By the end of 2022, the US economy is expected to reach new highs, with GDP growth averaging about 4.3% and positive growth in corporate profits and stock markets, according to the latest forecasts by the US Department of the Treasury. In other words, there’s no better time than now to consider investing in real estate. But when it comes to buying a home, getting it right the first time is always better. And according to the latest home buying index, 66% of millennials between the ages of 25 and 34 say they don’t know enough about how to start a home search or purchase a home. Fortunately, they don’t have to go through it alone. Here are some tips from professional real estate agents on how to purchase a property in 2022.
Know Your Financial Situation and Make Sure You Have Enough Savings
The first step is to know exactly how much money you have to spend on a house. According to the latest estimates, in 2022, most home buyers tend to use a home equity loan. So if you want to buy a home according to Ofirio, you first have to make sure that you have enough money. And that means having a very clear picture of your credit history. According to the latest data,
- 37% of homeowners between the ages of 35 and 54 have a credit score below 680;
- 25% of homeowners between the ages of 35 and 54 have a credit score of 640 or below;
- Nearly one-fifth (18%) have a score under 600.
If your score is below 640, you will have difficulty getting approved for a loan from a traditional bank or a major credit union. So, before making a big purchase like a home, you need to check out your credit and, most importantly, your budget. Once you know how much you can afford to invest in real estate, check all the available housing options and get a list with the most suitable properties.
Decide on the Mortgage Type
There are three types of mortgages, mainly fixed, adjustable, and interest-only. The most common type of mortgage in 2022 is a fixed-rate mortgage. As its name suggests, it comes with a fixed interest rate for the life of the mortgage, while the payment remains the same throughout the term of the loan. The interest rate you will pay on a fixed-rate mortgage depends on your credit score, how much you pay for your principal, and how much you owe. You will have a lower interest rate if you do not pay off your principal every month.
An adjustable-rate mortgage is the second type of mortgage you can use to buy a home. It is a bit more complicated since you have to make additional payments to keep your interest rate low. If you make your mortgage payment every month on time, you can also get a lower interest rate. But, if you miss a payment or are late on one, your interest rate will increase significantly.
With an interest-only mortgage, you will only pay interest on your monthly mortgage payment for the first years of your loan. This type of mortgage is the cheapest for new homebuyers, but it does not allow you to refinance the home anytime you want, unlike a fixed-rate mortgage. It’s worth noting that you have to be sure that you can make your payments every month. If you miss a payment and do not make it on time, you will have to pay more than you originally agreed to. But you should be able to handle this since you will not have to refinance your mortgage again.
Learn Available Financing Options
After you learn the different mortgage types, you need to determine what financing options are available. There are many different types of lenders who you can go to get a mortgage, however, more than one-third of home buyers tend to look for a loan from a bank.
If you are a new homeowner and do not have the credit history that you need to get a traditional mortgage from a bank, there is a type of loan that you can get – a federally insured loan. This means that the government backs the loan and that it is protected if something happens to your house.
There is also a loan called a first-time home buyer’s mortgage, a government-backed loan intended to help people with a lower credit score. If you do not have proper credit, your score is too low, or you have not paid your credit card bill in the last six months, you need to start looking for a loan from a bank or a credit union. But, if you can get a first-time home buyer’s mortgage, it is not as complicated as you might think. This is not a one-time process but a one-time payment, where you only pay once every three years.
Check a Home Insurance Before a Purchase
Home insurance is one of the most important purchases that you will ever make, so take your time to get to know your insurance needs. The first thing you need to understand is that your home insurance does not protect your home against fires and earthquakes. The insurance you get does not cover these types of things since this is something that you cannot control. So, if you buy a house in an area with a higher risk of a fire or an earthquake, you will need to ensure that you have additional insurance. Besides that, you should also ensure that you have a policy covering floods because you can be out thousands of dollars if there are frequent floods in the area. Besides, getting a policy covering damage from tornadoes, strong winds, and even fires will also be great. Thus, it will cover your needs and safeguard your investment.
Real estate investing in the US is all the rage these days. So, this guide is for those who want to make it short, sweeter, and probably save some money as well.