One of the first things people do after deciding to buy a house is to browse through property listings. Sellers list a property for sale through licensed agents who share relevant details on their websites or other real estate websites. However, certain aspects like research, budget fixing, and getting preapproved credit for your mortgage must be considered. Before closing on a deal, make sure to follow these steps for your financial safety.

Clarity about your needs
If you are a first-time homeowner, be clear about why you want a house. Is your requirement long-term or short-term? Do you want to create an asset for your family, or do you want to sublet it? If you are buying a house for your children, you should anticipate the potential scenario of them moving out. If you want to buy a home for the short term, renting a house would be cheaper. If you are purchasing a house as an investment, ascertain its resale value. These are essential factors that help you buy the right type of house.

Fix affordability
Once you are clear about your needs, fix a budget and the amount of down payment you can afford. Apart from the actual cost of the house, there are expenses like monthly repayment, lifestyle expenses, cost of maintenance, taxes, and home insurance. Before arriving at a figure, consider other expenses like furniture, home appliances, and present and future needs.

Identifying real estate agents
The first point of asking for references for a reliable real estate agent would be your friends and family. Identify the best-rated ones and further verify if they have the needed licenses. Research online and go through their reviews and ratings. It is equally important to confirm if there are any lawsuits against an agent for malpractice.

Identifying right mortgage
Types of home mortgages include VA loans for active and veteran military members, USDA loans for rural properties, federal housing administration loans, conventional loans, and jumbo loans. In contrast, some lenders specialize in a specific mortgage, and some deal in more than one type of loan. Your current bank can be your first point of contact for a home mortgage, as they may offer benefits to existing customers. Understand the eligibility criteria for different loans and see which ones you are eligible for. Compare rates from multiple lenders, and read the documents carefully for hidden charges, fees, or penalties. Research a lender’s credibility online through reviews and other platforms like Better Business Bureau.

Making financial preparations
A clear, well-defined plan is mandatory for buying a home so that you can make mortgage payments on time. The important financial considerations for buying a property are listed below.

Down payment
The amount you pay upfront offsets the mortgage and is typically 3.5% of the total purchase price.

Credit score
Lenders consider your credit score to sanction or reject your mortgage. The ideal credit score may vary based on the type of loan.

Debt-to-income-ratio (DTI)
DTI is a percentage(%) metric that evaluates the amount of debt to your total income.

Closing costs
You have to consider multiple legal and processing charges that you have to pay before closure. These fees amount to about 2% to 5% of the purchase price. Many do not budget for closing fees and put themselves under financial stress.

Bringing down your DTI
The Federal Housing Administration (FHA) uses 43% DTI as a standard guideline for approving mortgages. Suppose you have decided to buy a house and have a DTI higher than 43%. In that case, you can bring it down by increasing income by taking additional freelance or part-time jobs, reducing expenses, consolidating debts, making regular payments to reduce your debt before applying for a home mortgage, and avoiding new credit.

Preparing necessary documentation
Insufficient documentation can result in rejection or delay your mortgage approval. Lenders consider your income, assets, employment data, current debt, and debt history using tax returns, bank statements, credit scores, W2, and pay stubs. Underwriters may ask for multiple documentary evidences to support your financial status. Prepare the documents in advance so that preapproval can be done without delay.

Making an offer
Visit as many possible homes and compare rates before making an offer. Ensure that you have begun the preapproval process for your mortgage so that you can make an offer immediately. Before making an offer, one has to consider aspects such as how long the property has been on the market, repairs or renovations that may require, and if others are interested in the property. It is also advised to compare the asking rate of other properties in the area.

Once you make an offer, the seller can accept, reject or make a counteroffer. If it is a house you don’t want to miss, renegotiate, write or talk to the seller, or use the help of your real estate agent to close the deal.