1. Research and Preparation: Buying a house is a huge step in anyone’s life, whether done as an individual or as a couple. Taking the time to research and prepare for buying a home is as important as the purchase itself. Get your credit score, and run your credit report. Your loan and interest rate depend on your credit and finances, so ensuring your credit is in good standing before applying for a loan is a smart step to success. If there is an issue, dispute it, as it could help your credit score.
2. Determine what you can afford: Monitor your expenses for a couple of months – look at what you spend your money on, and how you spend your money. Based on what you see, develop a budget that truly reflects your lifestyle, and be as true to your spending habits as possible; owning a home greatly affects your spending habits if you don’t budget accordingly. Talk to a real estate professional, a current homeowner, or someone who can provide insight into new home expenses and taxes. Then revise your budget. Online resources are available to everyone, and mortgage calculators will help calculate your monthly mortgage payment. Oftentimes buyers forget to factor in money needed for a down payment, closing costs, fees (appraisal, inspection, etc.), and all of these things need to be taken into consideration as to what is affordable for the buyer. Click here to find a specialized agent!
3. Get Prequalified and Preapproved for your mortgage: Recommendations from family, friends, a financial adviser, and even the Better Business Bureau can help you make a good decision when it comes to a mortgage lender. Questions are a must when it comes to a mortgage loan, and finding someone you’re comfortable with is key to a good mortgage fit – remember, mortgage lenders are salespeople, and a mortgage is a huge sale. You wouldn’t buy a car without doing ample research, and the same goes for a mortgage. It’s best to talk to more than one mortgage lender to understand what you want to find/have in a lender.
Once you have your mortgage lender, get pre-approved for a loan. You can get a pre-qualification, but this doesn’t actually guarantee you a loan amount; it’s more of a guess based on what you tell the lender. Pre-approval gives a better idea of your loan amount as the lender pulls your credit and gets more information about you as a buyer (your employment information and finances). You can also get approved for a loan before you start looking for a home. This will make the sale process faster, and your offer will be more appealing to a seller if the purchase funds are already available prior to your offer.
4. Find an agent and shop: Now that you’ve been pre-approved for a mortgage, find a real estate agent to assist you in your home search. Again, do your research. If you have someone in mind, talk with his/her recent clients and look up his/her licensing and credentials. You want to make sure you find a realtor who has adequate experience and will actively work toward finding you that dream home. Don’t get caught up in the idea of a friend or family realtor – make sure you make an educated decision on who you want as your realtor as this will greatly affect your home buying experience.
Once you have your realtor, start your home search! Many buyers get caught up in the whirlwind of home shopping and focus more on their wants than their needs. Remember:
5. Make an offer and get an Inspection and Appraisal: Once you find your home, work with your real estate agent and make an offer. After the offer has been accepted, get the house inspected. An inspection is an objective visual examination of the physical structure and systems of a house, from the roof to the foundation. This covers:
An inspection also looks at the foundation, basement and the structural components of the house; it also helps you understand what you’re getting in your dream home, and can help minimize any surprises or difficulties that might pop up down the road; it’s also going to identify any major repairs, oversights, or maintenance needed for the house.
It’s worth the time and money to invest in a reputable home inspector – buying a home is a huge investment, and knowing what you’re getting yourself into before you sign any papers is common sense for any buyer.
Once you have an inspection, get an appraisal. An appraisal is the monetary valuation of the property and helps establish a property’s market value. An appraisal also includes:
The appraisal also determines the final loan commitment. An appraisal essentially insures the bank is covered on its investment in case you default on your loan.
6. Get your mortgage and paperwork: Your mortgage lender and real estate agent are a huge help when it comes to mortgage types, lock-in rates, points and any fees. They can assist you in coordinating all of your paperwork, and they can also assist in finding out about closing costs and any prepayment penalties from your lender. Once you have the paperwork, make sure you read all documents related to your purchase, and have a professional review them with you. The papers are a binding, legal document, and having a full understanding of your loan and any conditions associated with it is one of the most important parts of the home buying process.
7. Close, sign the papers and move in: Once you’ve determined a closing date and all the papers are signed, you are now a home owner! The home buying process doesn’t need to be a hassle as long as your do your research and prepare yourself for the process. Finding the right people to help you in your home search is crucial, and knowing all the steps ahead of time will prepare you for smooth sailing. Enjoy your new home! Click here to find a specialized agent!