Buying a home is a major investment and likely one of the largest purchases you’ll make in your life. As such, it’s important to take the process step-by-step. This will ensure you find the property that meets your needs and the loan product that fits your budget. The following guide, with lots of tips for buying a new home, will help you get started on the right track to finding your dream property.
Tips for Buying a New Home – Getting Started
Before you start looking at houses, it’s important to know where you are, from a financial standpoint. This means securing a copy of your credit report, checking it for accuracy, and contesting any incorrect information. Credit Karma provides a free report that can help you evaluate how much debt you have, whether that’s through car loans, credit cards, or other creditors.
Ideally, mortgage lenders want to see you have a comfortable debt-to-income ratio to ensure you can afford a house payment on top of your other bills. They also want to see you use your credit wisely. Using less than 30 percent of your available credit is the goal. For example, if you have a card with a £2,000 limit, you don’t want to have more than a £600 balance.
Talking to a Mortgage Lender
Meet with a mortgage lender before you start looking at houses. The lender can evaluate your finances and give you an idea about how much you can afford. They’ll take into consideration your debt, your credit, and your income. They may tell you it’s in your best interest to pay off some debt or save some money before house-shopping.
If you’re already in good financial shape, a lender can give you a letter of pre-approval. This tells sellers that you already have the bank’s approval for your loan. However, keep in mind that even if your lender tells you you qualify for a £400,000 mortgage, this does not mean you have to use all £400,000. Determine what you’re comfortable spending before you start looking.
While making arrangements for a mortgage, discuss whether paying points on the loan will work for you. Paying mortgage points will help you get a lower interest rate. However, whether this is worth doing will depend on how long you expect to live in the home. Use an online tool (such as a mortgage affordability calculator) to get a better idea of whether this is something you’d like to explore.
Start checking out online estate agent search sites to get a feel for the types of new and resale homes available in your location of choice in your price range. Online tools allow you to search by neighbourhood, post code, or school catchment area. You can also search within specific price ranges and search only properties that meet your preferences. For instance, the number of bedrooms, square footage, or if the home has a garden or garage. You can also secure an estate agent to help you find properties that meet your criteria. Agents may have an inside track on available properties that have not yet gone on the market.
Making an Offer
An agent can be useful in communicating with the seller’s agent, or with a home builder if you’re buying new. They can advise you on what to offer, how much to provide as a security deposit, draw up offers and counter-offers. If your offer is accepted, an agent will help you take care of property inspection and finalising the sale of the house.
If you’re simultaneously selling another property, an agent can also help you coordinate that sale, as well. According to Moving.com, if you need a place to stay between when one home sells and another closes, consider sublets, corporate housing, or long-term stay hotels.
Financing Your Home
A lender will be able to walk you through all of your options and let you know if there are special loan packages you qualify for. For example, if you’re buying in a rural area, are a military veteran, or are buying a home for the first time, you might qualify for certain deals, such as little or no money down.
You can also choose between a fixed-rate conventional mortgage and an adjustable-rate mortgage. Fixed-rate sets your interest for the life of a loan; an adjustable rate varies by a certain percentage in line with the index rate. The loan that’s best for you will depend on how much money you’re putting down — some loans require up to 20 percent — and how long you plan to keep the property.
More help and tips for buying a new home
Finding and buying the right home can be both exciting and sometimes stressful, particularly with COVID-19 restrictions in place. Many sellers offer virtual home tours and socially distanced open houses. These help ensure prospective buyers can see a property and still remain safe.
If you enjoyed this article, you might also find the following helpful:
- Tools for house hunting while socially distancing
- How to make your moving day super easy
- The ultimate new home move in checklist
- Why you should declutter before moving house
This guest post was written by Katie Conroy.
Katie is the creator of Advice Mine. She enjoys writing about lifestyle topics and created the website to share advice she has learned through experience, education and research.