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10 TIPS YOU NEED TO KNOW BEFORE BUYING A HOME IN 2020

Buying a house is a big commitment, so before you start house hunting and comparing mortgage rates, take the time to examine your current situation and how it could change in the future.


TIP 1: Ask yourself:


  • Are you planning on any major life changes, like changing jobs or starting a family, in the next few years that could impact your financial situation?

  • Can you commit to staying in a home for at least five years?

  • Do you have a stable income?

  • Are you confident you can handle house repairs (or can take the time to learn), or are you willing to pay a specialist when something breaks?



TIP 2: ARE YOU BUYING IN CASH OR LOAN ?


Loan Type


A mortgage's type depends on if a government agency or private investors are involved, as well as the amount of the loan.


FHA loans are the easiest to qualify for. They require a low down payment and FICO® score, but they can cost more over time because they require you to pay a fee called mortgage insurance. You can get an FHA loan from any FHA-approved lender. These loans are insured by the Federal Housing Administration (FHA), which just means that the FHA protects lenders against loss from homeowners who default on their loans.

Conventional loans are a bit harder to qualify for, but they typically cost less over time than an FHA loan. You can avoid paying private mortgage insurance if your down payment is 20% or more. This can save you hundreds of dollars on your monthly mortgage payment.

VA loans are exclusively for veterans, eligible surviving spouses and active-duty service members. VA loans offer the opportunity to buy a home with no down payment or private mortgage insurance.


Rate Type


There are two kinds of mortgage rates – fixed and adjustable – and you can pick the type of rate that matches your goals. You can see our current interest rates here.

A fixed-rate mortgage will stay the same for the life of your loan. This option keeps your month-to-month mortgage payment consistent and predictable. This is a great option for homeowners who plan to stay in their new home for a long time and want a regular payment to budget around.

An adjustable-rate mortgage will stay the same for the first 5, 7 or 10 years of the loan. Then, your rates will adjust up or down once per year depending on market conditions. An adjustable-rate mortgage offers the opportunity to get the lowest rate possible and is a good choice for homeowners who plan on moving or refinancing before the initial fixed-rate period ends.


Term


The term is the length of the loan. Most fixed-rate mortgages have 30- or 15-year terms, although you can choose any term from 8 to 30 years with a Quicken Loans YOURgage. Adjustable rate mortgages typically have a 30-year term.



Tip 3: Getting a Mortgage Approval Shows What You Can Afford

Getting approved first has a few advantages:  

  • You and your real estate agent will understand what you can afford so you don't waste time looking at homes outside your budget.  

  • You'll be in the best position to make a strong offer on a house because the seller will know a lender already verified your finances.  

  • After your offer is accepted, you're less likely to run into surprises that could slow down closing the loan.  

Keep in mind an approval is just the start of getting a mortgage. Once you find a house and make an offer, the house will need to pass inspections and be appraised by a third-party. Your approval amount could also change if your financial situation changes.  


What Lenders Review


Mortgage lenders typically look at three criteria when deciding on how much you can borrow: your assets, your income and your credit.


Your Assets


Assets are items you own that could be turned into cash should the need arise. They include things like checking and savings accounts, stocks, real estate, personal property and more. Lenders review your assets to make sure you have some money set aside to make your mortgage payments after closing.


Your Income


Lenders review your income to ensure you can afford a monthly mortgage payment. They'll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn't offset your income too much. Typically, a mortgage company will want to see you have a DTI below 50%.


Your Credit


Having good credit can help you qualify for a better interest rate because you've shown you're a responsible borrower. Some mortgage lenders have minimum FICO® score requirements.  


TIP 4: You Should Work with a Real Estate Agent WHY?

A real estate agent can make a big difference in the home buying process, and not just for the reasons you might think.



Agent will Help You Find the Right House


First and foremost, your agent will help you find the right house. Agents have access to the MLS database, which means they know what homes are on the market, what features they have, and what they're listed for. While real estate listing sites have this information and can be a good starting point, they're not always 100% accurate or up to date.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you're a first-time home buyer.


Zero in on a Good Area


Finding the right house isn't only about knowing which homes are up for sale. A real estate agent can help you zero in on the location that's right for you. An experienced agent will help you find the very best school districts, amenities and resale values – or whatever is important to you.


Get a Guiding Hand


According to Toney Black, a real estate agent and broker affiliated with Allen Tate Real Estate and Rocket Homes Real Estate LLC, the primary benefit real estate agents provide is consultation. Black talks each of his clients through the home buying process before they even start house hunting so they know what they're in for. While most homeowners will only buy a house a few times in their lifetime, agents go through the buying process with their clients day in and day out.


Manage the Paperwork


Do you know how to write a purchase agreement? Luckily, this isn't something you need to worry about. Your agent will draw up the purchase agreement so all you have to do is read it and sign it. There's a lot of paperwork involved in buying a home, and your agent is there to take care of it.


Make Connections


The buying process can be a whirlwind experience once you've had an offer accepted. There are so many things for you to take care of over the course of about a month, including getting an inspection, arranging movers, shopping for insurance, buying a home warranty and arranging for necessary repairs – and that doesn't even cover getting a mortgage.

Luckily, your real estate agent has seen it all before. They know which inspectors can give you an accurate report, which movers are worthwhile, which insurance companies will overcharge you, and which home warranties have it all. Black even sets up the home inspection for many of his clients. "The only thing that they do themselves is call the insurance company," he said.

Agents have also seen enough homes to know which ones are likely to have expensive problems. Your agent should be able to tell you what to look for and what to steer clear of, which is especially important if you're a first-time home buyer.


TIP 5: Finding Homes for Sale


You've likely seen plenty of “For Sale” signs in front yards. But what's the best way to locate available homes that match your goals and finances?

Searching online and exploring the neighborhood you want to live in can be a great start. Your real estate agent will also point out homes that match your goals and can help you keep an eye out for new homes on the market.

When browsing home listings, remember that you're not just buying the building – you're also buying a home that should match your lifestyle. Some aspects to keep in mind, aside from the house itself, include:

  • The neighborhood – If you're looking for an area with lively nightlife, you might want to find a home closer to a downtown area. But if you're hoping to get away from the city lights and sounds to a home with a nice yard and a bit more space, a suburb might be better for you.

  • The commute – If you're switching locations in a significant way, consider how much time you're comfortable spending on your commute to work.