If you’re thinking of buying a house in Indiana, you may find it to be a stressful prospect. Median home values rose by 10% last year over 2017 and they’re still rising.
You may be wondering if it’s the right time to enter the market. The short answer is “yes.” The state continues to see real estate as a solid investment, and the sooner you can get into the market, the better.
Buying a home can be complicated, however. There’s a lot involved and it’s likely the biggest purchase you will make. But if you do your homework and research carefully it can also be a rewarding experience.
It’s always best to work with a good realtor. They can help you determine your financing options and walk you through the process so that buying a house is not a daunting experience.
Here’s what you need to know about buying a house in Indiana.
Step 1: Evaluate Your Current Financial Situation
Probably the most important part of your home buying journey is determining how much you can afford. This is not as difficult to determine as you may think. There are some simple steps that you can take to determine what you can spend on a home.
First, determine what your total household income is (adding your spouse’s income if applicable). Then determine your monthly expenditures. Include what you are paying for rent right now, what you pay for groceries and other necessities, like car payments and vehicle insurance.
You also have to determine how much you can put up as a down payment. This can be as much as 20% of a home’s value. If you don’t have that much saved up, it doesn’t mean the end of your dream of homeownership. You may only need to put up 5% or less.
There are also government programs that either lower the down payment requirements or help you pay some of the costs. Speak to a Clever Partner Agent about state and federal programs that offer assistance for homeownership.
You should also factor in other costs associated with owning your home, such as monthly insurance payments, maintenance and repairs, and property taxes.
Most importantly, you need to consider whether or not you are ready for the responsibility of homeownership. Remember, it will likely take decades to pay off your mortgage. Do you have a financially stable job. Will it provide steady income for the foreseeable future?
Do you plan to live in your home or do like to pick up and go when you choose? If it’s the latter, then you may want to hold off on committing to buying a home.
Step 2: Find a Great Indiana Real Estate Agent
The best thing you can do when buying a home is to select the right real estate agent. This is often a confusing prospect for first-time home buyers. They’re usually unsure if that entails any costs.
Of course, real estate agents don’t work for free. But when it comes to buying a home, you will not be responsible for their cost. That responsibility falls on the seller, so essentially their services are free to you, the buyer. Your realtor will get paid through a commission from the seller of the sale.
Your real estate agent will be your expert guide in your local market. They have the latest data and statistics when it comes to home values and trends. You can be confident that you’ll know exactly what a home is worth when you make a bid. And they are legally responsible to ensure your financial interests during the sales process.
They are also expert negotiators. Making a deal is an art, as much as it is a science. They’ll work with you through the offer and counter-off stage, to make sure that you don’t overbid.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Step 3: Read Up on Local Real Estate Market Trends
If you’re thinking of entering Indiana’s hot real estate market, you’ve probably been watching prices rise. As noted earlier, they shot up by more than 10% last year.
When it comes to real estate and getting a great deal, you need to understand the market carefully. When you buy can have a huge impact on how much you end up spending.
Because Indiana is seeing such an upsurge (home prices are expected to keep rising), you may want to buy sooner rather than later. It may not be as difficult as you think. In fact, the state’s median home prices are relatively low, so you may actually be able to buy a home with a mortgage that is about the same amount as your rent right now.
The median home value in the state is $144,600. Depending on how much you put down and other factors such as interest rates, your mortgage payments could be less than $1,000 a month if you bought a home at the state’s median home value.
They would be significantly less if you bought a home at the median value in South bend where it sits at about $102,000. A professional realtor will work with you to determine all avenues that you can use to buy your home. That way you will be investing in your own property rather than paying rent to your landlord.
Learn More: Will it Be a Buyer’s or Seller’s Market in 2019?
Step 4: Get Pre-Approved for a Mortgage
This is an essential step for most home buyers before they dive into the house hunting process. It can be a bit confusing, but don’t let it stop you from buying your dream home.
