The Home Buying Process
Steps to Buying a Home
Step 1: Review Your Credit Report and Score
Always check your credit before applying for a mortgage or any other type of financing. You are entitled to one free copy of your credit report each year under the law. Visit Annualcreditreport.com for more information. Scores range from 300 to 850, with the higher your score, the better loan you'll be eligible for. Remember to double-check your report for inaccuracies. If you find any, challenge them. It might be beneficial to your credit score. At www.creditkarma.com, you can also check your credit score for free.
Step 2: Determine how much you can spend.
Starting online, you can figure out how much you can afford. Several online mortgage calculators will assist you in determining an affordable monthly mortgage payment. Remember to account for a down payment, closing costs, fees (such as appraisal, house inspection, and other fees), and the costs of remodeling or furniture. Remember that you are not required to put down 20% like your parents were. Loans with little or no down payment are available. An expert in house loans can assist you in understanding all of your loan alternatives, as well as closing expenses and other fees.
Step 3: Locate an appropriate lender and real estate agent.
It's wise to search around for the finest mortgage lender. Check with the Better Business Bureau and ask your friends and family for suggestions. At least three or four mortgage lenders should be contacted. Ask a lot of questions and make sure you get satisfactory answers. Make sure you choose someone that you feel at peace with.
Make sure you receive a pre-approval once you've found the correct mortgage lender. Pre-approval will offer you a better indication of how big a loan you qualify for, whereas qualifications are merely a guess based on what you tell the lender and are no assurance. The lender will pull your credit report and obtain other information about you. However, you might go one step farther and obtain formal approval before beginning your property search. When you're ready to make an offer, you'll be able to do so much faster. Furthermore, because your financing is guaranteed, your offer will appear more enticing to potential purchasers.
Step 4: Find the Right House
Make a list of everything you'll need in your home. Consider how many bedrooms and bathrooms you'll require, as well as the amount of space you desire. What size kitchen do you envision? Do you require a large number of closets and cabinets? Do your children and/or dogs require a large yard to play in?
Don't forget to consider the type of neighborhood you desire, the types of schools in the region, the duration of your commute to and from work, and the ease of local shopping once you've prepared a list of your must-haves. Take into consideration your safety concerns as well as the area's house appreciation rate.
Step 5: Make A Home Purchase Offer
You need to make an offer now that you've found the house you want. The majority of dealers set their prices a little high, anticipating some haggling. A reasonable starting point is roughly 5% below the asking price. You can also ask your real estate agent for a list of comparable sales to see how much they sold for. Don't assume your offer is final once you've made it. The seller may counter-offer, and you can counter-offer as well. However, you should avoid going back and forth too much. You must meet in the center somewhere. After you've agreed on a price, you'll put down an earnest deposit, which is money that goes into escrow as a statement of good faith to the seller.
Step 6: Find the Best Mortgage for Your Needs
There are numerous mortgage programs available, but as a first-time home buyer, you should be familiar with the basics: adjustable rate, fixed rate, and interest-only.
ARMs (adjustable rate mortgages) are short-term mortgages with a fixed interest rate for a set period of time, often one to seven years. After then, depending on the market, the interest rate can fluctuate every year up or down. These are ideal for customers who don't intend to stay in their home for a long time and/or want a cheaper interest rate and payment.
Fixed-rate mortgages are more traditional, with a fixed interest rate (and consequently a fixed monthly payment) for a longer length of time, typically 15 or 30 years, though 20 or 25 year terms are also available. These are ideal for folks who prefer a steady payment and intend to stay in their home for a long time.
An interest-only payment is possible on both fixed and adjustable rate mortgages. This means you're only allowed to pay enough to cover the interest part of your payment for a specified period of time within the loan term. You can pay the principal whenever you choose, but you don't have to if your finances are tight. It's a common misconception that interest-only mortgages don't allow you to develop equity. This isn't always true, because home appreciation can help you develop equity. Interest-only mortgages have the advantage of allowing you to boost your cash flow by not paying principal.
Remember to ask a lot of questions to your mortgage lender or banker about which mortgage is best for you and your scenario.
Step 7: Complete Your Purchase
Before you close, make sure you undergo a house inspection. It will be well worth the money spent because it ensures the structural soundness and condition of the property.
Setting a closure date that is convenient for all parties can be difficult, but it is possible. Keep in mind that you may have to wait until your lease expires, and the seller may have to wait until their new home closes.
Make sure you discuss all of the charges associated with the closing with your mortgage banker so there are no surprises. Closing costs will most likely include (but not be limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and any points you purchased to lower your interest rate.
Step 8: Make Your Move!
You've secured your mortgage, completed the transaction, and it's now time to move in! Whether you hire a mover or not depends on your financial status and how much stuff you have to move; it may also rely on whether you have a large number of friends willing to assist you. You've completed the home-buying procedure in any case! Simply begin unpacking and enjoying your new home! If you're prepared and know what to do and when to do it, buying a home for the first time doesn't have to be a pain. Choose an experienced home loan lender and a nice, competent real estate agent—they'll make your house purchasing experience go as smoothly as possible!