15 Steps to Homebuying Process

0
244
15 Steps to Homebuying Process

Getting your finances in order and choosing the best mortgage lender are necessary phases in the Homebuying Process, but there are also enjoyable activities.

The homebuying process is divided into 15 key steps as follows: Call it a house-buying checklist. There are decisions to be made and actions to take in each step. Some are unpleasant, some are quite cool, and some are worrisome. But each of the moves you are a little bit closer to your dream of becoming a homeowner.

Homebuying Process the 15 Steps

1. Ensure that you are prepared

Certainly, one must be financially prepared to purchase a home (see Step 2 for that). But are you prepared emotionally? Even if it’s only going to be your starting house, you’re committing a significant amount of money and establishing roots.

You should consider your long-term objectives as well. Are you purchasing with a partner, and if so, are you both on the same financial page? Is there a possibility that your job may need a move? Do you intend to have children? The advantages (or disadvantages) of whether now is the best moment to buy a property can be influenced by these broad questions.

2. Make sure your finances are in order

You should make sure your finances are stable before making what may be the largest financial decision of your life—buying a home.

Your budget may be established by using a home affordability calculator that takes into consideration your income, debts, location, and down payment amount (more on down payments in a moment). You’ll be able to calculate how much your monthly mortgage payments may total and how being a homeowner might affect your budget.

This may be crucial for keeping your goals realistic. Even though you might be able to secure a hefty mortgage, you might not want to allocate so much of your budget to housing.

3. Create a down payment strategy.

You may decide how much you want to save for a down payment once you’ve calculated what you can afford. Despite the fact that 20% down payments were once commonplace, many homeowners choose to put down less. Although it costs less up front, a lesser down payment means you’ll have to pay mortgage insurance, which normally raises your monthly payment. The minimum down payment needed varies depending on the kind of mortgage you utilize.

You might also want to look into state first-time home buyer programs if this is your first home or if you haven’t owned a home in a while. Many provide financial aid, including support with down payments. Additionally, you may utilize gift money to enhance your down payment if a friend or member of your family has the financial means to do so. Each lending program has its own set of rules regarding gifts.

4. Create a wish list

I told you there would be some enjoyable steps, see? And creating a list of necessities and luxuries for your home is unquestionably one of them. There are many small aspects to consider whether you’re searching for a beginning house or a place you might envision staying for many years, but here are some of the more significant choices you may make while making your list:

Attached or detached housing? A classic single-family home is for you if you’re all about having a backyard. However, purchasing a condo or townhouse can be your best option if you live in a more populated region or don’t want to deal with all that maintenance. Co-ops are another choice in several cities. They may be less expensive than condos, but financing them may be more challenging.

Where would you want to live? Now that you know roughly where you want to reside and that you’re remaining in the same state, it’s time to pick a neighborhood. Consider elements such as security, amenities (such as walkability, green areas, or coffee shops), and prices (which might include property taxes and, if it’s a member of a homeowner association, HOA fees). It’s a good idea to take the school district into account. Even if you don’t intend to have children, the quality of the local schools might affect the value of your house and, should you decide to sell it in the future, the price you receive for it.

5.Find the mortgage that right for you

What you need to qualify for the loan (including the needed down payment amount) and how you’ll repay it depend on the sort of mortgage you use to buy a home. The appropriate house loan can increase your chances of being approved and ultimately save you thousands of dollars.

  • Mortgages that are not federally guaranteed are known as conventional loans. They have stricter requirements but cheap minimum down payments.
  • Mortgages sponsored by the Federal Housing Administration are known as FHA loans. Compared to traditional loans, these are typically easier to qualify for, but mortgage insurance requirements are more stringent.
  • The Department of Veterans Affairs offers VA loans to qualified spouses and serving or former service members. You can finance a purchase with a VA loan with no down payment.
  • Jumbo loans are mortgages for homes that cost more than the typical lending threshold. Larger down payments and better credit scores are typically needed for them.
  • Renovation loans enable you to include the cost of home improvements in the overall loan amount. This can be a method to borrow more money for repairs while paying less interest than you would with another sort of home improvement loan, such a personal loan, especially when mortgage rates are low.

You might have the option to select a fixed-rate or an adjustable-rate mortgage with each of these loan options (also called an ARM). Fixed rates are constant, as you could have assumed from the titles, but adjustable rates can change. In the beginning, an ARM loan may have a lower interest rate than a fixed-rate loan, allowing you to purchase more real estate for the same monthly payment. However, rates may rise (or fall) over time.

6. Get preapproved for a mortgage

You are aware of your homebuying process budget and the home loan program that will work best for you. It’s now time to look for a mortgage lender. There are several lenders available, including well-known large brick-and-mortar banks, nonbank online lenders, and smaller local banks and credit unions that may provide more individualized service.

The first thing you should do when looking at lenders is make sure they offer the kind of loan you need. (Switch to the next lender if you’ve settled on an FHA loan and they aren’t an FHA-approved lender.) Beyond that fundamental barrier, you should evaluate mortgage origination fees, find out what your closing expenses will be, and see how their sample rates stack up against current mortgage rates. Most likely, you can discover some of this information on their websites; nevertheless, you’ll need to chat with a loan representative to receive certain specific data. Working with a lender to get preapproved for a mortgage is an important step in accurately determining your budget.

7. Speak with a realtor

Let’s locate someone to assist you in your search now that you have your preapproval in hand and a clear idea of the type of home you want. The appropriate real estate agent may significantly impact your homebuying process experience, from helping you negotiate with a seller to knowing the ins and outs of the neighborhood market to offering moral support when the search seems never-ending.

Interviewing at least three agents is a smart idea. Find out if people you know who have just purchased a property would recommend their agent by asking them. The only absolute “don’t” in this situation is to work with the realtor who is marketing the house you want to purchase.

