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Buying a House in the USA

Buying a House in the USA

No matter how well you can picture your dream American house and communicate that idea to a Realtor, (that’s real estate agent to you and me) the house you finally fall in love with, may have little resemblance to the picture you started out with in your head. But you have to begin somewhere, and a detailed wish list is a great start.

Figuring out what you want and how to get it”¦.
No matter how well you can picture your dream American house and communicate that idea to a Realtor, (that’s real estate agent to you and me) the house you finally fall in love with, may have little resemblance to the picture you started out with in your head. But you have to begin somewhere, and a detailed wish list is a great start. Let's say your wish list in order of priority, looks like this:

  • Two bedrooms, two baths
  • Safe, quiet neighborhood
  • Garden
  • Ability to add on
  • No major repairs needed
  • Close to downtown
  • Craftsman-style detached home
  • Lots of natural daylight
  • Parking
  • Good investment with excellent resale potential
  • Affordable property taxes
  • Neighborhood matches family personality, culturally and politically
  • Enclosed laundry area
  • Walk-in closet in master bedroom
  • Gas hookup for stove
  • Back deck or patio
  • Close to work, schools, church
  • Finished basement for office or guest room
  • No threat of commercial encroachment
  • Within 1/2 hour of the airport
  • Hardwood floors
  • French doors leading to backyard
  • Close to public transportation

Now, what if you could only choose 5 to 10 of these options? How would you prioritize it then? These details are invaluable when dealing with the Realtor (guess we’d better get used that word, if you are going to integrate into a new way of life).

What Can You Afford?

Every market is different, but the first step to answering this question is finding out what you can pay on a monthly basis after you've made your down payment””5, 10 or 20 percent of the asking price of the house. The deposit will also depend on the type of visa you acquire or if you have a green card.

Don’t forget, you don’t need a visa to buy a holiday home in the States.

Find a loan officer.

The best way to learn what you can afford is to get prequalified for a loan. Your Realtor may recommend someone or you can just walk into the office of a local lender. Do not expect it to be easy if you are a “New Arrival”. Prequalifying won't cost you anything, except a sales pitch, since the lender would love your business when you're ready to apply for a loan. You'll walk away with a good idea of how your income, assets and liabilities translate into what you can afford, and it can also help your chances of beating out the competition in a sellers market (where there are more buyers than houses on the market). Or you will walk out banging your head against a brick wall.

Do the math.

You can start by doing a simple calculation on your own.

Broker wisdom says that monthly payments should be 25 to 33 percent of your monthly gross income.

To calculate: Take your monthly income before taxes, including all sources, and divide it by four. Subtract from this figure the total amount you pay per month in debts (loans, charge accounts and the like). The result is the lower end of what you can reasonably afford to pay on a monthly basis. After deducting monthly homeowners insurance (say, $50 per month) and property tax payments ($100), you'll see approximately what you can afford for your monthly loan payment. To calculate the higher end, divide by three instead of four.

To find out how this translates in terms of house pricing, multiply your final total above by 12 (months) and then divide that number by the average interest rate on loans today””say, 8 percent cent. The result is the approximate market you'll be focusing on.

Additional costs.

Keep in mind that in addition to the purchase price you'll need extra cash for closing costs (including points and fees), inspection and future expenses. Everyone who works on your loan expects to get paid. To get through closing””meaning, once you've signed the last remaining paper after agreeing on price and terms with the seller””the cost TO YOU will typically be 2 to 7 percent more than the agreed-upon selling price. If you calculate that from the middle zone, at 4.5 percent, a $200,000 house will cost $209,000 to purchase. Be sure to consider annual property taxes and repairs (predictable and unexpected). First time home owners also, in the States, typically have to also pay the first years worth of house insurance up front, at least 2 to 3 months of property tax (similar to council tax and with similar benefits). The closer, either an attorney or a title company depending on the State will also require payment for their services. Underwriting and processing fees can be hefty but ask your Mortgage officer to ensure that you are protected and explain the process to you upfront. A good Mortgage officer will go through the closing costs at the start of the application, so that there are no nasty surprises in store. Also ensure that you are as honest as you can with the mortgage officer, about your situation, any nasty shocks can break a deal.

Take heart in knowing that most first-time buyers in America are simply getting into the housing market. Your dream house may be two or three houses into the future and with so much choice”¦ could end up becoming an Investment Tycoon.

{mosbanner right}Starting the House Hunt

So now, we know what the priorities are, how much we can spend, now we have to decide what kind of house we are looking for”¦..a condominium (customized flat that you own), co-op (a flat that is within a shared building), townhouse (we would say terrace house but heck of a lot bigger and nicer), single-family detached home (detached house with the yard) or if you really have cash to splash, then a custom built mansion. Begin with interviewing several Realtors, if you aren’t sure, ask for references or maybe someone can refer/recommend you to an agent. A great Realtor can educate you about what to look for and avoid, provide reliable references for other experts you'll need along the line””such as lenders and inspectors””and represent honestly you in negotiations and at closing.

Now you are ready to start explore the housing market. It is recommended to view as many houses as possible so you can achieve a sense of market value and better understand the area housing market. Initially look below the PREFERRED (PURCHASE PRICE) value you were thinking of, you may find a bargain that you would have missed. Remember; at each house that you view (and that includes “open houses”) inform them of your Realtor’s name and your loan officer.

Ask around about other people’s Home buying experiences after all, there is no one better to share advice and ideas than people who have already done this prior to you. Since the internet is a great place to start as Expats, (as we are nicknamed) we have quite a lot of websites available to us to utilize.

Lastly, when you feel like your feet can take no more, take the day off – the houses will still be there tomorrow! You will look back on this experience and say it was all worthwhile.

Good luck and happy house hunting.

©Lizzy McNaney-Juster
First National Mortgage Sources, LLC
Tel: 303-241-7853
[email protected]
Mortgages available in all 50 states.