Buying a home is not a walk in the park. You risk making an expensive mistake when you take the wrong path. Let us help you out. In this article, we have outlined the basics of the home buying process so you will have a guide from which to set your expectations and base your future plans.
Do your homework
There are diverse resources online that show you legit listings, price guides, lender offers, etc. Read magazines, talk to family and friends who went through the same process previously and take note of the particulars. Localize, or start where you see your future home will be. From here, you will be able to concentrate your resources on a certain area and filter your choices including but not limited to price range, possible loan financing sources, and necessary personal considerations, among others.
Evaluate how much you can afford
It is expert advice to choose a home that is at most no more than five times your median household income every year. That is considering you have a good credit profile and do not carry a lot of debt. Assess if you can pay the down payment amount as well.
If you are currently in a difficult financial situation, take practicality into consideration. Know what you can afford based on your needs. Assess if you will be able to carry the burden of the mortgage.
Get prequalified and preapproved for credit
An estimate is hardly the true cost. So in this step, you will have to ask the help of the professionals. By getting pre-approved for credit, you will know the range of how much you can actually spend in your future home based on your present financial setup.
To get prequalified, you need to forward vital financial information – assets, income, etc. to a mortgage banker. The banker will assess your files and from there, give you a range of home prices you should be looking for.
To get preapproved for credit, you will be asked to hand out your financial documents including paystubs, bank account statements, etc. so that the lender can review your credit and overall financial health.
Find a good, reliable real estate professional
The real estate agent is more than a salesperson. He or she will guide you from choosing a home to closing the sale. That is why it is important to find someone who understands your preferences and who can speak on your behalf.
Look for someone who has experience, is familiar with the little details of the process, and who can tell you the pros and cons of your choices objectively from a professional vantage point.
Shop for a home and make an offer
So now you have a list of prospects in mind, filtered according to the price range you were advised to follow. Then it is time to take a tour and make an offer.
When you do the tour, make sure you have your checklist ready. Is it near the school? Too near the station than you expected? Is it in good condition as it was shown online? Do you like the house layout? Consider these factors before making an offer. Never lay out a number if you are hesitant.
Work with your agent to negotiate on the home price based on the current prices in the area. Once an agreement is set, the transaction will proceed to escrow.
Inspect the home
An offer serves as a buffer that gives you a chance to withdraw or renegotiate in case there are fixes that need to be done on the home. The inspection typically takes place a few days after an agreement has been reached between seller and buyer.
After the home has been duly inspected, a report will be forwarded to you. In the event that there indeed are required fixes, you can ask the seller to make repairs before the deal is closed. You can also opt to visit the property once said repairs had been made to make sure they had been properly and responsibly carried out.
Choose your home financing option
It is important to know your needs when choosing a financing option for a home loan. Do you want to have fixed monthly payments? How long do you plan to keep your home? Do you want to save on interest and choose a shorter loan term?
Ask around for quotes, know the rate you qualify for based on your credit standing, and use various tools to compare. It is also helpful to enlist the help of friends. Experience is a very good resource when it comes to playing with risk and possibility.
Get an appraisal
An appraisal is required to determine your home’s market value. Getting an appraisal will be arranged by your lender. The appraiser is from a third party company not associated with the lender, much like the escrow. Take note that the agreed upon offer does not necessarily coincide with the property’s appraised value.
Follow up the paperwork
Work alongside your lender and agent to have the paperwork processed. These include underwriting, title search, lien search, finalizing rates, and ordering of loan documents.
Seal the deal
During closing, you will presented with papers that you need to sign to complete the home purchase. Read the fine print before putting your signature. After the papers have been signed, you might need to wait for a few days before receiving the funding. Once it is received, you can now move to your new abode.
Home buying can be daunting. But it doesn’t have to be. If you are well guided, you can easily move through each step in a breeze and complete the purchase in no time.