While you might be excited about buying a new home, the process can be challenging, which may cause setbacks if you aren’t prepared. Since there is so much involved in buying a home, such as specific requirements or tasks, you might be worried about spending more than you can afford.
Understanding the entire process and what you should and shouldn’t do can help go a long way when it comes to buying a home.
Here are a few vital steps to make the process easier for you and help you get the best of your money:
1. Evaluate Your Finances
Before you start hunting for your dream house, you must look at your finances to prepare yourself for the down payment, closing costs, earnest money deposit, ongoing expenses, and unexpected expenses down the road.
Ensure that you have an emergency fund with enough to cover your living expenses for a few months because the down payment and closing costs may burn through your savings.
Figure out your monthly spending to better understand the sum that you can afford and analyze your credit because you won’t be eligible for a home loan without a good credit score.
2. Figure Out Your Needs
Don’t head into the market without first knowing what you want because you might be swayed by a beautiful house that lacks accessibility and a good neighborhood, among other issues. There are quite a few options for buying property: a duplex, condo, townhouse, or a single-family home; the possibilities are plenty.
Think about the kind of house that you want and why it will suit you or your family. Weigh out the pros and cons of the possible choices.
3. Consider Ideal Features
You will have some expectations when it comes to your dream house. Perhaps it’s that beautiful patio and garden where you can add your porch swing and spend your evenings under the stars, or maybe it’s a spacious kitchen where you can spend your days baking.
While you should be flexible when looking for a new home, you should also consider your desires because buying a home is one of the biggest investments that you will have to make.
Separate your wants from your needs.
Be realistic with your wish list and your budget, and keep in mind that location drives up home values. You may have to compromise on location or features to find the right fit.
4. Find Out Your Mortgage Qualifications
Understanding how much mortgage you qualify for is one of the first things you should do before you start house hunting. While you may think that you can get a mortgage of $300-400,000, your mortgage lender may feel differently and may only offer you $200,00 according to specific criteria that they use.
Your monthly income, years of working in your current job, and your other debts are some of the requirements they consider before offering you an amount.
On the flip side, you may find that a lender offers you more than what you need. Although it’s tempting to take them up on their offer, know that you’ll have higher mortgage payments and pay more interest over time. You don’t have to take the full amount; you can only take what you need if you choose.
5. Get a Pre-Approval Letter
Get your hands on a pre-approval letter before you start your search for a home.
Pre-approval can improve your chances of getting your offer on a house accepted since it serves as proof that you can get the finances. Without a pre-approval letter, most sellers will not want to negotiate and may not take you seriously.
As a buyer, you will be assessed on the following to qualify:
Proof of income
Proof of assets
Credit score and debt-to-income ratio
6. Choose a Real Estate Agent
Consider getting professional help, such as a real estate agent that can help you find your dream home according to your needs, wants, and budget.
Your agent will help you refine your wish list, show you homes that match your needs, draft your offer, guide you through contracts, and walk you through the closing process.
Interview at least three real estate agents who are experts in the area you’d like to buy. Choose one who is not only qualified with a verifiable successful track record but also one who communicates clearly and makes you feel confident about your transaction.
7. Locate a Home
Keep an open mind when you’re touring properties. Some may be turnkey and move-in-ready, while others may be older and need some attention, like wall paint and flooring. Try not to get caught up in the cosmetics.
If your budget is tight, consider looking at homes that need a bit of updating, upgrading, or remodeling. That way, you can grow at your own pace and modify your home over time.
Be careful not to get emotionally attached to a house until the deal is done. You may come up against competing offers, or the seller might decline.
8. Make an Offer and Close the Deal
Once you’ve found the perfect home, ask your real estate agent to help you read the fine print, any conditions for the home, and make the right offer according to your budget. If you receive a counteroffer from the seller, your agent will negotiate until you end up landing on the correct number.
After the seller accepts your offer, the house must pass a lender-required appraisal and inspection. If the home is in good condition and valued at the sales price, you’re on your way to the closing table. Otherwise, you may renegotiate with the seller to make any repairs, get a lower price to accommodate your fixing the problems, or, in the worst-case scenario, you can rescind your offer.
Doing enough research beforehand will help move the buying process along smoothly and avoid any bumps down the road. Purchasing a home is one of the most significant steps that you will have to take in life, and once the closing process is over, you will have the keys to your new home! Ask your real estate agent for more tips about buying your first house.
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