have saved up for a home, you should also think about unexpected costs and having enough for emergency cases. A house purchase doesn’t have to be daunting if you have a clear plan for buying an affordable home.