The Home Buying Process
Steps to Buying a Home
Step 1: Check Your Credit Report & Score
You should always check your credit before applying for a loan of any kind, including a mortgage. You are entitled to one free copy of your credit report each year, per the law. Access AnnualCreditReport.com to do this. Scores range from roughly 300 to 850; typically, the better loan you qualify for, the higher your score. Remember to proofread your report for mistakes. Dispute any that you find. It might improve your credit rating. On www.creditkarma.com, you may also obtain a free credit score.
Step 2: Figure out How Much You Can Afford
Start online to see how much you can pay. You can determine an affordable monthly mortgage payment using one of the many online mortgage calculators. Don't forget to account for the cash you'll need for a down payment, closing costs, fees (such as those for an attorney, appraisal, inspection, etc.), as well as the price of remodeling or purchasing furniture. Keep in mind that you are not always required to put down 20% like your parents once did. With little to no down payment, there are loans available. You can get assistance from a seasoned home loan professional in understanding all of your loan alternatives, closing charges, and other fees.
Step 3: Find the Right Lender and Real Estate Agent
It's best to compare mortgage lenders before choosing one. Ask your friends and family for suggestions, and check with the Better Business Bureau. Speak with a minimum of three or four mortgage lenders. Make sure the answers to your many inquiries satisfy you. Find someone who makes you feel at ease and with whom you are comfortable.
Make sure you at least obtain a pre-approval once you have found the ideal mortgage lender. A pre-approval will offer you a better indication of the size of the loan you qualify for, whereas qualifications are merely an educated guess based on what you tell the lender and are no assurance. The lender will actually run a credit check to learn more about you. However, you might even go a step further by obtaining a formal permission before you begin looking for a home. In this manner, the sale will proceed much more quickly once you're prepared to make an offer. Furthermore, since your financing is guaranteed, your offer will appear more desirable than those of other buyers.
Step 4: Look for the Right Home
Make a list of the items you'll require for your home. Get an estimate of how much space you need by asking yourself how many bedrooms and bathrooms you'll need. How big should the kitchen be, in your opinion? Are you in need of a lot of cupboard and closet space? Do you require a sizable yard for your children or animals to play in?
After you've made a list of the things you absolutely must have, don't forget to consider the type of neighborhood you want, the kinds of schools nearby, the time it will take you to go to and from work, and the ease of nearby shopping. Consider your concerns about safety as well as the local real estate appreciation rate.
Step 5: Make an Offer on the Home
Once you've located the house of your dreams, you must submit an offer. Most dealers set their asking prices a little high, anticipating some haggling. Five percent less than the asking price is a good place to start. Your real estate agent may also be able to provide you with a list of comparable sales prices. Don't consider your offer to be accepted once you've made it. You may counter the seller's counter offer if one is made. However, you don't want to vacillate too much. You must meet in the center somewhere. Once a price has been agreed upon, you will deposit an earnest, or money, to show the seller that you are acting in good faith.
Step 6: Get the Right Mortgage for Your Situation
As a first-time home buyer, you should be aware of the three fundamental types of mortgage programmers: adjustable rate, fixed rate, and interest-only.
Short-term mortgages with an interest rate that is fixed for a limited time—typically one to seven years—are known as adjustable rate mortgages (ARMs). After that, depending on the market, the interest rate can change annually in either direction. These are advantageous for those who don't intend to stay in their homes for an extended period of time and/or who seek a reduced interest rate and payment.
Traditional fixed-rate mortgages offer a fixed interest rate (and corresponding fixed monthly payment) for a longer period of time, often 15 or 30 years, though 20 or 25-year durations are also an option. These are advantageous for those who enjoy consistent payments and intend to stay in their homes for an extended period of time.
An interest-only payment is an option for mortgages with fixed and adjustable rates. This means that for a specific period of time during the loan term, you are only permitted to make payments that are sufficient to satisfy the interest part of your payment. If money is tight, you don't have to pay the principal every month, although you can if you'd like. There is a misconception that equity cannot be built with interest-only mortgages. This is not always the case because house appreciation might help you accumulate equity. The advantage of interest-only mortgages is that by deferring principle payments, your cash flow will improve.
Always remember to ask your mortgage lender or banker numerous questions regarding the best type of mortgage for you and your circumstances.
Step 7: Close on Your Home
Prior to closing, make sure you have a house inspection. Since it guarantees the property's structural stability and good shape, it will be well worth the money paid.
Even though choosing a closing date that works for both parties can be challenging, it is possible. Keep in mind that the seller might have to wait until they close on their new home, while you might have to wait until your lease expires.
To avoid any surprises, make sure you speak with your mortgage banker to fully understand all of the closing charges. Your down payment, title fees, appraisal fees, attorney fees, inspection fees, and any points you may have purchased to lower your interest rate will likely be included in the closing expenses, but they are not limited to them.
Step 8: Move In!
It's time to move in now that the deal is done and you have your mortgage. Your decision to hire a mover or not will rely on your financial circumstances, the amount of belongings you need to move, and possibly the availability of many friends who are prepared to assist you. You've finished the home-buying process, either way! Start enjoying your first home as soon as you finish unpacking! If you're organized, know what to do, and are prepared, buying a home for the first time doesn't have to be a burden. Selecting a seasoned mortgage lender and a kind, educated real estate agent is the key to ensuring that your home purchasing process goes smoothly.