The good news is it is an excellent time to enter the real estate market since the interest rates are still low in many states across the country. The NerdWallet’s 2019 Home Buyer Report states that in 2019 more than 33% of Americans planned to buy a house within the next 5 years and 25% in the next 12 months.
However, jumping right into the housing market to buy a house without adequate preparation is an invitation to disaster. There are online companies, such as UpNest, that will help you out by providing a broker.
So, hiring a broker of the specific location of the house you intend to buy is crucial, since he or she will not only save you time, effort and money but also apprise you of current mortgage rates and sales trends. So, take pains to find a realtor, compare agents, and be clear on real estate agent fees.
However, it is vital to know all the things required to buy a house in 2020. Let’s see what these are:
Figuring this out will indicate whether you are in a position to buy a home. A thumb rule is to triple your combined annual income to arrive at a definite figure. If, for example, your combined annual income is $120,000, then you can buy a house worth $360,000. This means you need to study your current income, assets, and expenditures, as also your investments, banking and credit card statements, and weed out unnecessary expenses.
#2 Preapproval letter
Finding a lender is easy, but whether that lender will lend you money is not. Things do become easier if you have a preapproval letter. This indicates to the lender your seriousness in buying a house. The issues you need to address for getting preapproval may relate to student loans, significant recent cash deposits, and reporting self-employed income.
#3 Credit score
FICO or Fair Isaac credit score is vital for buying a house. If you have a FICO of 620, you can hope for a loan. However, if it is below this score, it will be difficult to find a willing lender, though some lenders entertain a credit score of 580 or below. The average credit score is considered to be between 620 to 680. A very good credit is from 680 to 740, and an excellent one is above 740. You need to be really careful in maintaining a good credit score by avoiding major credit purchases and not opening any new lines of credit.
#4 Down payment
It is a myth that you need a 20 percent down payment to buy a house. Nowadays, people are buying homes with three to five percent down payment. According to the National Association of Realtors, in 2019, six percent was the median down payment made by first time home buyers, and 16 percent was for repeat home buyers.
Fortunately, the 2020 mortgage rate trends indicate mortgage rates will continue to be around four percent, barring an unforeseen economic downturn. The steady mortgage rates will benefit home buyers and put their minds at ease regarding the rising rates that push monthly payments up, making them unaffordable.
A lot of paperwork is involved before you get around to buying a house. This needs to be organized to get a mortgage application through. These documents include:
● Federal and state tax returns for the last two years plus associated W-2 or 1099 forms.
● Complete bank statements for the last two months.
● Investment accounts statement for the last two months plus quarterly reports from your 401(k).
● A detailed account of monthly debt schedule, which includes all loans and credit accounts, balance due, and minimum monthly payments.
● Income statement or appointment letter from the place of work.
● Self-employed are required to verify their income through profit-and-loss statements and balance sheets.
● Other documents required may include rent payments, past bankruptcy, foreclosure, gift letters, divorce decrees, and others.
Finding a suitable house in the area of your choice and within your budget is certainly a tall order. You will certainly need the help of real estate companies. You can gauge their competence by reading reviews.