Buying a house is part of the all-American dream. You’ve spent a lot of time daydreaming about this part of your journey, many hours thinking about what it would be like – possibly even moving forward to the steps of saving money for a down payment. Yet, for all those hours, all that daydreaming, all those thoughts, there are many aspects to the home buying process that may never have crossed your excited mind. Here’s what you need to know about how to buy a house in Grand Rapids, MI.
- What Credit Score is Needed to Buy a House?
- How Long Does Buying a House Take?
- What to Look for When Buying a House
- Best Time of Year to Buy a House
- Go to top
- House Buying Programs
- FHA Loans
- USDA Loans
- Transferring Utilities when Buying a House
- Can You Buy a House with No Money Down?
- Renting Vs. Buying a House
- How to Buy a House with Cash
- Buy a House or Build a House?
- How to Buy a House with Equity
What Credit Score is Needed to Buy a House?
Your credit score is one of the most important numbers to consider when preparing to buy a house. Lenders are going to order copies of your credit report to gauge your relationship with other creditors, and to grade your ability to repay funds in a timely fashion. If your credit report is in disarray, you’ll want to spend time getting it tidied before moving forward with your loan application process.
An ideal credit score for purchasing real estate, in a perfect world, is 720-850, the highest ranking possible for a credit score. However, homes have been purchased with credit scores less solid than that, such as 680-719, which is considered good credit. Fair credit is a score that ranges between 640 and 679 and still provides a solid shot at home ownership. However, credit below 640 is going to make things a little more difficult. Not impossible, just more difficult.
If your credit is between 500 and 600, not all is lost. There are special programs in place to assist first-time homebuyers with down payments and credit requirements.
Accessing your credit report is easy. A lot of credit card companies offer access to credit reports, as does CreditKarma.com. You can also go directly to the reporting agency and request one free copy per year. Each of your accounts is listed on your credit report, along with your account standing such as whether payments are current or behind, the balance owned, the last payment made, etc. You can call or write to dispute any wrongful claims, or plan to satisfy any derogatory statements.
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How Long Does Buying a House Take?
How long it takes to buy a house depends on which phase you’re in when you ask the question. The simple answer is to measure from the moment an offer is accepted to the day of close. The average time it takes to buy a house between acceptance of offer and close of sale is between 30 and 60 days with a 45-day average. However, that’s assuming you’ve got an agreement on an offer and that the funding is already pre-approved and underway
However, if you back up to your point of realizing what you need to establish for savings, credit, and debt-to-income ratio, your timeline is greatly extended. Your goal is to save twenty percent for a down payment, so if you have visions of a $300,000 home, you’ll need around $60,000 for a down payment, or an alternative plan for a home buying program with down payment leniencies.
Your loan application process is also time-consuming but doesn’t have to count in time timeline of how long it takes to buy a house if you get pre-approved and knock that out of the way before you start the process of contacting agents or shopping for homes.
Shopping for homes can also take time, depending on your wish list and how rigid you are with your ideas of homeownership and your starter house. Your negotiation skills also play a role in determining how long your transaction takes.
What to Look for When Buying a House
When you begin looking at houses, it’s easy to get caught up in the design of it all – the pretty factor. You’re wowed by curb appeal and charmed by smart design, but don’t be fooled by well-done staging. Look deeper.
Check out the neighbor’s yards. Are they well kept? Are they full of kids’ toys, dog messes, or overgrown weeds? If so, it could be a sign of community upkeep or lack thereof. You may end of loving the house and hating the neighbors.
Inhale – does the air smell clean? Do you smell sewage, natural gas, or anything that could be a red flag?
When you’re in the house, look for structural condition, and for the status of electrical, plumbing, roofing, heat and air, or other major systems. You can always change cosmetics in a house but you could find yourself shelling out some serious dough as a new homeowner of a house that was pretty as a picture but in need of repairs.
Best Time of Year to Buy a House
The best time of year to buy a house is when you need one. That’s the simple answer, anyway. The other go-to answer is that the real estate industry is abuzz in spring, between March and the end of May. Things stay pretty happening throughout summer, begin to trickle down in fall, and then slow to a slumber in winter. But in reality, people are buying and selling houses all year round, so just because one time seems heavier in foot traffic than others doesn’t mean that now isn’t as good a time as any other to buy your home.
House Buying Programs
There are several home-buying programs designed for first-time buyers that can assist with credit requirements, down payment, closing costs, and other items that sometimes seem insurmountable when considering the purchase of real estate.
