put this blog together to help homebuyers prepare for the entire homebuying process. Contact me if you have any additional questions regarding the the steps involved.
1. Get Your Credit in Line. Your credit score will impact whether or not lenders will give you a loan and how big of a loan you can get. Low scores can also hurt your chances of getting the lowest interest rate. Remember that it is common for there to be errors on your credit report. If you notice any, be sure to contact the agencies to correct them. You should also be ready to explain a lower score to a lender.
2. Budget. You should figure out how much home you can afford by starting with a free, online calculator. To be extra accurate, go get pre-approved by an actual lender to find out the right amount. The lender will evaluate your credit, debt, and income to find this number. As a rule, your monthly home payment shouldn’t be more than 36% of your gross monthly income.
3. Have Cash Ready. You will need cash on-hand in order to cover your down payment and closing costs. Lenders like a 20% down payment, but loans are out there that allow for as low as a 3.5% down payment, depending on other factors. Note that down payments under 20% will typically require you to get monthly private mortgage insurance which costs around .5% of the total loan amount for your mortgage payment per year.
4. Find a REALTOR. Home sellers will typically list their home through a real estate agent, but these agents don’t have a buyer’s best interest in mind. Be sure to find your own buyer’s agent who will represent you. Buyer’s agents have access to all of the homes on the Multiple Listing Service (MLS) and will be able to find you the right home.
5. Start Your Search. You’ll first need to narrow down where you want to live. Be sure to look at local amenities, entertainment, schools, and anything else that you would like to be near. Then make a list of wants and needs for the actual home that you wish to purchase. Share this information with your real estate agent and they will be able to narrow down your search to find that perfect home.
6. Make an Offer. Once you’ve shopped around and found the right home, it’s time to make a smart offer. Your real estate agent should have a finger to the pulse of the market and know what a good offer amount will be. They should also be able to negotiate on your behalf if the offer is not excepted.
7. Review and Sign the Contract. Your agent should walk you through the entire contract from start to end – ensuring that you are satisfied with all that the agreement entails. Be certain that all the time frames and requirements are reasonable to you before signing and always require that a successful home inspection takes place before the purchase is finalized.
8. Get Your Loan. Call your lender who got you pre-approved and agree on the terms of your loan if you haven’t already. Fees for this will likely include the following:
$50 to $75 for your credit check
$150 to $300 for the home appraisal
Note: Other fees will be assessed at the closing. Plus, sometimes the seller will cover some of your fees, depending on what your REALTOR has helped you to negotiate.
9. Have the Home Inspected. You should never purchase a home without it being inspected by a professional home inspector. Remember, a home appraisal is not the same thing as a full home inspection and that most home inspectors do not take a look at pools. Expect to pay anywhere from $300 to $1,000 for your home inspection.
Be sure to be present for the home inspection and set aside at least 2 hours so you can witness the entire process. If the home inspector finds any issues, be prepared to negotiate the offer amount or for them to fix the problems. Also, as long as you made sure to have a successful home inspection clause in your contract, you can walk away from the sale at this point, if need be.