Buying a home is an exciting adventure. Most first-time buyers get completely consumed by thoughts, daydreams, and ideas about what life will be like as a homeowner. But before you jump in head-first to the waters of real estate, find out how to best prepare so you’re empowered and not discouraged along the way. Here are six steps to buying a house.
Navigate this article:
Money Matters & Credit Score
Substantial savings have got to be a part of your game plan from the word go. If you’re robbing Peter to pay Paul or you’re barely scraping by without a nest egg, you’re not ready. Work on your savings first.
Your down payment on a house will equate to about twenty percent. The bank will finance the other 80. But there are also closing costs, homeowners insurance, private mortgage insurance, property taxes, HOAs, and other expenses involved with your move.
Make sure you’ve got plenty of green in the bank. Aside from your real estate related savings, stash away a 3-6 month supply of living expenses as an emergency fund. And, an extra little nest egg for unforeseen situations and future comfort wouldn’t hurt.
When you apply for a home mortgage loan, your lender is going to order copies of your credit report to assess your credit score. Furthermore, your debt-to-income ratio will be measured. The goal of the lender is to gauge your long-term ability to pay off debts on time. The debt-to-income ratio indicates to the lender how much money you have coming in vs. how much going out, and whether or not you may be overextending yourself by borrowing that much money.
Before you set your sights on a single house online or in the tangible world, get pre-approved for your home loan.
Do not confuse pre-qualification with pre-approval. You need pre-approval. Pre-qualification means you’re testing the waters with the bank. It’s a hypothetical, “if this, then that” estimate of what you might qualify for if you meet the criteria. What it doesn’t do, however, is guarantee you the money. What you did was inquire as opposed to applying.
Pre-approval means you’ve submitted the application and the documents for verification, passed the credit check and debt-to-income ratio evaluation, and that the bank has agreed to lend you a specified amount.
Pre-approval accomplishes several things. The proof of home mortgage loan empowers you as a buyer, signals to agents that you’re ready to look at houses, tells sellers you’re ready to take action, and, above all else, determines your house-buying budget.
Find the Right Agent
You don’t have to pay a real estate agent up front to show you houses. In fact, you’re not the one that pays your agent at all. Customarily, sellers’ agents and buyers agents’ have working agreements with each other. Buyers’ agents bring the buyer to the house for showing, and when the house sells, the seller’s agent offers the buyer’s agent financial compensation for assisting with the sale. This point also supports why you shouldn’t work with an agent until you’re ready to make the purchase.
Find a professional real estate agent with expertise in the type of house you’d like to buy, in the neighborhoods in which you imagine yourself living, and who has a personality you feel comfortable and confident with.
Wish Lists and House Hunts
Your wish list may not be realistic. The wish lists of first-time buyers rarely are. Talk with your real estate agent about how far your money will stretch.
Also, discuss with your real estate representative the manners and etiquette of viewing houses.
Offers and Negotiations
When you find a house you love, your agent will help you craft a compelling and competitive offer. If needed, your agent will assist you with counter offers and negotiations.
Appraisals, Inspections, Surveys, etc.
The tension mounts as you wait out the final steps of purchasing real estate. The house is being surveyed, appraised, inspected, and is undergoing legal checks as well to ensure the title is free and clear.
When you take the steps out of order, you could find yourself frustrated and confused during the home buying process. Know ahead of time what to expect along the way and set yourself up for success.
Your real estate agent is the best source of information about the local community and real estate topics. Give The Neal Team a call today at 602-931-1010 to learn more about local areas, discuss selling a house, or tour available homes for sale.