Knowing the steps involved in buying a house will help you to understand and prepare for the purchase. Before considering the purchase of a home, you must first make sure that your finances are in order. Three to six months before embarking upon the adventure of purchasing a home, you should make sure that your finances are in order. Obtain your credit report from all three credit bureaus: Experian, TransUnion and Equifax.
Resolve any outstanding credit problems that appear on your credit report. It is important to obtain credit reports from all three agencies because one or more of your credit reports may contain negative entries that you are unaware of. Sometimes, entries appear that are in error. Challenge any errant entry and have it removed from your credit history.
Once your credit reports are in order, you can start walking through the steps to buying a home. The steps to buying a home include:
Step 1: Save the Downpayment
In today’s mortgage market, you need to have a considerable downpayment for the home you want to purchase. Ideally, you should have 15 to 20 percent of the purchase price for the downpayment. However, programs are available, such as VA and FHA loans, that will allow you to put 5 percent of the purchase price down as the downpayment. Once you have saved the downpayment, you can move onto the next step.
Step 2: Secure an Agent
A real estate agent is your best advocate when purchasing a home. Find and secure a real estate agent who will walk with you through the process. The real estate agent will need to know the type of house you want, the location you would prefer and the general price range you would consider.
The real estate agent will identify homes based on your criteria for you to see. The agent will take care of the details for you to view the home. The agent will be your best resource for purchasing your home. From doing the legwork to find homes for you to view, to presenting your offer to the seller, the agent will advocate for you every step of the way. Find an agent who is knowledgeable, experienced and who you will enjoy working with.
Step 3: Get Pre-Approved for Your Mortgage
Most Realtors suggest that home buyers begin the mortgage process before even seeing the first home. Most individuals with semi-acceptable credit will be able to obtain a mortgage. The objective with starting the mortgage process early is to obtain the best rate possible for your loan. Starting the mortgage process early will help you to determine how much house you are willing to afford.
Additionally, once you bid on a home, you have a specified amount of time to secure funding for the home. Generally, you need to secure funding from 10 to 15 days after the bid is accepted. Pre-approval for your mortgage means that you will not need to rush around to find funding when you find the house you want to purchase.
Working with a lender early on will help you to find programs that best meet your needs. If you are a first-time home buyer, you may qualify for programs that require less money down and are backed by the state. For purchasers who are buying a second or third home, other options, such as a 15 year mortgage might be more desirable. The lender will review your financial situation and suggest programs that will best meet your needs.
In order to obtain pre-approval for a mortgage, you will need to produce several documents. You will need to prove your income via paycheck stubs, W-2s and income statements. You will also need to produce your tax returns from at least two years back. You will need to show any investment income and any other source of income. You will need to show bank statements and any other documentation that is requested by the lender.
Step 4: Shop For Your Home
When you are considering the purchase of a home, you will want to look at several homes. You will want a broad range of choices and options because your home will not only likely be the most significant investment you will ever make, but you will probably live in the home for years to come.
Take your time and look at several homes in your price range. Consider homes in areas other than your desired neighborhood. Consider foreclosures to obtain a better purchase price. Your real estate agent will be able to find several homes for you to view during this step.
Step 5: Select Your Home
After you have toured several homes, select the home you would like to purchase. You have the option to accept the seller’s asking price or to provide an offer for the property. This is one step where having your real estate agent is very helpful. If you want to make an offer for a lower purchase price, your real estate agent will deliver the offer to the seller or their representative. The seller will then accept your offer or provide a counter-offer. The counter-offer will likely be a compromise between the original asking price and your offer. You will accept the offer or counter with another offer. When negotiations end, you and the seller will agree to a purchase price and the contracts may be drawn up for the property.
Step 6: Obtain Funding
If you have sought out pre-approval for your loan, you may now secure the loan. Now that you know the purchase price and how much you will need to put down, you can officially obtain your mortgage.
Your mortgage company will draw up the contract for the transaction. In the meantime, the seller’s representative will draw up the contract to sell the home. These contracts will be signed during the “closing.”
Step 7: The Home Inspection
The home inspection should be part of the contract and must be performed prior to closing. The home inspection is performed by a professional inspector who will examine every aspect of the home to ensure that the home does not have any damage or major problems that have not been disclosed to the buyer. The plumbing, the roof, the foundation and other components of the home are checked. Be sure to ask the seller for disclosures prior to the home inspection. However, the seller will not always be aware of issues with the home.
Step 8: The Final Walkthrough
Prior to closing, the buyer will perform a final walkthrough of the home with their real estate agent. You will check to make sure that all switches operate as they are supposed to. You will check to make sure that outlet covers are installed properly. You will also check for telephone and cable jacks, ensure the doorbell works, and that the plumbing operates as expected. In general, you will simply check each detail of the home to make sure everything works as expected.
Step 9: The Closing
You, the seller, their representative and your real estate agent will schedule a time for the “Closing.” The Closing is the time when all contract forms are signed. At the Closing, you and the seller will ensure that all documents are signed and any questions about the property are answered. You will take possession of the home at this time when the seller provides you with the keys to the property.
After the Closing, you are now officially the homeowner. Congratulations! You have purchased your home and you may now move in and enjoy your property.