Since the 1980s, the housing price index of single-family properties in Georgia has generally increased, even with five national recessions. If you inherited a house from the 1940s and sold it today, you will have amassed a profit that’s 6x larger (or more) than its original value.
More than its great investment potential, what makes Georgia a perfect place to buy a house is its flourishing urban environment. Fortune 500 companies have made a home in the state, and this is just icing on the cake for people who are looking to find their dream jobs. Georgia also has top educational institutions, a thriving entertainment & tourism industry, and plenty of quiet suburbs and towns for people who want to live away from the hustle & bustle.
If you are looking to build a home or set up your real estate investment portfolio in the state, here are a few couple things to remember:
Determining How Much You Can Afford
Determining how much one can afford isn’t just for people who are planning on buying a house for cash. Conventional mortgage terms can run for up to 30 years at an annual percentage rate between 2.5% – 3.5%. This means that if you go for conventional loans, you should make sure that you are going to be able to pay your mortgage for the next 30 years.
Aside from that, it would be best if you had ready cash for closing costs, homeownership expenses (like insurance and HOA fees), and possibly for 20% downpayment. According to HSH, you need to be earning about $51,000.00+ annually to afford a median-priced Atlanta home costing $275,200. If you pay a downpayment that’s lesser than 20%, you should expect to pay a higher monthly mortgage. Experts recommend that your housing expenses should not exceed 30% of your monthly income.
If you are looking to buy a house to convert into a rental or a fix & flip, you may need to prepare more money for renovation. Although there are loans for property repairs, setting aside a 20% contingency fund will allow you to continue with the works immediately in case something happens.
Once you have a good picture of your financial situation, you can now narrow down your choices according to your budget. Budget matters first because regardless of whether you have a big family or you don’t like the house’s aesthetics, you can always renovate it in the future once you’ve saved enough money.
Getting Pre-Approved for Mortgage Loan
When you apply for a housing loan, your mortgage lender will always check your credit score, your debt-to-income (DTI) ratio, credit balances, the number of times you’ve applied for credit in the last number of years, and how long you’ve had your credit account.
The rule of thumb here is to have at least a 43% DTI to qualify for a mortgage. You can calculate your DTI by dividing your total monthly debt payments by your gross monthly income. For credit score, your potential lender will check your tri-merge credit report or your residential mortgage credit report. The official minimum credit score to apply for mortgage are as follows:
- Conventional Loan – 620
- FHA-Insured Loan (@10% downpayment) – 500
- FHA-Insured Loan (@3.5% downpayment) – 580
- USDA VA-Insured Loan – no minimum score
- Jumbo Loans – 680
Take note that lenders may require a higher credit score than what is officially required by government-insured loans. Generally, FHA loans are best for low-moderate income earners, VA loans for veteran buyers, USDA for rural home buyers, and Jumbo loans for people who need to borrow more than $500,000.
If you are planning to buy a house but are still working on your credit score, you should allow at least three–six months after settling all your credit before applying for a mortgage. Credit reports update at least every 45 days or more, depending on how fast lenders submit their data. You may be sure that you’ve raised your score significantly, but since it will not reflect real-time, your potential mortgage lender will see a lower score.
Scouting for Houses in Georgia
Scouting for houses will depend on your own criteria. After knowing how much you can afford, it is recommended that you then lay down all your non-negotiables in a house. Here are a couple of guide questions to answer when shopping for candidate houses:
- What is my minimum space requirement?
- How many bedrooms do I need?
- What kind of neighborhood do I want?
- How far do I want the house to be from public services?
- Do I need a brand new house?
- Am I open to a house that needs a few repairs?
- What kind of style do I want for my house?
- When do I need the house?
Home Inspection, Making an Offer, and Contingencies
When you have a shortlist of potential houses, it’s now time to visit them and make an initial inspection. Apart from your non-negotiables, you must check all important structural components for your safety. You can request a “disclosure statement” from your seller before visiting to inform you of parts that need attention. This report will help you see if the asking price is reasonable enough or not.
Once you’re done with the viewing, you can create an initial offer along with your contingencies. Contingencies will allow you to back out any time within the negotiation process if the provisions are not met. Your official offer should include the following details:
- Names of people who will be on the title with you
- Your price offer for the house
- Specific contingencies that you want to include
- A list of concessions that you want
- The amount of earnest money that you can give
- Mortgage pre-approval letter (to let the seller know that you have the funds)
- The Date when you want to move into the property
- The deadline for the seller to respond to your offer
If the seller counters your offer, a good strategy to follow here is to identify your seller’s pain points. Why are they selling the house? Does the seller need to sell the house fast? This way, you’ll know what modifications in price and terms can be attractive to the seller.
Applying for Mortgage Loan
If your seller agrees with your offer and contingencies, the next step is to apply for a mortgage. You can move forward with the lender that pre-approved you, or you can also switch to another lender if you want (unless your bid contract specifies that you cannot). The downside to switching is that you might be delaying the sale, which can discourage the seller.
Furthermore, it is essential that you maintain a good credit standing even if you were already pre-approved for a mortgage. Remember that pre-approval is just to let your sellers see that you are financially qualified to buy their property.
Once you and the seller sign the bidding contract, the next step is to file your mortgage loan application. Some of the things you’ll need to disclose are your:
- Proof of income & employment
- Proof of assets
- Debt history and profiles
- On-going property taxes and expenses
- Reasons for any financial mishaps in the past (e.g., bankruptcies, foreclosures, delinquencies, etc.)
Closing the Sale
The closing phase basically starts once your seller accepts your purchase price and terms. The closing process usually takes about two months or more, depending on how fast the concerned parties do their jobs. Some of the activities to expect during a closing include:
- Application for title insurance (by the seller)
- Final inspection to see if the contingencies were met (by the buyer)
- Lender appraisal (by the lender)
- Opening of an escrow account to deposit earnest money (by the buyer)
- Obtain homeowner’s insurance (by the buyer)
- Transferring of utilities to your name (by the buyer)
It is crucial to hire a real estate lawyer or agent to help you during the final walkthrough. This final step ideally happens within 24 hours before the intended closing date to see if all the legal documents for the transfer of property are in place. This is dubbed as the most exciting stage in the house-buying process. Once everything is confirmed, the only next thing to do is to pack your things and move in!
If you are looking for a trusted real estate broker with years of experience in the Georgia real estate market, you can get in touch with us at HomeSold, GA! Your dream property doesn’t have to be light- years away, and we can help you navigate the entire house buying process with no inconveniences!