Buying a House in DC: Beginner's Guide
Homes are a basic necessity in life. A good home gives us peace of mind, stability and positively affects other areas of our lives, such as health. But what happens when we get bored of our apartment or have to change locations for some reason, like new additions to the family or looking to start/grow your real estate investment portfolio? Well, for most people, the answer is buying a new home. Buying a house in DC is often a daunting experience for first-timers, and with good reason.
In Washington DC, the housing market is quite competitive. Besides this, securing a loan in the District is quite tricky, considering all the requirements you have to meet. Also, you're buying a home! A place where you might spend a significant part of your life, so the pressure might take its toll and cause you to skip some major steps.
These are problems first-timers usually face and in this guide, I discuss ways to tackle such issues and ensure that your future house purchases serve their purpose; be it for real estate investments or just a place to call home!
Looking to Buy a Home in the Washington DC Area?
Buying a house in DC is often a complicated process. But it doesn't always have to be this way. I usually have Q&A sessions with members of the Everyday Investor community. Some of the questions asked during these sessions end up in thought provoking discussions about buying a home in DC. To say the least, our conversations usually end with members having the confidence and knowledge needed to buy excellent homes - with some members even earning residual income with their newly purchased homes.
I have created this guide for purchasing a home in DC as a means to communicate with those I can't speak directly with. Below you will find the requirements and steps needed to secure not just a lovely home in DC but one that will significantly boost and diversify your investment portfolio.
Requirements for First Time Home Buyers in DC
There are several requirements to be met if you haven't bought a home in DC before. Asides from this, the real estate market in DC is very competitive - ideal homes sell pretty quickly, so you'll always need to be on your A-game.
But this should not bother you too much. Not too long ago, the government created effective solutions to ensure everyone has a fair share of the housing market. One is the District of Columbia House Financing Agency (DCHFA).
If you are buying a home for the first time, this agency provides several ways to ease the stress that comes with home purchases. So it would be best if you understand how they can help you out as a newbie in the market before discussing the requirements.
They offer various services such as down payment and closing cost assistance, and affordable mortgage programs. The District of Columbia House Financing Agency also enables house ownership and eases property acquisitions by expanding housing options in the Capital.
Aside from this, DCHFA issues mortgage revenue bonds and gives loans that reduce the expenses of purchasing a home. Other initiatives the DCHFA provides include providing developers' costs of acquiring, constructing, renovating, and rehabilitating rental housing. In all, the District of Columbia House Financing Agency champions the course of making house owners and renters have access to suitable accommodation in the Capital.
Now onto the requirements. There are specific requirements that first-time buyers must pay close attention to in order to secure loans from various lenders. Here are the requirements;
For some loan programs, you must not own a house or another property.
Your credit score must be a minimum of 640, and your individual income must not be over $150,000 a year.
First-time buyers should also possess a good debt-to-income ratio.
There are no limitations on the home purchase price, but the loan size has a maximum cap of $548,250. To learn more about the requirements for securing a loan from the DCHFA, click here.
Guide to Home Buying Process
When looking for a home in DC, it is pretty important to follow a system that has been proven to work. After years of scouting the DC area and being involved in dozens of home purchases, I have come up with a list of requirements to be met before buying a new home. The following sections will reveal the proper steps to follow for home purchases in Washington DC.
Evaluate Your Credit and Finances
Your credit score is a factor that decides whether or not you qualify for a home loan. So if you intend to buy a property on credit, you should have a credit score that is at least above average. Lenders ask for credit scores as a means to identify if you will be able to pay back your loans. Once a bank or money lender is able to identify that you have a good credit score, then securing a loan won't be difficult at all.
640 is the credit score benchmark to qualify for a house loan. So it is crucial to always be on the lookout for ways to improve your credit score. Factors that affect your credit score include; credit card use compared to total limit, on-time payment percentage, marks on your reports, and credit age.
If you have a bad credit score, it isn't the end of the world. Here are some of the ways of having a better credit score include:
Requesting a higher line of credit
Fixing late payments
Paying credit card minimums at the right time
Applying for more credit cards
Improving your debt-to-credit ratio
Reporting any error on credit reports
In addition to this, you can manage your finances appropriately and ensure you have a stable income stream for paying off your house.
Finding the Best Neighborhood
Having a home in a pleasant neighborhood is crucial to your satisfaction in the long run. So before selecting an area, here are some factors that you should consider;
Does the neighborhood have a community school? If you have kids, this is a no-brainer. You should check if there is a good school within the area.
Workplace proximity: It would be best if your house is relatively close to your workplace. This can help lower commute costs and save you a lot of lateness queries.
Essential Infrastructure: Ensure your neighborhood is equipped with good hospitals, gas stations, and grocery stores. They are necessary to good living.
Social Amenities: Leisure and recreational activities can make your future neighborhood a fun place to stay! So check out for parks, gyms, and Cinemas.
Security: Safety is crucial. The last thing you would want to do is stay in a neighborhood with high criminal activity.
Cleanliness: A clean community is vital for overall health.
Partner with an Expert Real Estate Agent
Partnering with the right real estate agent can significantly reduce the burden of finding the best deals on housing. Professional real estate agents have tons of experience in house hunting and can quickly notice hidden details you won't see on your own. You can find good real estate agents anywhere; however, if you need a guide to help you find one, here are some steps that will point you in the right direction.
Get referrals from your network
Research on the potential candidates or agents
Conduct an interview process for up to three agents
Ask for references
Look through the references provided
And finally, select the best agent.
Start House Hunting and Making Offers
The final step involved in getting your dream house is house hunting. This is the stage where you will pull all your resources and knowledge together and actively search for your dream home!
By now, you must be familiar with all the previous steps listed, which are; Evaluating your finances, finding a good neighborhood, and partnering with an experienced real estate professional. Once you have completed all of these steps, I am pretty confident that you'll be able to purchase the house of your dreams.
My goal is to help investors get started and make the best return on their money from every development project they embark on. Get more FREE content on how to invest in real estate by joining our community list.
