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What should I prioritize before buying a home?
There are several steps to take prior to purchasing your new home. It may feel like a slow process at first, but after you select your new home things will speed up.
The First Steps to Homeownership:
- Save money – Not just for your down payment, but also to cover closing costs.
- Get a credit check – Know where you stand financially.
- Get pre-qualified for a loan – This paperwork will allow you to make serious offers on a home.
You should check your credit as early in the process as possible, as there are frequently errors that may take time to correct. Errors on your credit score could cost you thousands of dollars in the home buying process, even if you are still able to be pre-approved, so it is in your best interest to check your credit early and monitor it throughout your home purchase. Getting pre-qualified shows how much a lender will loan you, helping you know exactly how much you can afford.
How much will I be able to afford?
The pre-qualification process lets you know exactly how much you can afford, as well as the amount of your monthly mortgage payments. A typical recommendation from financial experts is to try to spend no more than 35% of your pre-tax income on housing expenditures each month. When calculating this percentage, don’t forget to factor in additional expenses, such as closing costs, your saved down payment, any future homeowners’ association fees, as well as regular maintenance and general upkeep costs. Including all of these costs in your budget when looking at homes will ensure you are able to comfortably set a price range and shop around Charleston without any financial worries.
Why should I buy instead of rent?
When you rent a home or apartment, your monthly rent doesn’t build any equity. When you own your home, each monthly mortgage payment builds equity towards your home. As your equity grows, your home’s value does as well! Owning a home also allows you to customize your living space as much or as little as you wish without having to request approval from a landlord.
How do I choose the best mortgage loan?
Without experience, choosing from the many different types of loans can be daunting. It’s best to start by considering the answer to these questions:
- Do you plan for your financial situation to stay the same for at least a few years?
- How long are you planning to live in this home or own this home?
- Are you intimidated by the thought of your mortgage payment changing month-to-month?
- When do you want to be free from your mortgage debt?
- Are you planning other major financial expenses, such as helping your kid(s) through college, purchasing a second home, or saving a significant portion of your income for retirement?
Having an idea of the answers to these questions can help your mortgage lender give you options that are right for you and your lifestyle.
What should I know when deciding my future community?
The city of Charleston, as well as the surrounding areas, is a combination of available and varied city amenities surrounded by historic charm. If you have a family, make sure to pay attention to the schools surrounding your future neighborhood, as well as local parks. If you work, focus on how each neighborhood will affect your commute. If you love the unique feeling of being surrounded by people and activities, perhaps living downtown would be a perfect fit for you.
How can I confidently make a good offer on a home?
Each member of the Riverland Realty real estate team is experienced and prepared to guide you through placing your offer. We will leverage data of other comparable homes that have sold in the nearby area to help you negotiate the best possible price.
What is Pre-Approval?
Why do People Need Pre-Approval?
Homeowners tend to need pre-approval for numerous and varying reasons. The main reason pre-approval is important is because it indicates with certainty how much the future homeowner is able to spend. Since a house can only be purchased with the amount of money (or loans) available, home buyers have to know how much money they have to work with. When it comes time to make an offer on a home, sellers prefer when buyers have documentation of pre-approval to show their offer is legitimate. Without the pre-approval letter, the seller will not think that the offer is serious. In addition, any home owned by a bank also requires loan pre-approval documentation before any offers will be accepted.
What Do Buyers Need to get Pre-Approved?
Step one is always visiting a lender. Lenders typically ask that potential buyers bring their W2 forms and tax returns spanning over the last two years. They also will ask for the last three months of pay stubs and bank statements. Any other statements or documentation that relates to financial assets – for example, stocks or bonds – gained within the last two months should also be brought to the lender. Current renters are advised to bring contact information for their landlord, while current homeowners should bring in all paperwork relating to their mortgage.
For self-employed individuals, not only must business tax returns be brought in for the last two years, but a current profit and loss statement is also needed. After all of the required paperwork is turned in, it typically takes a very short amount of time to be pre-approved.
What if a Lender Chooses not to Pre-Approve My Loan?
Every once in a while, lenders will deny pre-approval to a potential home buyer. This isn’t the end, and the decision can be dealt with and mitigated. A good first step is for the future homeowner to double-check for errors and take steps to correct any mistakes with their credit report. After all errors are fixed, the buyer’s credit score will improve.
Future buyers can also improve their chances for pre-approval by lowering debt and improving their debt-to-income ratio. Another manner of improving pre-approval chances is by increasing the amount of collateral available for the future down payment. Although this may be difficult, it could be worth it in the long term.
In addition to ensuring that the buyer is more likely to be pre-approved, a larger down payment lowers the overall total of interest that will be paid back in mortgage payments. Buying a home does not have to be difficult; as long as buyers get pre-approved and stick within their budget, the ideal property for their needs can be purchased.
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Riverland Realty, LLC | 1 Henrietta Street, Suite A. | Charleston, SC 29403 | 843.400.3032