Buying a house is the biggest financial transaction most of us will ever make, and people can experience both positive and negative outcomes for decades afterward. The most important factor that determines whether the purchase was a success is the value of the home. After all, whether the price was Rp 100 Million or Rp 1 Billion paying too much for a property is a bad deal.
Of course, a lot of emotion goes into buying a house. You can love a place so much, you can feel that you must own it at any price. But a few years into a mortgage, if your dream house has failed to grow into the inflated price you paid, it becomes a recipe for buyer’s remorse. Not only is the house worth the same—or less—than you paid, but you miss out on financial advantages that come with home equity such as eliminating the added expense of mortgage insurance, and the ability to use your home’s equity to leverage credit. So keep reading to learn the top tips to ensure you get a fair deal in the real estate market and avoid overpaying for a house.
Prepare yourself financially.
Don’t bother shopping for a house before thoroughly reviewing your financial situation to see what you can afford. What is your monthly budget for housing? What is your debt-to-income ratio? How much cash do you have on hand for a down payment? The best deals are available to those who put down at least 20 percent.
Lenders and other financial experts use a rule of 28/36 percent (or lower that depends on your credit rating) to help clients determine how much they can afford to spend on a house. No more than 28 percent of gross income should be spent on housing, and no more than 36 percent should go to total household debt. So if your income is Rp 15 Million per month, your house payment (including taxes and insurance) should not exceed Rp 4,2 Million per month. Total household debt, including housing and other monthly obligations like credit cards and other loans, should not exceed 36 percent, or Rp 5,4 Million
Shop for your mortgage.
Getting the right mortgage can potentially save you tens of thousands of dollars over the life of the loan. The money you borrow is principal, and the price you pay to borrow the principal is interest. Over the lifetime of a mortgage, you pay far more in interest than the amount of principal that you first borrowed. The two factors that impact how much interest you pay are the interest rate and the length (a.k.a. The term) of the loan. You pay more with higher rates and longer terms, and you pay less with lower rates and shorter terms.
Simply searching for online mortgage lenders provides great insight into the various mortgage types. Fixed rate mortgages charge the same percentage on the outstanding principal throughout the life of the loan. Adjustable rate mortgage (ARM) rates go up and down with market fluctuations. Terms range from 15 to 20 years. The most popular mortgage is a 20-year, fixed rate mortgage because it comes with a smaller monthly payment, but the rate is higher than with a 15-year mortgage. The lowest rates and least total interest you will pay are on 15-year fixed rate mortgages.
Get pre approved for a mortgage.
After getting to know the current state of the mortgage market, take the time to get pre-approved by a reputable lender — and don’t confuse prequalification with pre-approval. Prequalification is simply an estimate of the amount for which you may qualify, based on financial information you provide the lender. Pre-approval states the specific amount for which you have been approved, and the process to obtain it involves verification of financial information that you provide and a credit check.
Getting pre-approved ensures that the institution will underwrite a mortgage for up to a specified amount when you are ready to make an offer. Attaining pre approval can take several months, depending on your financial situation, the institution you’re working with, and how busy the market is. If you are looking for a way to secure your risk while you wait for bank approval in the situation which the seller requires you to pay for the down payment, Loyagami can help you mitigate the risk for that