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Duration:04:52
Uploaded:2016-01-01
Last sync:2018-11-22 08:40
In which we discuss how to buy a house, including how a mortgage works (with a quick mortgage calculator), realtors, home inspections, and how the heck to do price negotiation!

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& T. Michael Martin

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[intro plays]

Emma: Hey. So, we've already made a video about deciding whether to buy a home. Today we're going to talk about how to do it.

Number 1: credit check yourself before you wreck yourself. Knowing your credit score is important before making any large purchase. We've made a video explaining what credit scores are how to find out what yours is which you can watch here, you can pause this one go check out that one, I'll be right here waiting for you. Basically, the bank you choose for your mortgage will pull your credit score/report when you go to inquire about a loan. The lower your credit score the more of a risk you are and the more interest you'll have to pay. If you check beforehand and see that your report is in rough shape, maybe work on repairing your score before applying for a mortgage.

Number 2: determine your budget. How much can you or do you want to spend on a house? There are few different ways to determine this. First you should ask your mortgage lender for pre-approval letter. This will tell you the maximum the bank is willing to lend you based on your income, your other current debt and your credit history. But just because the bank will give you a certain amount of money doesn't mean you should spend the full amount, after all it never hurts to have a little extra scratch for the Disney World trip jar am I right?

Mike: You are so right.

Emma: Not only will this cut down your mortgage payment, it's also typically cheaper to maintain and pay taxes on a smaller house. General rule of thumb: buy a house that costs no more than three times your annual salary. So if you make fifty thousand a year you should be looking at houses at around a hundred and fifty thousand.

Number 3: Stack up your savings! If you're planning on purchasing a house you're supposed to put down no less than 20 percent. So the house that we were just talking about the cost 250 K, you're expected to put down thirty thousand in cash. Now bank's have come up with loans that require less than 20% down, these loans however carry a penalty called private mortgage insurance which can be quite pricey in the long run. Also think of the other costs: moving costs, furniture, fees for hooking up utilities, so having a financial cushion equals A++, 10 out of 10, would recommend.

Number 4: time to find a home. Before diving into your home search you should probably find a realtor or real estate agent first, someone who can help you navigate the housing market and who can answer questions that come up during your search. A quick search online can bring you Realtors or agents in your area or if you have friends who have recently purchased a home you can ask them if they have any recommendations. Your home search can start on the interwebs too. Many sites show listings available in your area and also include pictures, details about the home, and the listing price. You usually also find a mortgage estimator on these sites which can tell you roughly what your monthly mortgage payment would be. Once you've narrowed down the hunt, you can visit houses with your realtor or agent. Pro-tip: consider bringing a video camera to make a little walking tour of the house so you can remember what it felt like to be in that particular home.

Number five: once you've found the perfect house it's time to make an offer. Your representative should be able to give you an idea of the fair market value for the house that you want. Prices are negotiable but realize that most sellers have done the research you done and know what their home is worth.

Number six: if you in the seller reach an agreement, you'll enter into a contract to buy the house. When you enter a contract, you usually pay some earnest money to show that you're serious. This is also when you finalize your loan with the mortgage lender. The bank will almost always do an appraisal so they'll know exactly how much the property is worth. They'll then be able to tell you what your closing costs and down payment will be. From the time you sign your contract you're 30 to 60 days out from spending the first night in your new

Mike: Hizzy! Which I wrote but Emma didn't want to say so here we are.

Emma: Teamwork! It does make the dream work.

During this period you'll need to arrange an inspection to make sure there are no problems with the house or the property. You'll also likely need to provide your lender with a ton of paperwork to prove that you really can pay for this thang. [Mike laughs] I said it!

Number 7: it's closing time, so get ready to sit in an office for an hour or two and sign lots of documents. Closing is also when you pay your down payment and closing costs. When all the paperwork is done and money has exchanged hands, you get your keys and the house is yours.

But that's all we've got for you today, if you have any tips on home ownership, we would love to hear from you in the comments section below. In the meantime, the closing costs for today's video is the catchphrase, which we will retain in exchange for the video. Gah, there's some other joke to be made here. Got anything good?

Mike: Hizzy. [laughs]

Emma: Oh Jesus [sighs and then laughs] OK. I think we're OK.

Mike: I think that works. Yeah.

[endscreen]