How does owning a house work

The type of home that a person prefers is another factor to take into consideration when determining where to live. Things to consider include buying a new home versus a resale home.

Home types include single-family detached homes, semi-detached homes, duplex homes, town houses, or even condos. When determining what type of home is the best fit, a person should take into consideration the lifestyle that he or she lives, current needs - such as rooms - and future needs of the family if it should grow.

A real estate agent isn't always a necessity when it comes to buying a home, but he or she can be an invaluable tool for those who do work with one. An agent will understand the real estate market and lead homebuyers to the homes that they want to see.

As a result this will save the home buyer time and frustration. The recommendation of friends or family members is one of the best ways to choose a real estate agent. If there are no recommendations, choose a real estate agent or agency that has a good reputation in the area. The agent should be a buyer's agent dedicated to working in the best interests of the buyer.

The agent should also be someone who listens and has no problem answering any questions that are asked of him or her. Now that a the home buyer has determined the type of home that he or she is most interested in, the location, and has obtained the services of a real estate agent, it is time to view available homes in the area.

Of the steps to buy a house, this is often one of the most enjoyable. The real estate agent will locate and screen homes for the buyer and present him or her with the options that best match the established criteria. The agent can set up a date and time to visit potential homes. During this time the buyer should not feel pressured or make hasty decisions. Once the buyer has found the perfect home, it is time to make an offer on the property. This is an area in which a real estate agent is invaluable.

He or she will base the offer price off of comparable homes that have sold recently in the area. The agent will draft a contract that is agreeable to the home buyer. A complete and accurate budget is the best way to figure out exactly how much money is available every month for a mortgage payment.

If that number is lower than the bank's, play it safe and go with your calculations. Notice that there's a difference between getting pre-qualified and getting pre-approved. Pre-qualified means that you've told a lender your income level and your debt and credit information, and the lender estimated what you can afford.

Pre-approval, however, means that the lender has done the legwork of pulling your credit report , checking your debt-to-income ratio , and running a more in-depth analysis of your financial situation. The result is an official pre-approval letter than can be help seal the deal when negotiation with a seller. Sellers know that a pre-approved offer is more likely to result in a completed sale , which might convince them to accept a lower price.

Throughout the pre-approval process, there are some key facts to remember. The monthly mortgage payment is only part of the expense of buying a house. In most cases, you're expected to make a down payment of at least 20 percent of the home price to secure the loan. First-timers can take advantage of programs that allow them to put down significantly less money. To do that, you'll need a significant sum of cash on hand. There are also a number of additional costs that are not included in the standard calculation of monthly payments.

Ask your lender about property taxes in your area, the cost of mortgage insurance and the average closing costs for homes in your price range. Read How Mortgages Work for an in-depth review of the whole home financing process. Before you even begin searching online, sit down and think about what you "need" versus what you "want" in a home.

Start with the things you absolutely need: three bedrooms, central air, a backyard, a good school district, etc. Then list your wants: hardwood floors, a large kitchen or a swimming pool. By keeping these distinctions in mind, you can focus your search on the homes that meet all of your needs and include at least a few of your wants. Always be prepared to make some compromises to stay within your price range.

Consider different types of homes such as condos, town homes and apartments. Depending on the stage of your life, a low-maintenance condo or apartment may be a better choice than a single-family home.

Also think about the style of home you like: traditional or modern, brick or aluminum siding? While these seem like superficial considerations, you might find that you or your spouse has strong opinions. Of all of the decisions to make before you begin your home search, arguably the most important is location. The location of your home mirrors your list of needs and wants.

If you need a good school district, stick to locations with good schools. If you need to be able to walk or bike to work, search within a tight radius of your office. If you're looking for peace and quiet, avoid homes along major roads. By combining these requirements, you will waste less time looking in the wrong places.

Keep in mind that your location preferences may change over time. For example, having kids raises the importance of a good school district. And what if you lose or leave that walkable job? Would you still want to live in that neighborhood? Make sure to balance your near-term needs with your long-term goals. With a tight housing market, it's not always possible to sell and buy a new house every few years.

Do you need a real estate agent to buy a home? Absolutely not. Anybody with an Internet connection can search and view homes on the market. You can customize your search by price range, number of bedrooms, style, and location, and even contact the sellers to arrange a showing.

