Buying a new home for you and your family is one of the most exciting and rewarding experiences. However, as you probably already know, buying a home can also be incredibly stressful. Between getting approved for a loan and haggling with the seller, things don’t always go as planned.
We’re here to make your life a bit easier. We want to walk you through the most important things you need to know about the buying process.
Keep reading for everything you need to know about buying a home in Dallas in 2021.
Understand the Costs of Homeownership
Before you start shopping for homes or getting pre-approved for a mortgage, you need to understand all the costs of homeownership. The truth is, there is much more to owning a home financially than simply paying the monthly mortgage payments.
To ensure your financial security in the future, you need to identify these costs before signing for a home loan. Depending on where you live, these costs may include:
- Homeowner’s insurance
- Property taxes
- HOA fees (if your house falls under a homeowner’s association)
- Utilities (water, gas, electric, waste removal)
- Services (internet, cable, phone)
- Yearly home maintenance and repair costs (typically $1,000 to $3,000)
Figure out what costs your home will be subject to based on your desired neighborhood. Then, get an average of the monthly costs for each category based on the area.
Determine What You Can Comfortably Afford in Monthly Payments
Now that you know more about the true costs of buying a home in Dallas and being a homeowner, you can get a better idea of how much you can afford in terms of monthly mortgage payments. It’s important to pick an amount that you can comfortably afford.
Do not max out your monthly budget. Roughly 53% of Americans live paycheck to paycheck because they have too many monthly expenses. They take out the max amount on home loans, car loans, and more, don’t follow in their footsteps.
Use our monthly payment calculator to get a better understanding of your total mortgage affordability.
Get Pre-Approved to Identify Your Home Mortgage Eligibility
Now, it’s important to recognize that what you can afford and what a mortgage lender thinks you can afford might be two different things. Mortgage lenders use your overall credit score to gauge your eligibility for home loan amounts and interest rates.
If you have a low credit score, you’re going to be limited on how much you can get approved for. Furthermore, your interest rates are going to be much higher, which will cost you tens of thousands of dollars more over the life of the loan.
Before buying a house or even starting the shopping process, get pre-approved so you know your loan eligibility going in. Otherwise, you may end up putting an offer down on a house you’re not qualified for.
Take Steps to Improve Your Credit Score
If you’re planning on buying a home in Dallas but come up short in the pre-approval process, your next step is improving your credit score. We understand this can be somewhat demoralizing.
However, if you want to get the right house with a decent mortgage, taking three to six months to boost your credit can make a profound difference. Not only that, but it will save you tons of money in the long run.
Increasing your credit score is easier than you might think. Here are a few tips:
- Pay all of your bills on time
- Consolidate your debt
- Reduce your debt to income ratio
- Implement a debt payoff strategy
You can find extra money in your budget to make these changes by cutting out unnecessary expenses in your life like dining out and online shopping.
Educate Yourself on the Different Types of Home Loans
Before buying a home in Dallas, learn about the different types of home loans.
First, think about the repayment period. There are 15-year and 30-year mortgages.
A 15-year mortgage will have a higher monthly payment but will cost you less over the length of the loan in interest. After 15 years, you will own the house free and clear.
A 30-year loan, on the other hand, will be much more affordable but you will pay more over time. You’ll have an extra 15 years of interest payments.
Fixed-Rate Vs Adjustable-Rate Mortgages
Next, look at adjustable-rate mortgages versus fixed-rate mortgages.
An ARM is good for people who know they may be moving or selling the home sometime in the near future. They can take advantage of the low fixed-rate phase while they own the home then sell the house before the adjustable rate kicks in. Additionally, ARMs have the potential to get lower as well, depending on the housing market.
Fixed-rate mortgages are obviously a more secure option, whatever your rate is going in, it’s guaranteed to stay there throughout the life of the loan. If it’s a little high now, you can refinance in a few years for better terms, assuming your credit score has improved.
Conventional loans are traditional non-government mortgages where buyers are advised to put 20% down on the house. If you can’t afford 20% down, you’ll have to purchase private mortgage insurance, which will be added to your monthly payments. Conventional loans are harder to get and require a minimum credit score of 620.
Your other option is an FHA loan. These loans are government-backed and allow people with lower credit scores to get approved for mortgages with a minimum down payment of 3.5%. These come with a mortgage insurance premium worked into the price of the home.
Each type of loan comes with its own standards for potential properties. Mortgage lenders, like any other business, need to make wise investments.
Learn the Dos and Don’ts of the Closing Process
When buying a home in Dallas, it’s important to be cautious with your finances before the purchase agreements close. During the closing process, you can disqualify yourself by changing jobs, taking out a new loan, and more.
For your convenience, here are the things you should and shouldn’t do while waiting for your home purchase to go through.
Planning on Buying a Home in Dallas?
Think you’ve got your finances figured out? If so, you’re one step close to buying a home in Dallas.
What’s the next step? Why not start by applying for a mortgage. We can help you understand your eligibility and provide you fantastic rates.
Contact us today to learn more. We look forward to working with you!