Besides getting married, buying a home can be both the single most exciting and the single most overwhelming event of your life. But, I'm here to remove the fear and to keep it fun. So, let's find your dream home!
Step 1: Prioritize Your Wants and Needs
Before you start looking at homes, think about what’s most important to you. Make a list of must-haves and a list of nice-to-haves.
For some people, their priority is a high-end kitchen because they love to cook. If you order take-out every night, that probably won’t be high on your list. Some of my clients love to host out-of-town guests, so extra bedrooms are a top priority. Think about what’s most important to you so your realtor can find a home that really meets your needs.
Step 2: Check Your Credit Score
This is a must. Knowing your credit score before you apply for a mortgage loan is invaluable. The higher your credit score, the better the terms of your loan (i.e., a better score usually equals a lower interest rate).
You can get one free copy of your credit report per year at annualcreditreport.com, although you may have to pay a little extra to see your score. Scores range from approximately 300 to 850. Also, remember to check your report for errors. Errors on your credit report could lower your credit score, so it pays to dispute them with the three major credit reporting agencies. You can also check your credit score for free at www.creditkarma.com.
Step 3: Set Your Budget
Set yourself up for success by first getting out of debt and setting up an emergency fund. Once that’s done, ideally you should then save enough for a 20% down payment for your new home. A 20% down payment is not a necessity, however, there are a number of mortgage options available for low- or no-money down.
How much house can you afford? Well, budget guru Dave Ramsey suggests you budget no more than 25% of your take-home pay for your monthly mortgage payments. Also, be sure to factor in money you'll need for closing costs, fees (such as fees for an attorney, appraisal, inspection, etc.) and the costs of remodeling or furniture. You should also budget for home maintenance.
Step 4: Find the Right Mortgage
This is one of the most important parts of the process (other than, you know, actually finding a home). The right mortgage lender can guide you, educate you, and find a loan that fits the needs of you and your family. Ask friends and family for recommendations, and ask why they’ve recommended that individual. Interview a few lenders before making a decision. I’m also able to supply you with the names of really solid lenders.
Once you’ve chosen your lender, you will request a pre approval letter. A solid pre-approval puts you ahead of the competition. A pre-approval can make the sales process go much more efficiently. Also, if there are multiple offers, a solid pre-approval can make you look more attractive to the seller since your financing is highly backed by your lender.
Step 5: Look for the Right Home
Remember that priority list you created in step 1? This is where it comes in really handy. By having that list, it takes some of the emotion out of choosing a home. Based on experience, I can tell you that patience is key. It’s easy to get frustrated when you don’t find the right house right away. I can also tell you that the right house will come along. It always does.
Step 6: Make an Offer
Sellers traditionally expect that there will be some negotiating involved, so they price their homes a bit higher than what they actually expect to receive. As your realtor, I’ll do an analysis of comparable homes in the neighborhood that sold most recently. This analysis will assist us in arriving at an appropriate offer.
All of my first-time homebuyers worry when the seller proposes a counter-offer. A little back-and-forth negotiation is totally normal, so there’s no need to worry. Once the seller agrees to a price, you’ll need to make a small deposit called earnest money. I usually encourage 1% of the purchase price if possible. It’s whatever you’re comfortable with, but this is an opportunity to show the buyers how serious you are.
Step 7: The Inspection
Prior to closing, we will utilize the services of a licensed professional Home Inspector to conduct a thorough inspection of the property. The inspector will make recommendations about any repairs that need to be made, and we’ll work with the seller to ensure those are completed.
Typically, we will stipulate in the contract that we will have 10 days to complete the inspection. We will then submit a request for necessary repairs that are concerning to the Home Inspector and you as the buyer. From there we have a 5 day negotiation period to come to terms on what issues will be addressed in and by a profession before closing.
Once an agreement has been reached concerning the the requested repairs, an appraisal will be ordered by your lender prior to scheduling the closing.
Step 8: The Closing
I like to make my clients have a clear understanding of all the closing fees, because they can seem overwhelming. Your mortgage banker can walk you through all of those details before the closing.
During the closing, we want it to feel like the celebration that it is. While you might get writer’s cramp signing all of the closing documents, it will be worth it. You’re buying the house of your dreams!
Step 9: Move In!
Congratulations! You’ve crossed the finish line. Now, it’s time to celebrate and to enjoy your new home.