Process of buying a house can be overwhelming and exhilarating at the same time. Here are 10 easy steps steering you towards the road that leads right to your dream home.
You are done with the number-crunching part, thought about your lifestyle and finally came to the question ‘how to buy a house.’ Process of buying a house can be daunting and exciting at the same time. However, knowing what to expect can condense some of that anxiety and help you confidently steer your way to your home buying process.
To keep you sane, here’s a step-by-step guide to the house buying process. You could swap the order of a few early steps to buying a house – you can get pre-approved before you find an agent, for instance. However, you don’t want to find the perfect home first, only to have a better-prepared shopper dive in and snag it.
Step 1: Pulling Out Your Credit Report And Score
Before engaging with a lender, it’s smart to go through your credit report for deficiencies. By law, you can get a free report annually via Annualcreditreport.com. The report condenses data from the three major credit-reporting agencies: TransUnion, Equifax, and Experian. Having the information in hand before you engage with a lender lets you dispute any reporting errors. Depending on your credit report, Fair Isaac & Co. (FICO) dispenses you a credit score ranging anywhere from 350 to 850. The higher this score, the better the chances you have to secure a mortgage with low-interest rates. Scores are based on:
Have you made timely bill payments in the past?
The state of your overall debt?
Have you recently applied for new credit? This gives a bad impression.
Types of Credit:
Lenders like to see a diversity of types, such as car loans, bank cards, and student loans.
Length of Credit History:
The length of the period since you first started borrowing money? Mortgage lenders prefer a long credit history.
So how do you define a good credit score? A good mortgage rate is expected to be anything above and at720. Homebuyers who qualify for an FHA loan can typically secure a loan if their credit is in the range of 580 or above. FICO scores can be obtained through www.myfico.com for a single-time or monthly fee. Once you have your score, you can find out what interest rate you will possibly qualify for by researching interest rates over the internet.
Step 2: Figure Out Your Budget Limits
Even more considerable, decide how can afford to pay. Just because you have secured eligibility for a larger mortgage doesn’t mean you have the financial standing to make such kind of payment each month. The mortgage affordability calculator can be used to determine what you can afford. This is also a good time to explore your housing market and begin going to open houses in your prospective neighborhood to offer you a good sense of what your budget will actually fetch you.
Step 3: A Dependable Real Estate Agent is The Key
You wanna know your lifeline through the process of buying a house? Not so long ago, people didn’t have much to think about when picking an agent. A postcard in the delivery or a name on a sign might have been all you could use if there were no personal referrals. However, with the advent of the internet now it’s a breeze to check online reviews. Make some time and arrange a meeting with a few agents and ask some questions. Your agent is your chief confidante, advocate, and hand-holder in the process so you can’t leave this aspect of home buying to chance.
Step 4: Getting Pre-Approval For The Loan
The smartest move is to get pre-approved for a loan initially in your home hunt. Many internet portals have an easy-to-use tool that enables you to find a licensed lender in your region with a history of positive borrowers’ ratings, who can help you get pre-approval for your loan
Pre-approval necessitates the lender to collect the credit information and evaluate your financial situation. The lender will then offer you a letter that denotes the amount they would be prepared to lend you. In a multiple-offer scenario, pre-approval may provide you with an edge since the seller will have more assurance that you will be approved for a loan sufficiently large to purchase their property.
You are not indebted to acquire a mortgage from the lender who you get a loan pre-approved from. When it’s officially time to apply for a loan, it’s advisable to get loan estimates from at least 3-4 lenders to compare their fees and interest rates.
Step 5: Hunt For Your Dream Home
Let the house hunt begin! By this point, you’ve discoursed things over with your agent and you both know what you precisely are looking for in a home. Equipped with this, your budget limits and knowledge of the regional market, go through the listings online and with your agent, who will come up with prospective homes for you to tour. Chances are you’ll notice some new things to love or hate about properties and streamline your search.
Step 6: Layout an Offer
For most shoppers, this is when the butterflies really appear. Once you’ve settled for a home, you want your agent to work with you to craft an undeniable offer. Keep in mind, the listing price is only an opening point. Your agent will comprehend the market and help guide you to make the most tempting offer, whether it’s above, at or below the listing price. Are there any possibilities to your offer? Will there be a need for inspection? Your agent will likely take care of all these matters. Once you’ve given in the offer, an indeterminate period of wait follows. It might look endless. You may obtain neither a simple yes or no but a counteroffer consideration. It can be something to your liking. Getting a solid “no,” it’s a straight fall to Step 5. Getting a “yes” takes you down to celebration mode!
Step 7: Your Big Day – The Day of Home Inspection
If your offer obligated a home inspection, this is your big day. Certainly, you get to have a home inspector examine the home to ensure there are no concealed defects that warrant negotiation for fixing. However, more importantly, this is the maximum time you’ll get to spend on this future-home until the closing date. Go ahead and bring your measuring tape to figure out what goes where. This may be the last time you are seeing your prospective home until it is yours, quite a few weeks from now.
Step 8: Get Insurance And Establish Utilities
If you already a homeowner, simply contact your insurance agent and make them aware of your new home purchase. They will begin writing a new policy. If there is no insurance agent, now’s the time to find one since your lender will need homeowners insurance. Even without a mortgage, insurance is a critical component for protecting your investment. You’ll also want to provide utility companies your move-in date to launch service. Nobody likes moving into a dark, cold house because you didn’t establish your move-in date with the power company!
Step 9: The Ultimate Big Day – Closing The Deal
Finally the big day. You’ll go through and sign documents and then sign some more. Even though this step is about siting around a round table signing some papers, it can be exhausting. But it also means you’re approaching the finish line.
Step 10: The keys are Yours! Move in
You did it. This is it. You finally own your dream home! Your sale contract will lay down precisely how soon you get to move in. Occasionally, if you are lucky enough, it’s by a certain time on the day you sign the closing agreement. At other times, possession occurs a few days following closing. Whenever it is, you have transitioned from the adventure of home buying into the adventure of homeownership.
Mistakes to Avoid When Buying a Home
Make sure you cover this checklist of blunders to avoid when purchasing a home.
Not Asking For an Inspection.
A good home inspection can hint towards the most needed repairs – before you claim the homeownership and pay for all of them.
Not Hiring a Realtor.
You’ll need a seasoned real estate expert to guide you through what can be a complex home buying process.
Not Acknowledging The Importance of Credit.
Without a satisfactory credit score (a FICO credit score of 600-or-over is commended) you’ll have problems securing a home mortgage. Take care of your credit health before you plan to buy a home.
Buying “Too Much House” is Apparently a Thing
Indebting yourself too much for a new home can set the stage for years of apprehensions about covering the monthly mortgage payment and stop you from actually appreciating your homeownership experience. Don’t bite off more than you can chew. Only purchase a home you can afford, and never talk yourself into purchasing a home that costs more than its worth.