The Basics of Home Ownership

Posted by Jarrod on July 10, 2012

I recently got on Twitter to ask my followers what they would like me to talk about next. One friend told me they wanted to know about home ownership. That is a very broad subject so I’ll start with the basics of owning a home. 

Here are the basics on home ownership for the first time home buyer. It’s the first article in the series about owning a home. After I cover the basics, I’ll be back to expand on each one of these and give you some tips on how to get houses without even getting a loan!

Here are 5 things to do when you are planning to buy a house.

Basics of Home Ownership

  1. Get your credit score and reports. It sounds pretty basic, but some people don’t realize how important this step is. There are things on your credit report that can be outdated, erroneous, or just plain fraudulent. You want to take care of these things ahead of time so that you don’t start your loan process and get close to closing only to find out that you owe Visa $26 and you can’t get your loan. Here is a great post on how to get your credit report for free. In the future I’ll tell you some additional places to get your credit score for free. And they are pretty accurate. They’ve been talked about on My Dollar Plan before.
  2. Get Prequalified. Don’t go find your dream house only to find out later you can’t afford it. Review mortgage rates and get prequalified. Getting prequalified also puts you in a position to negotiate better. If you have a person ready to sell and you can close quickly, you look a lot more attractive than that person that still has to go get a loan. It’s a bargaining chip that you really need. Even though I suggest getting prequalified there are some ways around the bank. In a future post, I’ll show you some ways to buy a house without using your credit. This is especially helpful for people who are self employed and it’s harder to go through a bank.
  3. Know what you want before you start. Again seems pretty basic but people get overwhelmed by the pressures of buying a home. When a friend asks me about buying a house, I ask them, “Where do you want to live?”  They’re response is, “I don’t know.”   Even in my small city that will be a problem narrowing down where you want to live. My suggestion is find two or three neighborhoods that you really like. Then write out a list of things you will not settle on when you are looking for a house. A Realtors job is to show houses and give suggestions. Help them do a great job of knowing what you want ahead of time. They won’t waste your time by having them show you a bunch of houses that you don’t want. Also, because some Realtors are just sales people they will show you houses that don’t fit your criteria, which is also a waste of time. By knowing what you want you can keep them on task.
  4. Start packing now. There is nothing worse than for you to be ready to close and then have to pack. What could be a very systematic process can be a mad dash if you aren’t ready. If you know you are going to buy a house and you are going to move, go ahead and pack. Save yourself the trouble later. Plus exercising your faith isn’t bad thing.
  5. Budget Properly. When you step into a new home there are new things you never anticipate happening. Make sure you set-up an emergency fund for home maintenance issues. Going from apartment rent to a house note can be cheaper, but you have a trade off. You don’t have a maintenance guy at our beck and call to fix everything.

Tune in next time as I break down each of these 5 tips into a little more detail. I’ll also be giving tips on how to get free money for down payments. And tips on how to get that vacant dream house you’ve been eyeing but hasn’t been put on the market yet.

More on Home Ownership





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Comments to The Basics of Home Ownership

  1. A couple things I learned when buying my house were that I could get prequalified for a lot more than I actually wanted to pay and that the monthly costs are more than just your bank payment each month. The bank was willing to finance me about twice what I actually wanted, so definitely have an idea of what you want to pay based on your personal budget in mind before talking with a banker and realtor – also if you have a monthly payment in mind, recognize that when tyring to back out from there what the outstanding loan will be that you will probably have some escrow components as well. When I bought and moved into my house, I thought my monthly expenses would actually go down a lot based on what my monthly payment to the bank was supposed to be relative to my old apmt bill. I had an emergency fund for big repairs, but I hadn’t adequately factored in other increased monthly costs: significantly higher electric bill (to cool twice the sq ft of my apmt), a pest control plan, a water/trash bill. These things quickly ate up the delta between my old apmt rate and my monthly mortgage payment.

    Rebecca

  2. I would add that it’s really important to know how much you can afford to spend on your house. When you get pre-qualified for a loan, the bank will tell you how much you can afford but that often is more than what you can really afford because they use a formula based on a percentage of your income. You should base your number on your expenses and what you feel comfortable with. Keep in mind, you’ll also be paying for taxes, insurance, and maintenance so you should include those in the monthly cost of owning a home.

    Also, it’s important to decide how much to pay for down-payment and understand what a mortgage is and how it works. There’s also the closing costs. You really need to do your homework so you know what you’re getting into!

    Linda

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