There are so many questions when it comes to buying your first house. Not only is this maybe one of the most expensive purchases you’ve ever made, but the process can also seem daunting and hard to navigate.
You might have questions like: how much house can I afford? What Central Ohio suburbs or neighborhoods make the most sense for my lifestyle? How much money do I need for a down payment? How do I ensure I don’t overpay on this investment?
That’s where we come in with our handy little guide for first-timers looking to buy a home in Delaware, Ohio or in the surrounding Central Ohio area.
1. Determine how much house you can afford.
When shopping for your first home, you need to make sure you are buying what you can afford. Envision making your monthly mortgage payment — we want you to feel at peace doing that.
To determine how much you can afford, we need to figure out your income, and monthly expenses. Many financial experts recommend that your total housing costs (mortgage, maintenance expenses, association fees, taxes, insurance, etc) are no more than 25% of your monthly take-home pay. So, if you make $4,000 a month, you’ll want your total housing expenses to be no more than $1,000.
Try this handy calculator to determine how much you could potentially afford monthly:
You can also use this handy mortgage calculator to determine how much you can afford. If you aren’t sure what some of the numbers mean, keep reading!
2. Talk to lenders early in the process, and get pre-approved.
Your realtor and your lender are going to be your best friends during the home-buying process. The SJV Group would be happy to recommend lenders we’ve worked with and trust.
A lender can you help further understand how much home you can afford based on your credit history and credit score, and actual assets you have.
A lender can also help you determine what a realistic loan interest rate might be for you. Note that it would be wise to get mortgage quotes from different lenders as their interest rates might vary — you’ll want to go with the lender with the lowest rate to save you money over time.
Finally, a lender can help you get pre-approved for a loan. Pre-approval is a term used by the mortgage industry to describe the initial process of qualifying for a mortgage. When a buyer is pre-approved, it means a lender has agreed to let them borrow up to a certain amount for a home.
To get pre-approved, the borrower needs to submit basic financial information and provide access to their credit report. Pre-approval results in a hard inquiry on a credit report, so consumers shouldn’t go this route unless they’re seriously interested in buying a house right now.
The pre-approval offer from a lender usually lasts between 90 and 120 days. If you need more time, the lender can extend the offer – but it will cause another hard inquiry on your credit report.
3. Save up for a down payment.
A down payment is an upfront cash payment that you pay towards the cost of the home. The down payment is the portion of the purchase price that you pay out-of-pocket as opposed to borrowing.
The amount you need for a down payment varies. In America today, you can bring as low as 5% and still be able to get a home mortgage, but the more you can put towards the home, the better it is for your wallet.
If you put just a little down (less than 20%), you will likely have to pay private mortgage insurance (PMI). PMI benefits the lender in case you default (don’t pay) your mortgage loan. For you, it is somewhat like wasted money, because it doesn’t go towards your principal payment — it’s just extra money you have to pay to make the lender feel more comfortable with your loan.
You will continue to pay the PMI until you have reached the 20% threshhold, at which time the PMI will be dropped from your monthly payment.
Therefore, it is best to have 20% down. For example, if your home value is $200,000, you should save $40,000 towards the down payment.
3. Hire a professional real estate agent.
Because buying a home is one of the most expensive investments you’ll make, you are going to want someone in your corner to walk you through the many processes that happen in the transaction.
A professional realtor will help you look at homes in the area you are interested in. They will communicate with the home sellers to set up appointments and ask questions about the home on your behalf.
Very importantly, a good realtor will know the area you are looking in and can help determine if the purchase price is appropriate, and how competitive the home may be. Your realtor can show you “comps” — comparable homes that sold recently — to help determine what an appropriate offer price may look like.
Your real estate agent can also guide you through offer negotiation, home inspection, appraisal and any hiccups that may come up along the way.
4. See multiple homes.
Although some buyers just “know it when they see it”, it’s usually a good idea to view multiple homes before making an offer.
This will help give you an idea of what various neighborhodos are like, whether your commute time will be satisfactory, what types of layouts work best for your family and more
You should try and have a sense of your commute times to ensure they are satisfactory. Visit the neighborhood at different times and days to check for traffic conditions, noise levels, and look around the neighborhood to make sure you will be comfortable there. Only choose a community that you and your family feel good about and will be comfortable to live in.
When you work with an SJV Group real estate agent, we can set up automatic searches for homes that meet your criteria. You’ll get access to a custom web portal showing you all listings of houses for sale in your area. You’ll also get notified when new homes that meet your criteria come on the market.
5. Make an offer.
Yay! Now we are to the exciting part. Once you find the one, you’ll put in an offer. Your real estate agent will help you determine the offer price and any additional clauses you may want to include. Common clauses include requesting a particular closing or possession date, negotiating who pays the closing costs (usually it’s YOU — the buyer — unless you successfully negotiate otherwise).
If your offer is accepted, the final steps to making the home officially yours begins. This usually includes an appraisal (making sure the home is worth what you are willing to pay), a home inspection (making sure the home is in acceptable condition and any defects are disclosed), and securing your loan.
6. Welcome home.
If you made it this far, congratulations. You are in your new home sweet home.
While buying real estate in Delaware Ohio or surrounding areas can be a stressful time, the SJV Group is home to knowledgeable realtors who can guide you every step of the way. We can’t wait for you to #lovewhereyoulive.