In an earlier post I showed you the 10 steps needed to purchase a home. If I went into detail about each step it would be an entire blog by itself. The last post was more of a high level overview of what it takes to buy a home.
In this post I wanted to give you some tips that will put you miles ahead of others when trying to buy their home. From personal finance tips, to negotiating, this blog is going to share with you some of my favorite tips, many of them I used when I purchased my first home.
No Video for this Blog Unfortunately :'(
Have Money in Multiple Accounts
When you are trying to purchase a home you need to show proof of funds. The more funds you have the better. They will take any of your accounts into consideration. Checking accounts, Investment accounts, and Savings accounts are the big main three that people have.
But you can even leverage your 401k account as money to use in order to show proof of funds. They will even take other properties or assets that you own into consideration. Make sure you have everything accounted for during this step.
Pull your Credit Report
This is more important than just having a good score. When you pull a credit report it is going to show you every little detail that is on your credit. This is important when attempting to get a loan for a mortgage.
When you receive your report scrub it for inaccuracies that could be on it. I even told you where to go to do this for free in an earlier post. The better you understand what is on your credit report the better you can understand how lenders look at you.
Use a Mortgage Broker
When I purchased my first home I used a mortgage broker that was recommended to me. This is one of the single best things you can do when looking for a lender. The difference that a mortgage broker makes can save you thousands down the years.
What a mortgage broker does is shop your credentials around to different lenders. They try to see which lender will give you the most money, while also offering you the lowest interest rate. It is a delicate balance that they have perfected. This is the best way to let someone do the hard work for you.
What to tell your Real Estate Agent
When you finally pick your agent they are going to do what is in your best interest mostly. When you give them a price as your budget they are going to show you some options that are both above and below that price point.
In order to combat that this is what you are going to do. When you get your preapproval letter with that number on there. Give the real estate agent a number that is 20 to 40 thousand less than your actual preapproval number.
This accomplishes two things, first it prevents you from following in love with a home that is way out of your budget. The second being it puts the power back in your hand keeping an ace up your sleeve with that extra room in the budget if needed.
Down Payment Amount
If you look up how much of a down payment you should put on a house most people will likely tell you about 20%. This puts you in a special case where you can get approved for most low interest loans.
But what I am going to share with you is that you can put as little as 5% down on a house. That’s actually what I put down on my first home. When you do this though you will be hit with something called a PMI. This is basically insurance for the mortgage company. And what it does is protects the mortgage company in case you are unable to make the payments and end up defaulting on the loan.
You can even put the full amount of the house down. This of course would mean you wouldn’t need a loan. But the point I want to drive in is that the down payment is a fluid percentage. And what you put down should work in the best interest of yourself.
Rob’s Opinion
A general rule that I like is that you want to purchase a home that is 3x your yearly income. This prevents you from purchasing too expensive of a house, where the payments would eat up most of your monthly income.
The other thing that it will do is give you the option to pay more on the mortgage each month, thus paying the home off sooner. Just to give you an example. Let’s say you make $70,000 a year in salary. That means the max amount of home you should purchase is $210,000.
Like always if you find this blog helpful or have any questions please comment down below. If you have anything else to add please comment to help others who may be searching.
