Your Step by Step Guide to Buying a House
The process of buying a house can be more complicated than many may think – especially for first time home buyers. Deciding if you are truly ready to buy a home means looking at your finances, understanding what you want, and understanding the current market and how you fit into that market. Once you’re ready, there are several steps to go through to buy a house.
Get Your Finances in Order
Before you can start shopping for your home, you need to understand your finances completely. You’ll set your budget based on your income, debt, anticipated down payment, and credit score. In most cases you should plan to spend no more than 25-30% of your monthly take-home income on your housing expenses, which includes your insurance premiums and taxes. There are many online calculators that can help you determine your monthly budget for home expenses, and what that means for house prices you can afford. Look at your credit report and take care of any potential issues before you begin shopping for a mortgage, and make sure you don’t incur any new debt in the meantime. If you don’t have savings to use for your down payment and closing costs, start building that fund now.
Get Pre-Approved for a Mortgage
Once your finances are in order, you can begin to look for a mortgage. The first step is pre-qualification. In most cases, the pre-qualification is based on only a basic understanding of your finances, it won’t involve a credit check, and will just give you an idea of what you may be approved for when you apply. This gives you an idea of what kind of house you can look for. The mortgage pre approval is a much more comprehensive process. A lender will offer to loan you a certain amount toward a home purchase with specific terms. They will pull your credit report and review all of your financial documents. This is the time to begin shopping around for the right mortgage for your situation to see if you qualify for any special programs. Using a mortgage broker can help you through this process. In a seller’s market, having a pre-approval is crucial. Not only will you know exactly what you can afford, but you will be able to make a much stronger offer when the seller knows you have your financing in place.
Make Your Wish List
If you are a first time home buyer, you likely have a wish list of what you want in your home. In some cases, you can wait and do this with your real estate agent, but many agents appreciate it when you’ve done some basic homework first. Sit down and list your needs, your deal breakers, and your “nice-to-haves”. Take everything into consideration both for now and in the future. Create a list of qualities your new home should have and stick to the list. If you have your heart set on a walkable neighborhood, your agent should not waste time showing you homes on a busy street without sidewalks. Consider if you are looking for a starter home or a forever home and take those things into account when you are making your list.
Find a Real Estate Agent You Trust
Once your finances are in order and you know what you are looking for in your new home, you can begin to look at homes with a real estate agent. Buying a new home can be an overwhelming process, and the agent is there to take you through the process with the least amount of stress. Choose your agent carefully, especially if you are a first-time buyer. Ask for referrals from local friends and family and meet with a few agents before deciding on a real estate agent with whom you feel comfortable with to guide you through the process. You will be spending a lot of time with this person, so you need to make sure you find an agent you like and trust.
Prepare the Right Offer
When you’ve found the right house, let your agent guide you through the offer and negotiation process. The important pieces to remember are to stick to your budget and be careful about waiving the inspection. In a seller’s market, many first time buyers begin to resort to tactics such as waiving all inspections or bidding over their budget, but this is a risky move. You may be stuck with a mortgage you can’t afford or a home with serious problems. Let your real estate agent guide you and help you make the right decisions.
Go Through the Escrow Process
During this time, you’ll need to rely on your agent. You’ll get a home inspection and appraisal, you can ask for repairs or credits, you’ll finalize your mortgage, and you’ll do the final walk through before closing on your new home.
The process of buying a home can be overwhelming, but with the right agent to guide you and the right preparation on your part, it can go much more smoothly than you may be thinking. Understanding how to begin, where to lean on your agent, and how to prepare for each step can help you find a new home before long. If you’re ready to look at homes, contact Amberwood Real Estate today!