Buying a home can be a long and complicated process. Many people may not know where to start, or want to get preview of the steps they will have to go through. Here are some steps that will give you an idea of what the process is like.
Get pre-approved for a mortgage
There is no point in looking at homes if you don’t know how much you can afford! If you are interested in buying a home, your first step should be to talk to mortgage lenders and figure out how much they will lend you. Make sure you ask them about FHA loans that are available to you, as these loans often require a much lower down payment. Once you found a mortgage lender that you want to work with, make sure to get pre-approved. This is not to be mistaken with pre-qualified, which is not as official. With a pre-approval, banks will review your credit and income, and let you know what amount they will lend. The typically require pay stubs for the past 2 months, bank statements for the past 2 months, & 2 years of tax statements, so make sure you have them ready. In order to purchase a home in today’s market, you need the pre-approval letter. Most sellers will not take your offer seriously if you do not have one.
Determine what you can afford for your monthly payment
Just because a bank will lend you a certain amount of money does not mean you should spend the max amount! Make sure you look for a price that you will be comfortable with paying for the next 30 years. One of the perks of owning a home is the freedom you get with home ownership, but it won’t feel that way if you struggle to make the mortgage payments every month. Talk to your mortgage lender and find a monthly payment that works for you.
Decide on the area and type of home you want
Think about what you are looking for in a home. Are you looking for an updated, newly remodeled home? Or maybe you are looking to save money and build equity in your home with a fixer upper or a foreclosure. Think about the size of home, the number of bedrooms & bathrooms that you want. Think about what area you would like to live in. Do you want to live close to your work? Do you want to live near all the action in the city, or in the quieter suburbs? If you have any questions, a good realtor (such as myself) will be able to help you come up with ideas and send you potential homes you may be interested in.
Start viewing homes!
Now we get to the fun part! Make a list of potential homes that you would be interested in viewing. Also, ask your realtor to send you a list of homes based on your criteria, as they often have access to properties that you will not. After that, set the appointment with your realtor and view to your heart’s content!
Make an offer
So you finally found your next home, and you want to make an offer. Your realtor should do a comparative market analysis (CMA) on the home to let you know what similar homes in the area are selling for. This could potentially save you a lot of money if the seller overpriced the home. After reviewing the CMA, consult with your realtor to come up with a price to make the offer for. After the price is settled on, have your realtor prepare the paperwork and submit your offer! Once the seller reviews your offer, they may accept your offer, reject your offer, or make a counter offer. Your realtor should be there with you to help negotiate the best deal possible.
After acceptance of the offer
If you can to an agreement with the seller and they accepted your offer, congratulations! The next step is getting the earnest money to the seller (the amount is specified in the contract). Also, the buyer should get a certified inspector to inspect the home for any hidden problems that you may not have found when viewing the home. The inspectors check everything, from the condition of the roof to the condition of plumbing & electrical in the home. You should also line up a real estate attorney to review the contract and deal with any issues that may arise in the inspection.
If everything in the inspection process turns out okay, you then talk to your mortgage lender to submit the official application, and they begin their underwriting process. (A lot of issues can arise from the inspection process, but that is for another article). This is when the bank will send out an appraiser to determine how much the home is worth. This is often the final hurdle, because if the appraiser tells the bank the home is not worth as much as you are paying for it, they will not lend you the money! If the underwriting process does goes through, meaning the bank officially agrees to loan you the money, then you will be clear to close!
This is a very basic buyer’s guide to buying a home, as there are a lot of different scenarios that can happen during any one of these steps. To get all of the information down would require a novel! If you have any questions, feel free to contact me!