STEP 1: ASSESS YOUR READINESS
Before diving into your home search, assess your readiness both financially and emotionally. Financially, evaluate your income, savings, debts, and credit score to ensure affordability for down payments, mortgage payments, and ongoing expenses.
Emotionally, consider your stability, lifestyle preferences, and commitment to homeownership. Reflect on your expectations and ability to navigate the challenges of the home buying process. Taking this time to assess readiness will empower you to approach home buying confidently and make informed decisions.
STEP 2: EVALUATE YOUR FINANCIAL ELIGIBILITY
Lenders use credit reports to assess creditworthiness, typically requiring a FICO® Score of 620 or higher for conventional loans, while FHA loans may accept scores as low as 500 with a higher down payment. VA loans have no specified minimum score but may have lender-specific criteria.
Besides credit scores, lenders consider factors like credit history, income stability, and debt-to-income ratio for mortgage approval.
If you don’t meet these criteria, improve your credit score beforehand for better rates and terms. Consult your loan officer for personalized advice.
STEP 3: SELECT YOUR MORTGAGE LENDER & OBTAIN PRE-APPROVAL
Now, it’s time to select a mortgage lender and obtain pre-approval for your home loan. Take the opportunity to explore various lenders, as this decision can significantly impact your home buying journey.
By diligently researching your options, you can ensure you’re matched with a lender that best suits your unique needs and circumstances. Remember, investing time in this process can make a big difference.
STEP 4: FIND A REAL ESTATE AGENT
Your real estate agent will guide you through the home-buying process, helping you find the perfect property, ask crucial questions, craft offers, negotiate effectively, and handle disclosures. Their experience provides invaluable peace of mind. When choosing an agent, ask important questions, such as:
- How familiar are you with finding homes within my budget?
- How familiar are you with my desired area?
- What sets you apart from other agents?
Once you’ve identified the most suitable agent for your needs, they will review your pre-approval letter, discuss your budget, and assist you in prioritizing your preferences. With their guidance, you’ll be well-equipped to navigate the complexities of the home buying process with confidence.
STEP 5: BEGIN HOUSE HUNTING
To simplify your search, identify your priorities, which may differ based on whether you’re looking for a starter home or a long-term investment. When house hunting, consider factors like:
• Price
• Square footage
• Home condition and potential repairs
• Number of bedrooms
• Outdoor space or amenities like a backyard or swimming pool
• Local entertainment options
• School district rankings
• Property value trends
• Property taxes
Rank these aspects based on their importance to you, and share your list with your agent. They will then curate a selection of homes that match your criteria. Remember, finding the perfect home may take time, so stay patient and optimistic. Once you discover a property that aligns with your needs and financial plan, it’s time to make an offer.
STEP 6: MAKE AN OFFER ON A HOUSE
Most offers need an earnest money deposit, usually 1% to 2% of the home’s price, applied to your down payment and closing costs. Negotiations may continue after the initial offer, with your agent guiding you. Stay flexible yet firm, and be prepared to walk away if terms can’t be agreed upon.
What happens when you submit an offer?
Once your offer is submitted, the seller can respond in one of three ways:
1. Accept the offer: If the seller agrees to your terms, you can proceed to the next stages of the buying process.
2. Reject the offer: In the event of rejection, the decision returns to you. You may opt to submit a revised offer or explore other properties.
3. Present a counter- offer: The seller may offer adjustments like price or conditions. You can accept, reject, or counter their offer.
Once you’ve identified the most suitable agent for your needs, they will review your pre-approval letter, discuss your budget, and assist you in prioritizing your preferences. With their guidance, you’ll be well-equipped to navigate the complexities of the home buying process with confidence
STEP 7: GET A HOME INSPECTION
It’s strongly recommended to schedule an inspection before completing your property purchase. A qualified inspector will evaluate the property for potential issues, including electrical systems, roofing, and appliance functionality. After the inspection, you’ll receive a comprehensive report detailing any identified problems.
What Do You Do With Your Inspection Report?
Review the report carefully, focusing on major concerns. If health hazards or structural issues like lead paint or foundation cracks are found. If any issues are found, your agent will discuss repairs with the seller. Remember, you’re responsible for major repairs after the sale, so serious issues like foundation cracks need careful consideration.
How Does An Inspection Contingency Work?
To protect yourself, many buyers include a home inspection contingency in their purchase offer. This contingency may allow you to back out of the sale or renegotiate terms if significant issues are uncovered during the inspection, without losing your earnest money deposit.
STEP 8: ASK FOR REPAIRS OR CREDITS
After reviewing your appraisal and inspection reports, your agent may address any issues found with the seller. Here are three ways to do so:
• Request a discounted purchase price considering the results.
• Ask the seller to provide credits to cover some of your closing costs.
• Request that the seller address and fix the problems before closing.
The seller may accept or reject your requests. If they reject them, it’s your decision on how to proceed. If you have an inspection contingency in your offer, you can opt to walk away from the sale while retaining your earnest money deposit.
STEP 9: GET A HOME APPRAISAL
A home appraisal determines the property’s value for mortgage loans, ensuring lenders don’t exceed its worth. If the appraised value is lower than your offer, you may need to adjust your down payment or renegotiate. Your real estate agent can advise on contesting the appraisal if needed and provide comparable homes to support your case.
How Does An Appraisal Contingency Work?
Including an appraisal contingency in your offer allows you to withdraw or negotiate if the home’s appraisal falls short of your offer, without losing your earnest money deposit. These contingencies vary, so ensure you understand your agreement before proceeding.
STEP 10: DO A FINAL WALKTHROUGH
During the final walkthrough, carefully inspect the home to ensure the seller hasn’t left behind any belongings. Verify requested repairs have been completed and double-check your home’s systems to ensure everything is in working order. If everything appears satisfactory during the walkthrough, you can confidently proceed toward closing on your new home.
STEP 11: CLOSE ON YOUR NEW HOME
Three days before closing, your lender will give you the Closing Disclosure, detailing your closing expenses and loan terms
What To Expect At Closing
At the meeting, you’ll sign a settlement statement outlining all home sale expenses, make your down payment, and cover closing costs. You’ll also sign the mortgage note, confirming loan repayment, and the mortgage/deed of trust to secure it.
Once the closing is complete, congratulations! You’re officially a homeowner!
