Are you thinking about buying your first home? If so, use these ten steps to buy a home with confidence.
Understanding the complete home buying process is key to having a successful home buying experience.
Before making an offer, I want to make sure you understand each step for a smooth road to homeownership. So, let’s get started.
1. Do your research
Step number one is to do your research. There are several things that you should research before putting an offer on a home.
You want to learn about potential lenders and the interest rates that they offer.
Do you have a down payment? What monthly mortgage amount is sustainable?
Research and understand the different types of loans and choose one that is right for your situation.
2. Create a budget
Step number two is to create a budget for the home buying process.
When creating your home buying budget, there are a few things to take into consideration. Think about the amount of money that you have for a down payment.
If your down payment is less than 20% of the purchase price, be sure to save money in your budget for PMI.
PMI stands for private mortgage insurance. That is insurance that lenders charge when you have less than a 20% down payment to ensure that you will repay your loan.
Don’t forget to create a category for one-time fees and closing costs.
This budget will help you stay on top of everything financial for the home buying process.
3. Check your credit
The third step in the home buying process is to check your credit.
Your credit score is one of the factors that help to determine the terms of your loan.
It’s straightforward to check your credit report. You have access to three credit reports through www.annualcreditreport.com.
Since the pandemic started, the number of times you can pull your credit has increased, so be sure to take advantage of this.
If you don’t want to pull your credit, you can get a ballpark idea from Credit Karma.
When you pull your credit report, look it over and make sure everything there is accurate. If it’s not correct, you have the opportunity to dispute it.
If everything is accurate but your credit score is low, there are a few things that you can do.
Look into paying off some of your debt, or talk to a representative at your bank for ways to increase your credit score based on your credit report.
4. Find a real estate agent
The next step is to find a real estate agent. Your real estate agent is going to be your go-to person during the home buying process.
This person will make sure you make a firm offer, help you negotiate if you get into a bidding war, and know the market well so they can tell you if this is the right time to buy.
The real estate agent can help you look for a property that meets all of your standards. They can even point out things you wouldn’t know to look for when you view a home.
Find a top-rated agent in your area by asking around. You can ask your current neighbors or your family and friends that live in your area.
Most real estate websites will have reviews for their agents. Go to the review section on their websites and review each agent to choose the best fit for you.
You may also have luck finding an excellent real estate agent on Facebook for your local area.
Just ask around and make sure you always look at the reviews for the person before you choose.
5. Get a pre-approval letter
Step five is to get a pre-approval letter. A pre-approval letter is a letter that you get from your lender that shows that you are eligible to get a mortgage loan from this lender.
The letter shows the sellers that you’re serious, and it could be the determining factor on whether they go with you or choose another offer.
A pre-approval letter gives you a competitive advantage because it shows the amount of money that you’re eligible to take out, and it shows that you’ve already been in contact with a lender.
You have to submit your check stubs, bank statements, and credit report to your lender to get this letter.
Once you get a pre-approval letter, do not make any large purchases.
If you make a large purchase after this point, it could change the complete terms of your pre-approval, and you may no longer be eligible to get a mortgage.
6. Gather documents
The next step is to gather documents. You want to make sure that you collect your documents and submit them as quickly as possible while you’re going through this process.
You can do this before you even find a home.
A few of the documents that your lender may ask for are two years of work history and two years of your address history.
You will also need bank statements and copies of the past two check stubs and tax returns.
Depending on your situation, you may need more documents, but make sure you have these available to be approved for a loan.
7. Find a home
Step seven is to find a home. Finding a home is the most exciting part of the process.
You get to figure out what you like and what things are non-negotiable.
This step should be easy because you already have your pre-approval letter and know how much house you can buy.
Make sure you communicate with your real estate agent and let them know your preferences.
Your real estate agent will pull the list and give you a few options to view.
During this process, you can also find houses on your own through websites like Zillow and Trulia and forward those to your real estate agent as well.
After you find the perfect home and put in an offer, you will call your loan advisor and give them information about the house.
They need the address, purchase price, the amount of your down payment, and any fees that are related to the neighborhood.
At this point, your pre-approval letter turns into a mortgage application.
8. Get final approval
Step eight is to get final approval. During this step, a few different things happen at once, and things start moving quickly.
One thing that’s going to happen is your loan advisor will collect all of the required documents from you.
The faster you get those submitted, the faster you get your final approval.
While this is going on, you’re also going to get an inspection and get the home appraised.
You will have to pay out of pocket for the inspection and the appraisal.
A couple of other things going on in the background are finding your homeowners insurance and presenting that to your loan officer.
Once you get your final approval, you’ll start to receive closing documents that will tell you the amount to bring to closing and any other relevant information.
Repairs from your inspection will be made by your seller now as well.
You’ll know when you’re at the finish line when you receive your final closing documents. You will get those at least three days before your closing date.
9. Attend your closing
Step nine is attending your closing. Your closing is where you’re going to do your final walkthrough of the property.
Make sure that any repairs are complete. The home should also be in the condition that it was the last time you saw it.
If anything is out of whack, let your real estate agent know, and they will make the necessary calls to see what the next steps are.
The final walkthrough is usually a couple of hours before your closing appointment. Once you’ve done the final walkthrough and everything looks good, it’s time to go to your closing appointment.
Remember to bring your ID, bank account information, and wire transfer information for your down payment or closing costs.
Be prepared to sign a ton of documents.
10. Get your keys and move in
The last step is to get your keys and move in. You have finally made it to the end!
The home buying process is pretty long, but once you get your keys, you’re ready to move in.
Once you complete your closing, you get your keys!
If your seller has left any notes about the home, you’ll get that at closing as well.
When you have your keys, you can breathe. If you’ve put off any major purchases, you can make them now.
The bottom line
I know it sounds like a lot, but the home buying process can last 30 to 45 days.
Pay attention to all of your emails and communicate with your loan advisor throughout the process.
Also, don’t make any big purchases during this process, or you may jeopardize your loan.
While this process may be stressful, owning your own home will be worth it in the end.
Are you planning on purchasing a home anytime soon? Have you already started the process of buying a home? Let me know in the comments.
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