8 Steps to Buying a Home
Buying a home can seem to be an extremely overwhelming task - especially for first-time home buyers. Whether you are buying your first or your fifth home, there are important steps you need to take to ensure this process goes smoothly and stress-free. We're here to give a quick refresher for those who have already bought homes before, and a handy guide to those who are brand new to this! Here are the standard steps you must take in order to purchase your dream home:
First thing is first, find out what you like! Start looking at magazines and websites for local listings, or turn to social media for some inspiration. Make notes of particular homes you are interested in or "must haves" in your future home. Your wishlist is what will guide your entire transaction going forward.
Next, you have to determine how much you can afford. Start by analyzing how much you spend per month, and on what. This includes groceries, utilities, gas, car payment, rent, or any activities. After deducting those expenses, you can look into your savings and see how much you would be able to allocate toward a down payment (which can be anywhere between 5% to 25% of the total value of the home). Experts say is important to have at least 3-6 months of living expenses left over after these deductions before you consider buying a home. Remember, you will be taking on a mortgage!
One of the most important steps in this entire process is checking your credit score and history. Credit scores can impact your mortgage eligibility and whether or not you can secure financing to purchase a home. Most mortgage lenders require a credit score of at least 620, depending on the type of mortgage a borrower is attempting to secure. If a buyer has poor credit, they unfortunately will not be able to secure a mortgage. The better your credit score, the more likely you are to have a lower interest rate on the mortgage. So, it is vital to make sure your credit score and history is in line before continuing forward in the home buying process.
Find an Agent
This step will play a huge role in the overall success of this process - finding a real estate agent! The agents previous experience and knowledge of the sales process, skills in negotiating, and familiarity with the area you want to live in are some obvious reasons to hire a local agent. And while there are many other reasons to hire a real estate agent, one of the major benefits as the buyer is that it will cost YOU no additional money! Real estate agents are compensated from the commission paid by the seller of the house. Before hiring an agent, you should make sure you feel comfortable and confident that he or she will be able to best serve you.
Find Lenders & Get Pre-Approved for a Mortgage
The reason finding an agent comes before finding a lender is that your agent may be a reputable source in finding a trusted mortgage lender. Once you have found a lender, the next step is to get pre-approved for a mortgage. Being pre-approved and pre-qualified are two important distinctions to make in this transaction. A pre-qualification is more of an idea of the amount you may be expect to be approved, since it is based only on information you provide to the lender. Getting pre-approved is much more favorable than a mortgage pre-qualification. With a pre-approval, your lender can tell you the exact amount for which you are approved, and you will receive a commitment in writing for the exact loan amount, allowing you to search for a home at or below that price. With a pre-approval, you have an advantage over buyers who only have a pre-qualification, especially in a multiple offer scenario - your offer will look more attractive to seller's since your financing is guaranteed.
See a more detailed explanation here.
Search for Your Perfect Home
Keep that wishlist handy! You can search online through your local listings, and it may be helpful to talk with your realtor on what the best avenue for searching for homes will be. It is important to stay within your price range when searching for homes. Some buyers make the mistake of browsing above their budget, and this can only lead you to seek out certain attributes of homes that may not be found in the homes that are within your budget. Remember, your realtor will show you any home you care to see. If your search is thorough, you could see A LOT of homes! Be sure to keep notes, or take pictures or videos of the homes you tour, so you do not forget what you liked or disliked about them.
Make an Offer
Once you've found your perfect home, it is time to make an offer! Your realtor will be a very useful resource in this step - as it can get a bit tricky. Your realtor will assist you in looking through the specifics of the situation. For example, has the house been on the market for a long time and the seller may settle for a lower price just to get it off the market? Or perhaps it is a multiple offer situation. Whatever the circumstance, your agent will help you navigate through it and assist you in coming to a consensus on how much you are willing to bid.
In your purchase offer you will also be deciding on other aspects, not just the price you hope to pay for the home. You will also include the preferred closing date, the amount of the initial deposit, and other important information. Again, your agents expertise may be helpful to rely on.
Once your offer is accepted, you will go on to get a final approval for your mortgage.
Complete Home Inspection
It is important to not skip this step! A home inspection is worth spending the money on - it ensures the universal condition of a home. Not only will you learn about the property you are about to acquire, but you will also know about any repairs that need to be done prior to closing on the deal. This benefits you as the buyer because if there are necessary repairs, you can leverage your offer and hold the seller financially responsible for any of the repairs. You can also negotiate for the seller to fix the issues prior to you moving in or take the costs of the repairs off of the closing cost. It is better to find out about any issues prior to closing to avoid having to deal with them on your own!
Close on Your Home
It's closing time! First, you should do a final walk through. Not to be confused with home inspections, the final walk through is performed by you, the buyer. It allows you to have one last look at the house to ensure that nothing has changed since your purchase offer. This is also an opportunity to make sure that any issues that may have presented themselves during the home inspection have been dealt with, if that was agreed upon.
Finally, it is time to sign the documents that finalize the sale of your new home. Once this is complete, you will be given the keys to your new home and become a new home owner - Congrats!
Now all that's left is to fill your new home with the things you love!