Familiarity with the HouzMaxx standard 7 step house buying process takes the stress out of buying a house. Knowing the goals of the current activity and what is to follow are well known. A common reference established for all the folks involved in the house buying makes communication easier and meaningful. So we strongly urge you to get familiar with the 7 steps of the house buying process viz.
- Strengthen your credit score.
- Figure out what you can afford.
- Save for down payment, closing costs.
- Build a healthy savings account.
- Put your budget together and find out how much house you can buy.
- Find a house you like AND it meets your budget.
The Twenty-Five Percent Rule.
The most basic guideline is that your house payment should not be more than twenty-five percent of your monthly income. This is the general rule that the mortgage company follows.
Work Out Your Budget Before You Start Shopping
Get your number together for earnings, obligations, savings etc.
Before you start shopping for a new home, work out a budget with a house payment. In addition to the payment you will need to budget for home insurance, taxes and housing repairs. You should set aside a bit of money each month to cover remodeling and home repairs.
What If I Want a Nicer Home?
If you are disappointed with what you can afford, you have three options. The first is that you save up a larger down payment and wait to purchase. The second option is that you buy a starter home or condo and live for five years in this type of home. It takes about five years to break even on purchasing a home. The third option is to buy an older home that you can renovate. Often you can get a fixer upper for less money, but you need to be prepared to deal with the hassles and additional expenses of renovations.
In addition to the down payment, you will need to have money set aside for the closing costs. Your realtor should be able to tell you the estimated amount for the closing costs.