While it’s exciting to think about owning your dream house in beautiful California, you still need to come down to earth to ensure successful results. Not only do you have to gain pre-approval, but you also need to know some of the ancillary costs involved in owning a home.
You may not be familiar with some of these costs if you currently rent. Therefore, review the following information so you can make your dream of owning a home a pleasant reality.
Searching for Home on the Ardent Real Estate Group Website : Buying a House
When you start your home search, it helps to get pre-qualified first. That way, you can narrow down your choices and save time and frustration. If you don’t get pre-qualified, you won’t have a solid idea of what you can afford. Some houses may be too pricey for your budget. Therefore, get prequalified first before you begin to look at homes online.
1. A Pre-Approval is More Valuable than A Pre-Qualification
While pre-qualified can get you started on an online search, a pre-approval for a mortgage loan indicates you’re serious.
A mortgage pre-qualification offers a helpful guess about what you can afford to spend, while a pre-approval requires you to provide your credit report to a mortgage lender.
If you search for properties through a website like the Ardent Real Estate Group, you can commit to the home buying process more quickly if you’re pre-approved. A pre-approval is suitable for a specific time frame, such as 60 or 90 days.
You will experience several advantages by getting pre-approved for a loan. By taking this critical step, you can review your loan options and unearth any issues with your credit score. You can also find out the maximum amount you can borrow to determine a price range.
You can figure your monthly mortgage payment based on your down payment, home price, property taxes, and loan terms by getting pre-approved. You’ll also have to factor in costs, such as the interest rate on the mortgage and what you’ll pay for homeowner’s insurance. If your credit score is lower, you’ll need to pay a higher APR.
If you determine pre-approval using a mortgage calculator, you’ll enter your loan term (10, 15, 20, or 30 years) and insert your credit score or APR and your down payment. Providing this information will give you your monthly payment for the loan term, the amount of the principal and interest, and how much you’ll pay in property tax.
You can also review the mortgage total and the total interest to see how much you’ll pay. This assumes you’re choosing a mortgage with a fixed rate. If you opt to finance your home with a variable rate loan, you’ll usually receive a better rate upfront. However, you may run into a higher-than-acceptable interest rate later.
2. Property Tax Rates Also Play a Part in Your Choice of a Neighborhood
While some areas of California feature lower property tax rates, other regions may be cost-prohibitive. Therefore, it helps to know which communities charge lower property taxes. For the most part, Californians pay reasonable rates for property taxes. For example, the average property tax rate in California is 0.73%.
Cities taxed more heavily include Hillsborough, Newport Coast, Hidden Hills, Atherton, and Los Altos Hills. If you’re interested in living in a specific city or suburb, check the property tax before you begin your search
3. Some Communities Assess Homeowners Association (HOA) Fees
As a renter, you may not be aware that you’re responsible, in some instances, to pay HOA fees. Therefore, if you wish to buy a property, you may need to include the HOA cost into your payments. The HOA’s board of directors typically sets the fees for a community.
If you live in a condominium, the HOA fees will usually go toward building maintenance or maintaining the elevators and lobbies. They are also used to support the community’s parking spaces and swimming pools.
If an HOA community comprises single-family homes, the HOA dues go toward road maintenance and landscaping.
4. Most Lenders Will Not Approve a Mortgage Unless You Get an Inspection
As a contingency plan, you should schedule a home inspection. Doing so will help you avoid any future repair issues. Lenders also may not offer financing without an inspection. Generally, however, an inspection is a good idea, as it will tell you if you have significant problems, such as mold, corroded plumbing, or frayed wiring.
Typically, you have seven days to withdraw an offer after receiving your home inspection results. The inspector checks the outside and inside of a property during a home inspection, including the roof, pipes, foundation, HVAC system, and wiring. The cost of inspecting a home can range from $300 to $500. However, paying for the inspection can save you hundreds of thousands of dollars, so you can’t overlook its importance.
5. Closing Costs are Also Included in the Real Estate Transaction
While it helps to know how much your monthly mortgage payment will be, you also must understand what closing costs you’ll assume. These expenses are also part of what you’ll be paying to gain the privilege of owning a home.
Closing costs usually range from 3% to 6% of what you’ll pay for your house. So, if you buy a home worth $400,000, you’ll pay from $12,000 to $24,000 in closing costs. What you pay will depend on the loan type and the lender’s requirements. Therefore, you need to know how much it will cost to close your property.
Generally, it is better to pay the closing costs out-of-pocket as a one-time expense. Otherwise, you can fold them over into your loan amount for Buying a House. Closing costs usually include the application fee for processing your loan request, an assumption fee if you’re assuming a mortgage and taking over the remaining balance, and attorney’s fees. You are also charged for prepaid interest and a loan origination fee.
Know What You’ll Owe Before Buying a House
The above facts can be an eye-opener for first-time buyers. However, you need to know this information to avoid misunderstandings when purchasing a property. Review your financing options carefully and know how much you can afford. Taking these measures will help you get through the Buying a House in California process successfully.