Purchasing your first home will require a lot of time and effort. You’ll have to understand how to shop and finance your home.
As a first time home buyer, you may not know where to begin. Read on; these ten steps will make the buying process easier and help you to get ready to buy a new home.
1. Determine What You Can Afford
Before you start looking for a home, you’ll need to understand how much house you can afford. You don’t want to buy an expensive house and be cash-poor. Additionally, don’t feel pressured by family or friends to buy a home, wait until you’re financially ready.
The best way to do so is to get prequalified for a mortgage. You should determine how much you’ll spend on the mortgage so that you can meet your daily obligations after buying your first home.
2. Get Prequalified and Preapproved for a Home Loan
Mortgage pre-approval is a free process; it presents you as a serious and qualified buyer.
Your lender will review your financial information and documents to verify your financial status. Your mortgage banker can tell how much they can lend you.
3. Prepare Your Finances for a Down Payment
Of course, you’ll need a down payment, generally between 3.5 and 20 percent of the price of the home. It’s crucial to ensure your down payment secures competitive mortgage rates and affordable monthly payment.
It’s also an excellent time to check your credit report for errors and pay your credit balances. Lenders will scrutinize your credit reports; you might get an interest rate higher than you deserve.
4. Shop for Mortgage
With the full range of loan programs, don’t wait for the last minute to shop for a mortgage. There are many factors to consider before picking a loan.
A loan officer can help you look into the mortgage options and to choose the best.
5. Find a Real Estate Professional
You don’t have to go through the process alone. Consult a professional who is flexible to meet your specific needs as a buyer. The knowledge of a real estate agent on the buying process and the negotiation of a fair offer is valuable.
Agents have useful information on homes that isn’t always available to home buyers. Typically, you’ll not have to pay the agent; they’re compensated as a commission by the seller.
6. Look for Your Home
Shop for homes in your price range; check out the details of each house (the electrical system, windows, doors, and test the plumbing). Don’t forget to wait for the home with qualities that are important to you.
It’s vital to check the location. The last thing you want to do is to find your dream house only to discover you don’t like the vibe of the hood. Evaluate the neighborhood, such as street parking, shopping centers, and public transport.
7. Get a Home Inspection
An inspection should be done immediately after the seller accepts your offer. Besides checking the property for signs of damage, it gives you a chance to renegotiate your offer. After the findings, you can ask the seller to make repairs on the property.
8. Have the Home Appraised
A lender should arrange for appraisal. An appraiser provides an estimate of the value of the home you’re buying and lets all the parties involved know the pricing of the house is fair.
9. Coordinate Your Documentation
There’s a lot of paperwork required when buying a house. You’ll need loan documents (W-2s, bank statements, income reports, and copies of tax returns) when applying for a mortgage.
Make sure there’s a company to verify the seller is the rightful owner of the property.
10. Closing the Sale
Once you agree with the seller on the price, the house goes into escrow, the period it takes to complete the remaining steps of purchasing your home.
The lender takes a few days to fund the loan and delivers the check to the seller. You’re now ready to move to your first home.
Mistakes to Avoid for a First Time Home Buyer
Every year, most first time home buyers get into the process of buying their first house and make mistakes.
Here are six common mistakes you should avoid:
- Miscalculating repairs – Estimates of renovation costs can be unrealistically low. To prevent getting surprised double the estimates to get more realistic costs
- Underestimating monthly costs – After buying your first home it could have higher costs if you’re not ready since it comes with new monthly bills such as oil, gas, and cable bills. You should also budget for tax fluctuations and routine maintenance
- Shopping for a home before mortgage – You might get disappointed and waste time looking for houses in the wrong price range (aiming too high or too low). So it’s best to get pre-qualified or pre-approved first before you start looking for a house
- Ignoring loan programs – Most first time home buyers don’t always know the details of programs that can make it easy for them to buy a home with little or no down
- Applying for new credit – It’s a mistake to get a new loan, buy appliances or furniture on credit, or take an auto loan. You don’t want to add your monthly debt payments and mess your credit score. You may not qualify for the home loan, and the lender might charge higher interest rates
- Getting just one rate – Mortgages vary in interest rates and fees, such as closing costs. Most first home buyers get just one mortgage rate. It pays to compare offers from different mortgage lenders.
You’re Now a Homeowner!
Buying your first home is the most significant financial decision you’ll ever make. It’s essential to prepare yourself and follow the steps to make sure you’re ready to purchase and move into your new home.