Buying a house is an emotional, exciting, and stressful experience. It is a process filled with a lot of questions that you didn’t even know you had before you started. Whether it is choosing the right home or qualifying for the best mortgage, you want to minimize the amount that you don’t know. Use this 10-step guide to aid in your home buying journey and help answer any questions that may arise.
1. Start your research early
Once you know that you want to buy a house, begin researching by reading newspapers, magazines, and websites that have real estate listings. Keep an eye out for homes you like and try to track how long they are available before they sell or change in asking price. This will also give you an idea of what the market looks like in the areas you are interested in moving to.
2. Determine your budget
Determining your preliminary budget sounds relatively tricky, but most lenders recommend that people look for homes that cost no more than three to five times their annual household income. Potential home buyers also need to plan on giving a 20% down payment.
3. Get pre-approved for a mortgage
Now that you have your budget, it’s time to figure out how much you can spend. The best way to do this is to get prequalified for a mortgage. To do this, you must provide some financial information to a mortgage banker, such as your income, and the amount of savings and investments you have. Your mortgage banker will be able to tell you how much that they can lend you based on this information. After this, you can get pre-approved for credit. This involves providing your W-2 statements, paycheck stubs, bank account statements, etc. for your lender to verify your financial status and credit.
4. Find the right real estate agent
Finding the right real estate agent is one of the most critical steps of the home buying process. They can provide you with helpful information on houses and neighborhoods that you are looking at that may not be known to the public. Their negotiating skills, knowledge of the home buying process, and familiarity with the area you are looking at are extremely valuable. Real estate agents are compensated from the commission paid by the seller of the house.
5. Time for house hunting
At this point in the buying process, your finances should be stable. Make a list of must-have features that you want for your home and share them with your realtor. Using this list and the budget you have provided, you can begin touring homes. Here are some things to keep in mind when considering houses:
- Don’t compromise on location or layout. You can change a lot of things within a home, but not the layout and location. No amount of curb appeal should make you look past these things.
- Look past the surface. Don’t let that terrible pea-green kitchen scare you away from an otherwise great house. Other people might be scared off by some color choices throughout the home, but those easy fixes could save you money.
- The least expensive house, in the best neighborhood you can afford is the safest bet to guarantee your property value increases.
6. Submit an offer
Now that you have found the right home, you can submit an offer. A lot goes into an offer, especially if you get into a bidding war.
Your purchase agreement will include details of the real estate transaction like:
- Buyer and seller information
- Property address
- Purchase price, lender information and down payment amount
- Earnest money deposit
- Items to be left with the home (like appliances or furniture)
- Contingencies like the home inspection, appraisal, and final mortgage approval
- Closing date
7. Get a home inspection
Normally, purchase offers are contingent on a home inspection of the property to check if repairs are needed or identify any structural damage. Having a home inspection as part of a contingency plan is essential because it protects you by giving ythe chance to negotiate or back out without penalty if the home inspection reveals unforeseen damages.
8. Work with a mortgage banker to select the right loan for you
Every homebuyer has its own priorities when choosing a mortgage. Some home buyers know they will move again in a few years, and others are interested in keeping the mortgage at the same monthly rate. Many homeowners are also interested in keeping the monthly rate as low as possible, so be sure to choose the right loan that will best fit your needs with your mortgage banker.
9. Have the home appraised
Your lender will have the home appraised by a third party to make sure that you are getting a fair price for the home. The appraiser is not affiliated with the lender and is there to let all parties involved in the transaction know that a fair price was paid for the home.
10. Close the sale
Congratulations on your new home! Once all the paperwork is signed, you will be ready to move into your new home.