But with so many tools at our fingertips, why do most people still use a real estate agent? To answer that question, we first need to define our terms. Real estate agent or realtor is the general name for someone licensed by the state to help people buy and sell homes. Real estate agents provide a huge advantage because they know the process and the paperwork; they have relationships with lenders and understand the local market. However, as a homebuyer, it's important to understand that most real estate agents are working for the seller, not you.

The reason is simple; the seller is the one who pays the commission when the home is sold, not the buyer. Since the real estate agent's commission usually 5 to 7 percent is higher when the price is higher, it is in the agent's interest to secure the highest sales price.

Keep this in mind if you contact a real estate agent directly regarding a specific home that you find online. While the agent may be a perfectly decent and ethical individual, the simple fact is that he or she is not working for you. Your agent is working to sell the house. In fact, he or she is bound by contract to try to get the best deal for the seller.

Another thing to understand is that most real estate agents work for a specific agency. If you call up George from Howard Hanna and ask him to show you some properties, he'll likely show you homes that he's listing first, then homes that other Howard Hanna agents are listing.

For him, it simply makes the most financial and business sense. But for you, it limits your choices. The best type of real estate agent for a homebuyer is a buyer's agent. This individual signs a contract with the buyer to help find the best house for the best price, regardless of which person or agency is listing the house.

We'll talk more on buyer's agents on the next page. A buyer's agent is a real estate agent who is working exclusively for you, the homebuyer. A regular real estate agent becomes a buyer's agent by signing a contract with the buyer. The contract stipulates that the agent will work to negotiate the best price, ensure the property is inspected, and represent your interests throughout the entire process.

What you tell a buyer's agent, like the maximum you can afford to pay, remains confidential. How do you find a buyer's agent? Shop around. Meet with different real estate agents and have them show you a few houses.

Look for someone who really understands you and your particular needs. A good place to start is by asking friends and neighbors for recommendations. Will you pay more for a buyer's agent? Not usually. In most cases, the buyer's agent splits the sales commission with the seller's agent and you don't pay anything. You could argue that this arrangement still favors the seller, since even the buyer's agent will want the highest commission possible.

Buyer's agents counter that the difference in commission is usually so small that it doesn't affect their loyalty to the buyer. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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Personal Finance. Your Practice. Popular Courses. Part Of. How Renting Works. Know Your Legal Rights. Types of Renters. Insurance for Renters. Alternative Investments Real Estate Investing. Table of Contents Expand. Nonrefundable Upfront Fees. Lease-Option vs.

Agreeing on the Purchase Price. Applying Rent to the Principal. Rent-to-Own Home Maintenance. Buying the Property. The Ideal Rent-to-Own Candidate. Before You Sign the Contract. The Bottom Line. How is rent to own different than buying a house? Getting preapproved takes a little more work. A lender will need to verify your financial information and submit your loan for preliminary underwriting.

Bad financing turns your biggest asset into a liability. You can do a lot of research on your own, but you need the help of an expert when it comes to actually finding and securing your perfect home. In some cases, they may even be able to help you find a house before it hits the market, giving you a competitive edge. A real estate agent will advocate for your best interest and is a crucial part of your home-buying team. So how much should you be prepared to pay? Why would you not want to have a true pro in your corner as you make your biggest investment?

You may know a lot of real estate agents in your area. But keep in mind that not all agents bring the same knowledge and experience to the table. You want an expert who can show you how to buy a home! A true rock star will have:. As a home buyer, working with a rock star agent is one of the biggest advantages you can give yourself! To get started, first create a list of must-have home features. Once you have clarity on the features you both want, share them with your real estate agent and use those criteria as the foundation of your home search.

Your agent will be able to help you set realistic expectations and target your search to areas you can afford. Here are some house-hunting tips to help you make a smart investment:. That means submitting an offer and signing a contract agreement with the sellers. Your real estate agent will work with you to submit a solid offer. If you end up in a bidding war with other buyers, keep a cool head and put your best foot forward. Things like being preapproved with your lender and having a flexible closing date can help make your offer strong.

Sometimes agreeing on terms is quick and painless, but it can also be one of the hardest parts of the process. If your negotiations get intense, remind yourself that both parties want the same thing.