The process of buying a house for the first time can be daunting, but it doesn’t have to be. With a little research and preparation, you can be ready to take the plunge into homeownership. Here’s what you need to know.
1. Do Your Research About Buying a Home
You may be here because you wanted to do research. If so, congratulations on your next purchase! However, apart from knowing what to do, you also need to think about what you want to see in your next home. Keep abreast of the real estate market by reading pages, newspapers, and magazines with listings. Jot down any homes that interest you and see how many days they’re on the market until sold. Also, take note of changes in asking prices; that’ll give you a keener insight into trends for specific areas.
2. Determine Your Budget Limit
If you’re looking to put down money on a property and have other debts, lenders usually recommend that your mortgage payments should not go above 28% of your monthly income. Going beyond that may stretch you too thin and lead to you either losing your home or getting buried in debt.
3. Apply for Mortgage Pre-Approval
Here is the first concrete step in the home buying process: getting pre-approved for a mortgage.
Getting pre-qualified and pre-approved is related to the previous step: knowing how much you can actually spend.
Pre-qualification for a mortgage simply requires that you provide your banker or mortgage provider with some financial information, like income and how much you have saved in investments. After reviewing this data, they will be able to tell you an estimation of the amount of money we can lend you—AKA the price range of homes you should look at. If later on down the road you decide that you want to get pre-approved for credit, know that this process is more extensive and will require W-2 statements and bank account statements so that they can verify both your finances and creditworthiness.
4. Get the Best Real Estate Agent for You
Real estate agents play a critical role when you’re transacting a home purchase or sale. They can offer helpful insider information on homes and neighborhoods that the general public doesn’t have easy access to. Furthermore, their expertise in the home buying process, as well as their ability to negotiate makes them invaluable. And there’s no need to worry about any additional costs for using an agent — they simply get compensated from the commission paid by the seller of the property.
5. Look for the Right Home and Make an Offer
Look into homes that fit your budget. Taking down notes might be helpful to avoid feeling overwhelmed by the number of houses you’ll come across. And because it can be tough to recall everything, take pictures or videos as reminders for each property.
Tiny things matter too! For instance:
- Test the plumbing by running the shower to check the water pressure and hot water availability.
- Flip switches on and off to see if the electrical system is OK.
- Open and close windows and doors to see if they work properly.
Likewise, it’s necessary to look into the surrounding area and document any observations, for example:
- Are the other houses on your street well-kept?
- Do many people walk or drive through your street?
- Are there spots to park on the street for your household and your visitors?
- Is there crime in the area?
- Does the location offer proximity to places that you frequent or need access to, like schools, shopping centers, restaurants, parks, and public transportation?
Don’t make decisions too hastily in your search for the perfect home. When you’re ready to make an offer, your real estate agent will help you put together a purchase agreement. This document will outline the price you’re willing to pay, any contingencies (such as the sale of your current home), and other important details. After you and your real estate agent have looked at comparable homes in the same neighborhood, you will work together to come up with a fair offer. Once the seller accepts your offer, you’ll move on to the next stage: due diligence. Entering escrow is the final step in the home-buying process, which can take a few weeks to complete.
Due diligence is the period of time between when your offer is accepted and when you close on the property. This is when you’ll have inspections done to make sure the property is in good condition and get all of your financing in order. This leads you to the next step.
6. Have the House Inspected
A home inspection is generally needed when making an offer on a property. This checks for damages that may need to be fixed and gives the option to renegotiate or withdraw the offer without penalty if there is significant damage found. Your real estate agent will help you set this up usually within a few days after your offer has been accepted by the seller.
After the home inspection, you and the seller will receive a report of the findings. You can then negotiate with the seller to have them fix anything on the property before closing the sale. Before finalizing everything, you will do a walk-through of the house to confirm that any repairs made were up to standards.
7. Get the House Appraised
An appraiser from a third-party company will provide an estimate of the home’s value to involved parties, letting everyone know that you are paying a reasonable price for the property.
8. Handle the Paperwork and Close
A lot of paperwork is needed when you’re buying a house, but luckily your lender can help by arranging for a title company. The title company will sort through all the papers and make sure that the seller actually owns the property in question.
You will sign all of the necessary paperwork to finalize your purchase at closing, including your loan documents. Your loan is typically funded a couple of days after the paperwork is sent back to the lender. The check will be given to the seller once it’s been delivered, and then you can move into your new home!
Now that you know what to expect in the home-buying process, it’s time to get started! Follow these steps and soon you’ll be moving into your new home. Keep in mind that this is just a general overview–be sure to consult with your real estate agent for more specific details about the purchase of your property. Buying a house can seem daunting, but with the help of an experienced professional, it can be a breeze. Are you ready to start house hunting?