By Ted James
How to Find and Buy the Home of Your Dreams
Whether it’s your first or fifth home purchase, buying a new place is always exciting. At the same time, it’s a process that can be downright overwhelming, and it’s easy to let it get away from you. Here’s how to ensure you find and buy your dream home with minimal angst.
Research Your History
Before you start seriously house hunting, it’s important to give some attention to your credit history. Banks will look at your FICO score and spending habits as part of the lending process. If you have snags in your past, sprucing up your credit is something you can do yourself.
Get a copy of your credit report early on because it can take time to clean things up. Several actions can improve your score, like paying down debts, disputing inaccuracies, and maintaining a timely bill-paying regimen. The better your score, the better your loan and interest rate will be.
Know What You Can Afford
It is recommended that homebuyers follow the 28/36 rule, which means no more than 28 percent of your income goes toward housing costs and no more than 36 percent of your income goes toward debt — anything beyond those amounts can lead to financial instability. With a few quick calculations, you can get a better idea of how close you are to those percentages, and how much home you can comfortably afford.
Build or Buy?
House hunters are often on the fence about building or buying a home. Seeing your dream home assembled from the ground up is exciting, but it can be stressful. And if you find a house that makes you happy, or could be easily tweaked, it’s a quicker way into your new place. Look into your local market to see what’s available, as that can help shape your decision.
You might be wondering which option is less costly, building or buying. According to HomeAdvisor, the average cost to build ranges from $166,480 to $474,977, but it could easily run upward of $750,000 — if not much, much more.
Those figures don’t tell the whole story, though. MoneyUnder30 points out sometimes it’s less expensive to build, and sometimes it’s less expensive to buy. You need to price out your personal circumstances thoroughly for a better idea, weighing the cost of land, whether you’ll be on a septic system, the size of the home, and so forth.
You may want to hire an architect and have plans drawn up before you go too far. Wisebread notes that architects cost 5 to 20 percent of your home’s price if they are involved in the whole project, or if you’re hiring on an hourly basis it’ll cost between $50 and $200 per hour.
Land a Good Loan
You might be surprised to learn how many types of mortgage loans there are. Some loans, like balloon loans and adjustable-rate mortgages, can put you into a precarious financial position as the interest rate changes. Some loans are easier and more agreeable to first-time buyers than others, such as FHA loans and USDA loans, because of the low down payment and more lenient qualifications. Your lender can help you with selecting a good loan for your situation.
You should choose a lender you trust and then get your loan pre-approval letter. This will tell sellers you’re serious, whether you’re looking at land or houses. When the time comes to make an offer, it provides an edge over other house hunters. Once you have an accepted offer, it’ll be a matter of closing on the property, and then either starting construction or moving right in.
It’s easy to get lost in all the options and details of buying a house. Be sure to shape up your finances and weigh your choices carefully. With a little legwork and number crunching, you’ll be well on your way to your dream home.