Purchasing Your First Home? Here Are 8 Steps You Should Be Taking Along The Way.
If you’ve entered the world of real estate as a first-time homebuyer and your head is saturated with questions, then acknowledge that you’ve come to the right place. If the whole process of searching for and purchasing a home has you feeling batty, then be relieved to know you’re completely normal. There are many steps, which you undergo as a buyer, many of which you’ll discover below. If this is your first-time buying a home, we suggest the followings steps as you move forward. Remember, we’re always standing by to provide any assistance you might need.
Commit to the purchase
Sometimes those uncomfortable feelings creep up as you embark on the buying process. These feelings can certainly be good as you want to make sure you’re ready to buy. It is, after all, a large investment you’re undertaking. Homebuyers of all stages in life, but especially first-time ones, should review their financial situation and see how much home they can actually afford. Evaluate factors such as your monthly income and expenses. During this process you’ll also want to bear in mind your debt as well as your credit scores. What are other important benchmarks while evaluating your finances? Saving up for a down payment, having a stable salary, having an emergency fund and knowing you won’t have to move within five to seven years or less make judging if now is the right time to buy a little easier. When you’re serious about purchasing a property, have funds set aside for a down payment, closing costs and other related expenses.
Stay up to date with your credit score
As mentioned above, this a step not to be overlooked. In the months leading up to your home search, stay on top of your credit. Mortgage lenders like to see consistency and predictable behavior patterns from potential buyers. Paying your bills on time is critical, therefore make every effort to do so. Another thing you’ll want to keep tabs on is your credit utilization ratio. This is generally defined as your total credit used versus your total credit available. The lower, the better, and aim to stay below 30%. Your credit history (average age of your credit), new lines of credit and a mix of credit can also affect your score, and in turn, mortgage approval. Speaking to a lender about these things will help provide you context and give you direction as you journey toward homeownership.
Seek out a lender and preapproval
Another consideration to take into account is obtaining mortgage pre-approval. You’ll want to minimize any surprises as well as show the seller you can afford their property. By getting pre-approval for a mortgage and knowing you can purchase a home in a certain price range, you’ll have a clearer picture of your purchasing power. It’s imperative to understand how much home you can afford from the start. This will give you confidence when submitting an offer to a seller, through your real estate professional, once you’ve found the right property. Seek out the expertise of a few different lenders, including at least one local bank. You want to land the best deal, so don’t settle for only one quote. See what interest rates they’re offering and how that will affect your payment. Adjusting the down payment, amount borrowed and the loan term will also affect your monthly principal and interest payment. The lender you choose will also analyze your debt-to-income ratio to see what loan programs you’re eligible for. Popular loan options include: conventional, FHA, VA and USDA.
Wish list
As you begin to assemble your wish list — exciting, isn’t it? — it’s crucial to consider any needs you currently have and any future ones you might be able to anticipate. Create a list and prioritize your needs over your wants. What is essential for you and your family? Think about size, layout and other features. Your research will expose you to different neighborhoods and school districts. Consider your proximity to good schools and amenities that might be of value to you.
Choose a qualified buyer’s agent
This is why it can be beneficial to work with a real estate professional who has a thorough grasp on local market conditions and is very informed about the area you’re interested in. Never underestimate the benefits of teaming up with a REALTOR® or real estate agent, who will represent your best interests and guide you through the buying process. A buyer’s agent will assist you in your search, direct you through showings, offer you sound advice, help you submit an offer, negotiate with the seller, anticipate the next steps, leading you to settlement and beyond.
Home inspection and negotiation
Once you believe you’ve discovered the home, which is a good fit for your situation, it’s important to conduct a thorough inspection with a properly licensed home inspector to identify any potential issues or problems. This can help you negotiate repairs or price adjustments before finalizing the purchase. Remember, when you write up an offer, you can negotiate a number of items other than price, such as repair work or renovations to be included/completed prior to closing.
Under contract
If you’re uneasy about signing a contract, such as an agreement of sale or buyer’s agency agreement, review the documentation with your agent and seek other legal advice, if necessary. It’s important to review all documentation, including the mortgage terms, homeowners’ association (HOA) rules, if applicable, and all other legal obligations related to the home.
Closing costs
It’s easy to forget these upfront expenses as you set sail toward homeownership. In exchange for the services provided by your lender, attorney and/or title company, you’ll need to pay costs for inspections, appraisal fees, title insurance, attorney fees, transfer tax, etc. at or before closing.
Overall, the homebuying process is exciting, but it can be challenging, notably if it’s your first-time. Taking these steps and considerations into account will encourage a smoother homebuying experience.
If you’d like to review these tips as well as download our guidebook for even more strategies in homebuying, click here.