Here’s what you need to know. First off, there’s a difference between pre-qualification and pre-approval. A pre-qualification can give you a good estimate on what you can afford to spend on a home.
A pre-approval is more accurate and valuable. It is done after an appraisal and the lender has checked your credit and actually “approve” a specific loan amount. It is then good for a specific time period (for example, 90 days).
Once you know what your mortgage loan will be (and you know your down payment amount), you can then begin house hunting. That’s because you know exactly what you can spend. You’ll know which neighborhoods you can afford and which homes are out of your price range.
Step 5: Start House Hunting
A good real estate agent will sit down with you before you begin looking at homes. The start of the house hunting process begins with determining your needs.
After all, you will only waste your time if you’re shown homes that don’t suit your tastes or lifestyle. Your realtor will have neighborhood specific data so can limit the range of homes for viewing to just those you can afford.
Do you have kids and are you looking for a neighborhood that’s safe and has good schools? A professional realtor will know the answer.
Do you want to be close to a highway for work? Do you want easy access to shops and restaurants? How many bedrooms do you need? Once you’ve discussed all of your needs, with your realtor, you’re ready to visit open houses and setup time-specific viewings.
Learn More: Free House Hunting Checklist
Step 6: Make an Offer
Once you find a home you want to buy, you’ll need to make an offer.
This usually requires proof that you’ll be able to pay for the home. You will likely have to establish the expected closing date and show how you will cover additional costs, if the offer is accepted.
Once you are ready to make an offer, let your realtor know. They will tell you if it is realistic. If it’s too high, they may suggest making an initial lower offer. They will be fully aware of the market trends, so they can also advise you if they think there will be multiple offers and time is of essence.
You can also add contingencies in your offer. These can include such factors as the sale of the buyer’s current home. In a seller’s market, this can be a sore point for some sellers because it puts an additional constraint on the sale.
Once an offer is accepted, you will want to discuss it with your realtor. They deal with real estate contracts on a daily basis and can guide you through most of what you need to know. You may also want to have an attorney look over the final documents.
Learn More: How to Make an Offer on a House
Step 7: Inspections and Negotiations
Home buyers typically pay for the cost of a home inspection, which can range from $300 to $500, depending on the size of the property. Despite its cost, it should be undertaken as soon as an offer is accepted by the seller.
Buyers should be aware that they can negotiate to have the seller pay for the cost of a home inspection, if you end up buying the property.
The offer you make on a home should include a dollar amount (a limit) that you are willing to pay for repairs. So, if a home inspector finds major repairs are needed beyond what you put in your offer, you have some options. You can negotiate a new price for the property with the homeowner, pay the total or partial costs of repairs, or walk away from the deal and look for a new home.
While home buyers may be tempted to skip out on the home inspection because of its cost, you should have one done, even if the seller does not agree to pay for it. A few hundred dollars can save you tens-of-thousands of dollars in the end. It can help you avoid the headaches and frustration of buying a home that turns into a costly money pit.
Step 8: It’s Closing Time!
In Indiana, there are more than a dozen closing costs associated with real estate transactions. Some of them, like courier and mailing costs, are less than $100. But they all add up. And not all of the costs are so miniscule.
When it comes to determining your closing costs, the general rule is that buyers should expect to pay about 3% of the purchase price of a home. That’s more than $4,300 if your home is worth the Indiana median value ($144,600).
A title search, which is a must for all home buyers, can cost as much as $500 in Indiana. They’re essential because they make sure that the seller has can lawfully sell the property. There’s also title insurance, which your lender may require. That can cost $1,000. Appraisal fees in the state may run you as much as $500.
As you can see, the closing costs of buying a home in Indiana are significant. Luckily, our Partner Agents can guide through the various programs and grants available to help cover costs of closing a home sale. Speak to them about how they can help you find your dream home, and find out about our rebate program that provides up to $1,000 to help you with closing costs or your down payment.