Keep in mind that if a program is able to lower or eliminate your down payment, your monthly mortgage payment will increase. Your down payment offsets the amount of your loan so you’re borrowing less principal and paying less interest. However, when you avoid the down payment and borrow the full amount, you pay higher monthly payments. Furthermore, when you pay less than a 20 percent deposit, you may be required to purchase private mortgage insurance, an added expense.
FHA Loans are the most popular home buying program, accounting for 40% of the home loans issued today. FHA loans are home mortgage loans backed by the Federal Housing Administration. These loans are easier to qualify for because they have less stringent credit requirements, and can lower the down payment to either ten percent or to 3.5 percent, depending upon your credit score.
USDA Loans are backed by the United States Department of Agriculture to foster rural lifestyles. In many cases, USDA loans eliminate the down payment altogether as well as lowering credit requirements. However, because these loans are meant for low to medium income buyers, rules state that applicants cannot make more than 115% of the median household income for the county.
Transferring Utilities when Buying a House
One of the hiccoughs that can happen by accident in transferring properties is in coordinating the transfer of utilities. Discuss the details of the seller disconnecting service and the buyer initiating service. If you’ve never had utility service of your own before, expect that you may be asked to pay a deposit for each utility required with new service.
Can You Buy a House with No Money Down?
The simple answer is, yes. There are ways you can buy a house with no money down, but you’ve got to assess whether or not that’s in your best interest long-term. When you do not pay the down payment, you increase the amount of money that you’re borrowing, that you owe, and that you’ll pay in interest.
Renting Vs. Buying a House
Renting has advantages because in most cases, you’re able to make a phone call or submit a work order when something breaks or goes wrong. You don’t have to pay for those repairs (unless you were directly responsible for damage), and you don’t have to deal with contractors other than allowing them in to do the work. However, when you buy a home, you’re 100 percent responsible for the maintenance and repairs on your property. When you rent, you build no equity, and you have no interest or property taxes to deduct come tax season.
How to Buy a House with Cash
There can be many benefits to buying a house with cash, especially regarding saving interest and saving time by skipping over the loan processing portion of the transaction. But there are risks, too.
A lot of reasons people opt to pay cash is to avoid the lending fees and interest. Another reason is that if they offer cash, they may be able to get a cheaper deal on the property.
You still need an emergency fund. You’ll still need to pay for an appraisal and an inspection if you want to secure your investment.
Buy a House or Build a House?
Whether or not to buy a house or build one depends, in large part, on your personal style and interests. You can buy an existing home in a mature neighborhood with a canopy of trees, lush lawns, and a developed sense of community spirit, or you can slip into a never-lived-in neighborhood and break it in while you wait for its landscaping to settle in and grow up.
You won’t find a bargain with a builder, so if you’re looking forward to negotiating a steal of a deal, new construction might not be for you. However, while builders don’t often knock dollar signs of their price tags, they have been known to throw in a few upgrades or incentives as negotiation tools.
An existing neighborhood isn’t likely to have some of the creature comforts and modern amenities of a new construction neighborhood, most of which now being built are master-planned communities with fitness centers, community pool, walking trails, area parks, local shops, and other fabulous features.
How to Buy a House with Equity
This might not be your first rodeo. In fact, this time around, you might be looking to upsize – to cash in on your existing house and trade it in on a newer, bigger, prettier model. That’s okay, too! When you put your 20 percent deposit down on your first home, and then made timely payments, you built equity. You can then take out a loan against that equity, which you can use as a cash down payment on your next house. Once you move to your new house, you sell the existing property, pay off the Home Equity Line of Credit, also known as HELOC, and pat yourself on the back for a strategy well played.
Whether you experience your first real estate transaction ever with the purchase of your starter home, or you’re ready to upsize from your starter house to a new and improved version, there’s a lot to think about with buying a house. Get your savings, credit, and debt-to-income ratio in good condition as your first order of business.
Determine which house buying programs, if any, are best for you, and then lay out your timeline. Once you’ve been pre-approved for your home mortgage loan, you’re ready to contact a professional real estate agent who can represent you in the process of shopping for your home. Be realistic with your wishlist when shopping for houses and be mindful of proper etiquette when touring homes.
Determine whether to shop new construction or existing homes, whether you’re paying cash or using a home buying program, and if you’ll be making any real estate maneuvers like using a home equity line of credit on one property for the cash to use as a down payment on another.
Your options are endless. Don’t be in a hurry. Take your time; think things through, and talk with your real estate agent and financial advisers about the best course of action for your home buying journey.