Buying a house is a complicated process. It’s not as simple as finding a home you love and making an offer. In fact, many first-time homebuyers encounter setbacks and frustration because they didn’t know what to expect when purchasing a property. Here are six steps to buying a house that can point you in the right direction.
Step 1: Savings, Credit, and Debt-to-Income Ratio
When you purchase a home, unless you qualify for a special program, you’ll be paying a twenty percent down payment of the total value of the home you buy. If the home you’re buying is $300,000, your down payment will be $60,000. Savings is your priority. Closing costs are also the responsibility of the buyer and average between one percent and eight percent of the home’s total value. Furthermore, you’ll need to purchase homeowner’s insurance, pay property taxes, and potentially HOA fees.
Even with a down payment of twenty percent, your credit score influences your ability to obtain a home mortgage loan for the balance. Order copies of your credit score and take care of any derogatory marks before you apply for your home mortgage loan.
Your debt-to-income ratio is another factor considered by financial institutions when you request credit, especially for substantial amounts such as purchasing a property. When you’re preparing to apply for your loan, avoid making any major purchases with credit, and work to pay down any current debts to lower your debt-to-income ratio.
Step 2: Pre-Approval for a Home Mortgage Loan
With the proper amount of savings, a clean credit report, and a low debt-to-income ratio, you’re ready to apply for your home mortgage loan. Your loan should be pre-approved before you seek out an agent or begin shopping properties. Lending institutions vary in their requirements, rates, and processes. You have the right to explore loan options until you find the lender that’s best for you. Keep in mind, though, that every time a business orders credit check for you, your credit score drops. Be selective.
Step 3: Finding the Right Real Estate Agent
Now you’re well on your way to becoming a homeowner! Your finances are in place, your loan is approved, and you’re ready to move forward. Finding the right real estate agent is key when looking for houses. Interview agents. The agent you choose should specialize in the type of home you’re buying as well as in the locations you’d like to consider. Ask friends, associates, and family members who they’d recommend. Whether referred by someone you know or pulled from a search query, check the ratings and reviews of agents before making your decision.
Step 4: Offers & Negotiations
When you find the house that speaks to your heart, you’re ready to submit an offer. However, try not to attach emotionally to a property until you receive the keys. Real estate transactions can be tricky, and there are many phases along the way that could present deal-breakers. Your agent will help you submit a fair, competitive offer as well as guiding you through negotiations. Be careful when adding contingencies as too many restrictions could set you apart from your competition in a negative way.
Step 5: Surveys, Inspections, and Appraisals
When the seller accepts your offer, your lender requires that the house is surveyed, inspected, and appraised. The surveyor details the property lines; the inspector verifies that the structure is in good condition, and the appraiser determines the fair market value of the asset you’re buying. At any point during this phase, if problems become apparent, you’re still within the window of opportunity to negotiate or retract your offer. However, once these steps are completed, there’s no turning back.
Step 6: Closing and Closing Costs
Closing costs encompass the fees for services provided throughout the transaction such as the survey, inspection, appraisal, administrative tasks such as title check and transfer, lending fees, escrow agent costs, and real estate agent commissions, among others. Closing costs are not generally covered in your home mortgage loan, so you should be prepared to pay those fees out-of-pocket.
Once the closing costs have been paid, signatures obtained, i’s dotted and t’s crossed, you’ll receive the keys to your new home.
Buying a home isn’t easy, but it can be far less complicated when you have an idea going in of what the process entails. Prepare in advance so you can enjoy the journey into home ownership.
Your real estate agent is the best source of information about the local community and real estate topics. Give Charlotte Trone a call today at 505-350-0099 to learn more about local areas, discuss selling a house, or tour available homes for sale.