You want your own agency to represent you and engage in negotiations.

The seller often pays a commission to the buyer’s agent. However, if you and your real estate agent agree to a representation agreement, it may hold you liable for the commission in the event that the seller doesn’t. Even though it’s uncommon for the seller to forego payment, it could happen, for instance, if you’re purchasing a for-sale-by-owner property. Nonetheless, you should read the contract carefully and confirm who will pay in your particular situation.

8. Go shopping

It’s time to move beyond browsing online real estate listings and actually visiting some homes, so yes, this step deserves an exclamation point. Make the most of your walk-through because, particularly in a competitive market, you might only have one opportunity to visit a house in person before submitting an offer. Avoid being misled by other homebuyers or the seller’s agent (who may or may not be in attendance).

When determining whether to make an offer, use the photos you took with your phone to help refresh your memories. The attractive breakfast nook or the spare bedroom that would make a wonderful home office could be simple to remember, but the outdated appliances or the decking that needs to be replaced might be out of sight, out of mind. Potential problems may have an impact on your offer price or be something to discuss with a house inspector.

9. Make an offer

Have you located the ideal home for you? The time has come to make a proposal. Your real estate agent may be a great help in this situation by giving you details about recent sales in the area as well as any information they may have learned about the sellers from the sellers’ agent (such as whether they’ve already located a new home and are more eager to sell). A real estate lawyer might be of further assistance to you. Any real estate transaction must include a lawyer in several states.

Depending on the reason the seller rejected your offer, you might counteroffer or withdraw your offer. If the seller counters, discuss your options with your agent before deciding whether to accept or submit a counteroffer of your own.

Accepted the offer? Congrats! There are now only a few steps left. At this stage, you’ll probably also write your first check. Earnest money is a down payment you’ll make on the house you want to buy. Typically, it is placed in an escrow account, and when the deal closes, the majority of buyers use it as part of their closing funds.

10. Get a mortgage

You are aware of the cost of the property you wish to purchase. You will now select a lender to obtain a mortgage from (you can go with a lender that preapproved you, or start fresh with a different one). You’ll frequently collaborate closely with a loan officer to finish the actual application, even with a lender that prioritizes the internet.

What Is a Real Estate Attorney and Do You Need One?

Prepare to upload a lot of documents because this process requires a lot of paperwork. What you’ll probably need is listed below:

  • W-2 forms from the last two years, and perhaps more if you’ve changed jobs.
  • the last 30 to 60 days’ worth of pay stubs.
  • evidence of additional income (including documentation of any gift money).
  • the previous two years’ federal income tax returns.
  • last few bank statements (usually for the last couple of months).
  • Information on long-term loans, such as auto or education loans.
  • A valid ID and Social Security number

After submitting your mortgage application, you’ll move on to underwriting. The lender will ultimately decide whether to grant you the loan during this phase; essentially, they are making sure that there are no aspects of the agreement that are simply too dangerous.

You might need to gather even more documentation because underwriting involves looking closely at your finances. The lender will also conduct an evaluation on the house you have chosen.

11. Purchase home insurance

Although it may seem unusual to purchase insurance on a home you do not yet own, most lenders need homeowners insurance as a condition of granting you a mortgage. The policy should normally go into effect on the closing date, and you’ll want enough coverage to completely replace the house (which might not be the same as your purchase price or the appraised value).

12. Arrange for a house inspection

A simple house inspection can highlight any problems and identify any fixes that are required. The foundation to the roof are all covered in this visual evaluation of the house and its systems. You might want to get one of the more specialized types of home inspections in addition to a standard inspection if you have a specific concern, such as mold or radon. Additionally, you might want to have the home’s amenities like a pool, septic system, or retaining walls evaluated.

The home inspection should be paid for and the house inspector should be chosen by you. You might be able to work out a deal with the seller if it reveals issues that weren’t disclosed in the seller’s disclosures (see Step 14).

13. Get the house valued

The home assessment and the home inspection are entirely different processes. While the appraisal is mainly for the lender, who doesn’t want to lend you more money than the home is actually worth, the home inspection is for your piece of mind. An appraisal determines the market worth of the property by carefully examining the home you’re purchasing and similar previously sold homes.

The appraiser will be selected by your lender, but the cost will be borne by you. (Even if you’re paying cash for the home, you might want to think about doing your own appraisal to protect your investment.)

14. Discuss any required fixes or refunds with the seller.

You may still have some issues to negotiate before closing, even though some issues, like prorating property taxes or HOA fees, will have have been addressed in your offer letter.

Depending on the type of market you’re in, your capacity to bargain may be affected. Given that the seller can easily accept their next offer in a strong seller’s market, getting concessions can be challenging. However, you may still have leverage if it’s a problem that will be raised by any buyer, such as a required repair that will be noted by any house inspector. A buyer’s market also makes it possible to negotiate practically any part of the deal, including having the seller cover some of your closing expenses or loan points.

15. finalize the purchase of your new residence

You’ve at last reached the finish line! The closing process can be less stressful if you are familiar with the customary closing documents beforehand.

The closing disclosure must be given to you by your lender at least three days before the closing. To see whether and how any closing costs have changed, you can compare it to your Loan Estimate. This will inform you of the total amount of cash required to close.

You’ll conduct a last walk-through with your real estate agent on or just before closing day. Although you may be giddy with anticipation, double-check that everything is as planned (for example, that all the appliances that are supposed to be included in the sale are still there).

You may have just wrote the largest check of your life, and it’s been a tornado of emotion and what seemed like never-ending paperwork, but now you’re getting the keys to your new house. Congratulations! You succeeded.

LEAVE A REPLY

Please enter your comment!
Please enter your name here