10 Steps to Take when Buying a Home
Buying a home can be a very intimidating process, especially if you’ve never done it before. So the first thing you should do before you start the home buying process is to figure out whether owning a home is right for you. It may or may not be and this decision depends on you, your family, your lifestyle and what your circumstances are. Take into account that if you do buy a home, there are extra responsibilities and costs that go along with owning a home, such as lawn care, home maintenance and repairs that take up your time.
Step 1: Check Your Credit Report & Score
Before getting a mortgage or any kind of loan, you should always check your credit. According to the law, you’re allowed to receive one free copy of your credit report per year.
Scores range from approximately 300 to 850. Typically, the higher your score, the better loan you’ll qualify for. A credit score of 700 is generally considered “good.”
Remember to check your report for errors. If there are any, dispute them. It may help your credit score.
Step 2: Figure out About How Much You Can Afford
THEN, I advise you speak with a lender. They are professionals at knowing how much you can really qualify for. The lender on my team is Chad Conley at American Pacific Mortgage. He is amazing! Chad has helped almost all of my clients get through the financing process and they love him!
Yes, you can get a ballpark figure on how much home you can afford by searching for “online mortgage calculator”. These can help you calculate the monthly mortgage payment based on how much money you need. But the BEST thing to do, BEFORE anything else, is to talk with a lender.
Step 3: Find the Right Lender and REALTOR®
In the case of choosing the right lender and the right Real Estate Agent, make sure to find people that you are comfortable with and who makes you feel at ease. It’s also important that they have experience and knowledge about the housing market and homes in the areas you are considering.
A lender knows the law and other factors that go into mortgage payments so it’s always best to start there to save yourself time, frustration and disappointment. They can help you with understanding the money you’ll need for a down payment, closing costs, fees (such as fees for an attorney, appraisal, inspection, etc.).
I can help you with the best resources for lenders and other Real Estate professionals.
At this point, the lender will pull your credit and get more information about you. Make sure you get a pre-approval letter (many Realtors will ask you for one). This way, you’re ready to make an offer and the home purchase process may go much more quickly for you.
Note: In case you’ve previously gone through the pre-qualification process, note that pre-qualification is only an estimate based on what you tell the lender and is not guaranteed, whereas a pre-approval will give you a better idea of the size of loan you actually qualify for.
In today’s competitive market, it is ALWAYS wise to get a pre-approval letter PRIOR to starting your home shopping. In addition, your offer will look more appealing than other buyers’ since your financing is guaranteed.
Step 4: Look for the Right Home
Use the Wants vs Needs blog post I wrote to make a list of what’s really important to you and what you’re willing to compromise on.
Ask yourself how many bedrooms and bathrooms you’ll need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard (that comes with lots of maintenance)?
You’ll want to think about the kind of neighborhood you want, types of schools in the area, the length of your commute to and from work, and the convenience of local shopping.
Then you and I will sit down and talk about your list and I’ll give you private tours of homes on the market that match up to the list. At that point, you’ll probably change your list a little because sometimes, what we think we want or need isn’t always as important as we thought.
Step 5: Make an Offer on the Home
Now that we’ve found the home you want in the area you want, it’s time to make an offer.
Your offer sometimes comes down to how competitive the market is and how badly you want that specific home. Timing is also a factor (that is, how much time do you have before you need to be moved in to the house).
I’ll prepare a list of comparable homes that have sold recently in the area which will help you see price per square foot. No two homes are the same though, so that’s when your other factors come into play.
We’ll put your offer in a Purchase and Sale Agreement (P&S) along with any contingencies or requests you have (i.e. Love those window treatments? Ask for them now in this agreement.)
We’ll ask for a home inspection as part of this agreement with an exit clause if the home inspection shows major issues with the home. We’ll also specify a close date.
Expect that your initial offer will not be accepted. It’s likely, if your offer is reasonable, that the seller will come back with a counter-offer. Rarely does a seller flat out reject an offer and refuse to speak with you further (only on really low, unreasonable offers have I seen this happen).
At this point, we can talk about your options, such as meeting somewhere in the middle, again considering the other factors such as other bids.
Once you’ve agreed on a price, you’ll make an earnest money deposit, which is money that goes in escrow to give the seller a sign of good faith.
Step 6: Get the Right Mortgage for Your Situation
There are many different types of mortgage programs out there, but as a first-time home buyer, you should ask your lender about the three basics: adjustable rate, fixed rate and interest-only.
- Adjustable rate mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period of time, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don’t plan on living in their home very long and/or are looking for a lower interest rate and payment.
- Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period of time, usually 15 or 30 years, though they’re available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.
- Both fixed and adjustable rate mortgages can have an interest-only payment. What this means is that for a certain amount of time during the loan term, you’re allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don’t have to if your budget is tight. There is a myth that with interest-only mortgages, you don’t build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.
Step 7: Close on Your Home
We’ll get your home inspected and review the results. A home inspection helps you understand the property’s structural soundness and overall condition (and can be the start of the “honey-do” list). J
Timing of the close is dependent on a few factors such as your financing coming through, your rental agreement running out or the seller having to wait until they close on their new house.
Be sure you talk to your mortgage banker to understand all the costs that will be involved with the closing so there are no surprises.
Closing costs will likely include (but are not limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and points you may have bought to buy down your interest rate.
Step 8: Move In!
CONGRATULATIONS! You’ve got your mortgage, closed the deal and now it’s time to move in! I’m happy to provide you with mover referrals.
Now, you can start unpacking and start enjoying your home!
Choose a TEAM of real estate professionasl vs trying to pick and choose each one individually. Your home buying process is likely to go more smoothly when everyone knows each other because they’ve worked together for a long time. These are the keys to helping you have a smooth, stress-free home buying experience!
Call or text me if you’re ready to get started! (602) 577-7410 – Evie