10 steps new homebuyers should know
Deciding that you’re ready to buy your first home can be both exciting and overwhelming. But before you run off to the nearest open house, the first thing you should do is familiarize yourself with the homebuying process. That way, you’ll know what to expect and what’s expected of you at each step.
It may seem like a lot, but by taking your time and working with professionals you can trust, you can alleviate a lot of stress and be able to focus on the excitement instead. Here is a very basic overview of the homebuying process from the buyer’s perspective along with tips to prepare for each step.
Calculate your budget
Before looking at homes, figure out how much you can afford to spend. You’ll need to consider your income, monthly expenses, projected maintenance costs and how much you have saved for a down payment, in addition to your estimated monthly mortgage payment. This will help you narrow your search and avoid looking at homes outside your price range.
Consider the long-term costs
When buying a home, it’s important to consider the purchase price and the “hidden” costs of owning it. These costs can include any initial repairs, ongoing maintenance of the property, HOA fees, annual property taxes and homeowner’s insurance. These should also factor into your budget.
Save for a down payment
A down payment is a percentage of the purchase price that you pay upfront. The larger your down payment, the lower your monthly mortgage payments will be. Many lenders have minimum down payment requirements. Lower down payments may be subject to mortgage insurance costs as well.
Check your credit score
Your credit score can affect your ability to get a mortgage loan and the interest rate you will need to pay. Review your credit report to make sure everything’s accurate. See what you can do to improve your score if needed. A credit score in the mid 600s or above will generally give you a lower APR on mortgage loans.
Get pre-approved for a mortgage
Getting pre-approved for a mortgage can give you an idea of how much you can borrow and the interest rate you’ll pay. You only need preapproval from one lender—and you are not required to use that same lender when you apply for a loan. This can help you narrow down your home search and make an offer when you find the right property. It also shows sellers that you are a serious buyer, and realtors may only work with pre-approved buyers.
Research neighborhoods and homes
Research the neighborhoods you’re interested in and the homes that are available in your price range. Look at factors such as school districts, crime rates and proximity to amenities like shopping and public transportation.
Select a real estate agent
A real estate agent with knowledge of the neighborhood you’re interested in can help you find homes in your budget that meet your criteria. Interview multiple candidates to make sure they also have experience in negotiating deals and can help you get the best possible price for your property. They can also help you navigate the complexities of the buying process, including dealing with multiple offers and counteroffers.
Get a home inspection
Once you’re under contract on a house, a professional home inspection can help you identify any property issues before buying it. This can include issues with the foundation, roof, plumbing, electrical system, HVAC system and more. By identifying these issues early, you can decide whether to move forward with the purchase or negotiate repairs or a lower price. Knowing the condition of the property can help you make an informed decision and feel confident in your purchase. It can also help you avoid costly surprises down the line.
Apply for a mortgage
Once you’re under contract and ready to purchase a home, it’s time to apply for your mortgage loan. Shop around between multiple lenders to make sure you get a good rate. Many experts suggest getting loan estimates from multiple lenders so you can compare rates, closing costs and other fees. Just try to keep your lender shopping period to within 30-45 days to minimize the impact on your credit score. You are not required to apply for a loan from the same lender who granted you pre-approval.
Prepare for closing
The closing process for buying a house involves several steps that must be completed before the sale can be finalized, and ownership of the property can be transferred to the buyer. Title insurance is typically purchased to protect the buyer, and a closing disclosure document is provided outlining the terms of the sale. Your real estate agent can help you navigate through the paperwork and other legal requirements. Be sure to read everything carefully before signing and keep records of the information and money that you send out.
Conclusion
Buying a home is a big decision, and it’s important to take your time to find the right property for you and your budget. Don’t feel pressured to make an offer on the first home you see. Be willing to walk away if the deal doesn’t feel right. With a step-by-step approach, you can make a more informed decision when buying your first home.