Assess your Financial Resources
Before you can begin to know how much home you are able to purchase, first you have to know much you are able to work with. Assess your resources in a few steps.
- Monthly Housing Expenses: How much you pay each month on housing. Consider how much room you have to pay more. As a homeowner, there will be continual expenses and repairs, on average ranging up to $3,000 or more per year.
- Gross Annual Income: How much the household takes in, annually, before taxes.
- Monthly debt: Credit cards, car payments, student loans, etc.
- Down Payment: Have you saved enough to put money down on a house? Remember that some of your savings will used to cover closing costs and other fees. If this amount of saving is not as much as you would like, you still have options. Besides the traditional 20% down, there are options for home buyers that range anywhere from 3% to 0% down.
Check Your Credit Score
Knowing your credit score is important so you can assess how much loan you will be able to take out, and what your interest rate will look like. There are several free credit estimation tools available online. These credit estimations are not official FICO scores, but for planning a home buying budget, it will put your score close enough.
Estimate Your Interest Rate
There are online tools to help estimate your mortgage interest rate, as well. Using your estimated credit score and the state you are planning on buying your home in, you can get a good idea of what your interest rate might be.
Estimate Your Annual Property Taxes
Property taxes vary from city to city, but the most important thing is to get a general idea. Municipal property tax rates are information that is readily available. The national average is just over $2,000 per year.
Use a Mortgage Calculator
Take all these numbers and plug them into a mortgage calculator. Find our mortgage calculator here.
Back to: How to Prepare to Buy a Home
The Home Buying Process Demystified
The home buying process is wrought with potential pitfalls and challenges, but when done right can be relatively painless. As champions of homebuying, we’ve created this step-by-step guide to help you through the process.
Below you’ll find an overview of the home buying timeline as well as the major components of the home buying process with links to the various steps, tools, and information to educate and empower your home search, discovery and purchase.
How Long Does it Take to Buy a Home?
Your timeline may vary, but the following is a good guideline
- Preparing to Buy a Home: 3-4 weeks
- Initial Search for Ideas: 1-4 weeks
- Building a Team: 1 week (overlap initial search)
- Pre-Approval of Mortgage: 12-48 hours
- The Home Search: 4-8 weeks (depending on criteria)
- Contract-to-Close: 14-60 days
So, on average a homebuyer will spend 30-60 days shopping and 14-60 days from contract to close. For some folks, the process can be extremely quick taking as little as 30 days total, while for others, the shopping period alone can last several months.
How Much Home Can I Afford?
The first step in the home buying process is understanding if you have the resources to buy a home. This includes knowing how much home you can afford, what type of down payment and monthly mortgage payment to budget for, as well as what type of loan program you’ll use to finance your new property.
Buying a home is a complicated process that requires a good deal of research. In the course of it, there will be a number of professionals and specialists involved. Once you’ve done your homework and assessed your resources, you’ll need to assemble your team.
Assembling Your Team
After you have a good understanding of your own wants, needs, and goals, it’s time to assemble your team and begin the home search! Who should be on your team? Who you’ll need to find on your own may vary, but the key team members could be: Real estate agent (could be a RealtorTM but not all agents are), home appraiser, title company, home inspector, insurance agent and mortgage lender.
When selecting the members of this team, take the same amount of care you would in choosing a home, because these people will be working for you to help you do just that. Trust & communication are key considerations in working with your team.
Sorting Out Your Finances
With the selection of a mortgage lender comes the application for mortgage pre-approval, a task that requires collecting the necessary financial paperwork to help obtain the approval. Once obtained the clock begins ticking because many pre-approval offers have a limited life-span before they expire.
Your Home Search
While you juggle the paperwork and timelines implicit to the process, remember that your team works for you. Now your search for (and discovering) your new home begins. Research, save, view and repeat. Remember Homes.com has all the tools you need to find and keep track of your favorite properties and home shortlist.
You’ve got a mortgage pre-approval in hand and have found a property you can afford to purchase and see yourself living in. Time for a purchase offer to a listing agent or seller!
Once you receive an acceptance offer, the due-diligence period starts a timeline of checks and tasks for final mortgage approvals, appraisals, inspections, and other requirements that would be stated in the terms of the contract.
Assessment, Conditions & Negotiation
Many consider this to be the most difficult part of the home buying process as it includes, but isn’t limited to, inspection, obtaining the final loan, purchasing insurance, and the potentially arduous negotiation. In this part of the process, every member of your team will be utilized, and the more homework you have done in building your team, the smoother this part will go. Those who haven’t conducted their proper due diligence could potentially see the purchase fall apart at this point.
Closing the Deal!
A successful closing requires all of the team players to come together at the same time, with the same agenda, on the same date, with numbers and figures that match. From the start of the home search to the home inspection and closing the deal, the entire home buying process can take most homeowners about three months.