Thirty can be the best age for you to start thinking of investing in a property. By this time, your career is on the right track, you have a significant amount of savings, and you have built a good credit score. Being in your thirties also gives you the maturity that is required to own and maintain a house. But before you hit the market, make sure you have sufficient knowledge of what purchasing a house entails.
In the United States, the down payment is one of the biggest upfront costs you need to shoulder when buying a house. Down payment is technically the price you pay when you close a deal with a real estate broker. It also affects the type of mortgage you would qualify for and the amount of money the lender is willing to give you.
How much is a down payment? Generally speaking, the typical down payment cost in the United States is 20% of the property’s total price. You also have to consider that choosing to pay a lower price for the down payment will incur higher interest and fees in the long run.
A mortgage is a type of loan used when buying a real estate property that you agree to pay back over a period, including interest. The house that you’re buying is the collateral that will secure the loan. If you stop paying the mortgage, the lending company has the option to foreclose the property.
To qualify for a mortgage, the lending company will first conduct a credit check to verify if you are qualified. They will also look at your recent tax returns, proof of current employment, and bank statements and investments. If your application gets approved, the lender will allow you to borrow a certain amount.
The two most common types of loans are 15-year and 30-year fixed-rate mortgages. Some mortgages have a term as short as five years or as long as 40 years. If you are a first-time homebuyer with a loan, keep in mind that stretching the number of years may lower the monthly payment and increase the interest rate.
Everyone who owns a house is subject to property tax. The local government collects a certain amount of tax from homeowners to fund services and projects that will help improve the community like emergency services, public hospitals, roads, and schools. If you are successful in applying for a mortgage, there is a huge possibility that the tax is already included in the monthly mortgage payment. If not, then you have to pay the tax voluntarily.
Property Tax is classified as an ad valorem tax, referring to the amount of tax is based on the total value of the property. It is the job of a property assessor to determine the property’s value by estimating its fair market value or FMV — the cost that you and the seller would agree on during an open market.
The mortgage that you have might include at least one or two types of insurance: private mortgage insurance (PMI) or home insurance. The latter is designed to protect your belongings and house against fire, theft, personal liability claims, and natural disasters. On the other hand, private mortgage insurance, or PMI, is for those that paid a down payment that is less than 20% of the property’s total value.
Every home insurance has a liability limit that refers to the total amount the insurance will cover if an unfortunate incident occurs. Generally speaking, the standard liability limit is set at USD100,000, but as a policyholder, you can always choose a plan with a higher limit. If you live in an area prone to natural disasters, you might be asked to take out special coverage that will ensure your house against earthquakes or floods.
Before making an offer and closing a sale, the house needs to be checked by a professional home inspector to ensure it is in good condition. Many buyers tend to take this for granted because it’s an added expense, but this is important because the inspection will determine if any major repairs need to be done, especially if it concerns your safety.
In most cases, real estate agents work in partnership with professional home inspectors. But if not, you can always look for independent companies that offer this service. During the home inspections, they should look at:
- Pre drywall — the mechanics and structure before the drywall is laid
- Foundation — if the concrete is poured correctly with no cracks or damages
- Full Inspection — checking of the plumbing and electrical system and HVAC unit
Being able to own a house in your thirties is an achievement on its own. It proves your independence and capability to maintain and keep a house up and running. This is just the beginning of a new phase in your life, and with proper knowledge, you can make sure that you’re heading in the right direction.