How To Buy Your First House - Owning a house is the American dream, and although the market has collapsed, it is the perfect opportunity for people to buy real estate. We will never see these low levels again in our lifetime. This is why it’s very important to begin your search now and to prepare your finances before you get a mortgage.
It is likely that buying a house will be the single largest transaction you will ever make. The budget you set for the property will depend on a number of factors. Some of these are:
- You and/or your partner’s salary/income
- The equity in your existing property (if you have one)
- The size of your deposit for your mortgage (if you need one)
- Any outstanding debts or committed outgoings.
Before you begin your search for property to buy, it’s worth discussing your requirements with your mortgage lender or financial adviser to determine how much you can afford. This will save you a lot of time and the information is free.
Most lenders will lend up to three times your salary. Some will lend you more, though often at a higher rate. However, banks have tightened up since the housing crises in 2008.
Some banks may require you to put more down on a house. Don’t be surprised if a lender wants you to put down 30 percent of the home value. Remember, it’s not the home price, it’s the home value.
A home value can be determined by having an appraisal done on the property. For example, if the asking price is $100,000, and the value is $90,000, the bank will only lend 70% to 80% of the value. In this case, you will need between $18,000 to $27,000 for the bank, plus an additional $10,000 for the difference.
As you can see, buying a house can get complicated with numbers. The best advice on how to convince a lender is to be honest and make sure your FICO score is higher than 635.By: Kara Gilmour
Add our Facebook page to receive updates and participate in new tools and features. It's a great way to stay connected with all the latest news.
Receive daily bite-sized updates by following us on Twitter. Receive Tweet-sized 140-character updates on your mobile phone device or PC.
Subscribe to our daily RSS feed to get the latest national news stories. We offer a feed for every topic including business, entertainment, health, politics, science & technology, travel and more.