When considering how much you can afford to buy a home, one of the things that lenders will consider is your credit history. If you have bad credit, you may still be able to purchase a home through one of the federal mortgage programs, such as Housing and Urban Development (HUD), or through a local government home buying program. Your local office of housing and community development or a real estate agent may be able to assist you in finding a suitable program for your situation.
Affording a Home
One of the first steps that should be taken is to calculate how much you can afford to pay on a mortgage loan. An easy way to do this is to go to a lender and get pre-qualified for a home loan. The lender will let you know the maximum amount that you will be able to spend on a home. In order to come up with that figure, the lender will consider your non-housing expenses and your income. Your non-housing expenses include items such as vehicle loans, student loans and child support.
In calculating how much you can afford, the lender will also take into consideration the cash that you have available for a down payment. Some types of loans require a down payment of 10 to 20 percent of the purchase price of a home while others, such as HUD and other government programs, may only require up to 3 percent. It should be noted that the more cash you have for a down payment, the lower your monthly mortgage payment will be.
Once you have been pre-qualified and know how much the monthly payment will be on the amount that you qualified for, you should calculate your expected monthly expenses yourself. Add the total monthly loan amount to your monthly expenses. Items that should be added include food, transportation, regular payments for vehicles and credit cards, if any, vehicle insurance, clothing and any other regular monthly expenses that you have. You will also need to consider the monthly expenses of owning your own home including utilities, cable/satellite, telephone and home maintenance. Make sure to note whether your pre-qualified mortgage payment includes insurance and property taxes. If not, you will need to add those amounts into your total monthly expenses. There are calculators available on the Internet that can help you obtain an estimate for this purpose.
Deduct the total amount of all expenses from your regular monthly income. You must then decide whether you will be able to afford a home in your pre-qualified price range. If you decide that you cannot, you can consider purchasing a home in a lower price range.
Location and Other Considerations
Once you have been pre-qualified and know the maximum amount that you qualify for, you can begin your search for your new home. First, you should consider the type of home that you would like to purchase. In addition to single-family homes, choices include multifamily homes, condominiums and townhouses. Some people who purchase their first homes buy multiple family dwellings so that the rental income will help with the cost of owning the home.
The second consideration should be what area you would like to live in. Would you prefer to live in an isolated country setting or a setting that is close to schools and shopping centers? Once you have chosen the area or neighborhood where you would prefer to live, you should decide the minimum number of rooms that you and your family must have to live comfortably. Other considerations include whether you would like a new home or if would prefer an older home that needs repairs.
It is a good idea to make a minimum requirements list to aid you in your search. It may also be helpful to make a wish list of items, such as a dishwasher, garage, minimum acreage and other items that you would prefer came with your ideal home.
Finding a Home
The next step is to begin your search for the perfect home that fits all of your minimum requirements. Homes that are for sale are advertised in newspapers, flyers, real estate ads and on Internet sites. You can also contact a real estate agent to help you in your search. Real estate agents have access to databases that they can use to narrow your search down quickly. They also have access to new homes that come on the market as soon as they are listed in the database. An added benefit to using a real estate agent is that they are aware of many things about the different neighborhoods that you may consider, such as quality of schools, neighborhood safety, traffic volume and many other facts.
Making an Offer
Once you have found the home that meets all of your requirements and that you would like to purchase, you are ready to make an offer. The offer does not have to be the actual asking price. If you have enlisted the help of a real estate agent, he or she can help you decide on an offer that the owner of the home is most likely to accept.
If you chose to make an offer on your own, you should consider what the asking price is of other similar homes in the area, the condition of the home, how long it has been on the market and how much you really want the home. If the home has been on the market for a long time, the owner may be eager to sell and more inclined to accept a lower offer. If you really want the home, the closer you are to the asking price, the more likely the owner will be to accept your offer.
Tips to Consider for Future Resell of the Home
One bedroom condominiums are often much more difficult to sell than those with two-bedrooms.
Single-family homes that have two bedrooms but only one bath are less appealing to purchasers than three or more bedroom with two or more bath homes.
Homes that are well maintained and attractive when viewed from the street are the easiest to resell.
Purchasing a home creates a major financial obligation that will last for many years. It is also one of the largest assets you will likely purchase in your life. If you are ready to make that step, bad credit is not necessarily a major roadblock to making your wish come true. Do your research on lending agencies or contact a real estate professional to assist you in finding lenders who will finance a home for you.
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