I Want to Buy a Home, But I Don’t Know Where to Start
A to Z for Purchasing Your Lovely Home
Buying a house is a major life decision. It's an exciting time, but it can also be overwhelming. If you're a first-time homebuyer, you may not know where to start. That's why I've put together this comprehensive guide to help you through the process, step-by-step.
1. Get your finances in order and make yourself financially predictable
Before you start shopping for a house, you need to get your finances in order. This means checking your credit score, getting your credit report, and calculating how much you can afford for a down payment and closing costs. Down payment usually means certain amount of money you should pay with cash when purchasing a house or auto. You will pay some percentage of the total price as down payment, and loan will cover the rest of the money you need to pay. If you are a first home buyer and qualify lender’s other criteria, down payment can be dropped down to 3.5% of the total price, whereas conventional loan requires 20% of down payment. The detailed percentages and condition are differ from your situation, so make sure to contact lender. We are going to discuss it at the next step.
Remember, once you decide to buy a house, you want to avoid making any big purchase or making substantial changes on your financial status. Purchasing a car, opening a new credit card, or taking an expensive vacation can turn your journey of purchasing a house to a nightmare. If you need to do those, it should be done at least 1 month before you start this step or should be postponed until you actually purchase a house. It’s because the most of house buying processes include loan application. Once lenders find your significant debt made recently, they can reject your application in the worst case scenario.
Therefore, make sure before you start this journey that you are in a predictable financial condition if you need a loan.
Avoid making a significant purchase
Avoid changing your employment status
Avoid changing your address by moving
Avoid opening a new credit card account
2. Get pre-approved for a mortgage, buyer’s powerful weapon
You should get pre-approved for a mortgage. This will give you a better idea of how much you can borrow and will make you a more attractive buyer to sellers. Because, although this pre-approval letter DOES NOT guarantee you will have a loan, it can be strong proof for the seller that you will bring the money to the table.
If you need to buy a house urgently, this step should be performed before you start to look for houses. If you already have a pre-approval letter from your lender, you can accelerate the process when you find a perfect house for you and your family.
Contact a lender and apply for pre-approval. If you don’t know which lender to contact, ask to someone who recently purchased a house or ask your real estate agent if they have any lender list you can refer.
3. Find a real estate agent
A real estate agent can help you find the right house, make an offer, and negotiate the closing. They can also provide you with valuable advice throughout the process. If you find a well skilled agent, they will handle the most of the documentation part and the behind scenes preventing you from potential risks. Once you hire one of them, they owe you various types of duties. They will fight for your interests.
4. Start your house hunt
Once you have a real estate agent, you can start looking for houses. This can be done online or in person. Be sure to let your agent know what you're looking for in a house, such as the number of bedrooms and bathrooms, the location, and the price range.
If you are considering specific life style, environment, location, or any other condition, let your agent know. Visit houses with your agent and let them know how you think about the house.
5. Make an offer
When you find a house you like, you'll need to make an offer. Your real estate agent can help you determine how much to offer. Be prepared to negotiate with the seller. The seller may accept or ignore your offer. Or send you a counter offer. A counter offer usually means, the seller wants to give you some of discount but not much as your original offer. Once you receive a count offer from the seller, you can accept, reject, ignore, or send another counter offer with modified condition.
But remember, while you are playing a ping pong with the seller, if the seller receives a better offer from other potential buyer, than the house you like may be sold to others.
6. Get a home inspection
After the seller accepts your offer, usually potential buyer has a right to inspect the house. At this step, you will hire a professional inspector to check the house. They will try to find hazardous factors, safety issues, malfunctioning of the house, or anything that can affect to your decision to buy the house.
Usually they discover multiple issues unless the house is completely perfect. They will give you an inspection report, and you can negotiate with the seller based on what the report says. You can request seller to lower the price considering the defects, you can request the seller to fix the issue, or even you can withdraw your offer without any penalty depending specific circumtances. Your agent will consult you what’s the best action to take considering your unique situation.
It costs to hire someone for the inspection, but based on my personal experience, this step always brought me benefits exceeding the cost.
7. Get homeowners insurance
You'll need to purchase homeowners insurance before you close on the house. This will protect you from financial losses if your house is damaged or destroyed. Depending your loan condition, there may be several insurances you have to purchase. So, check the lender’s policy and ask to lender if there is something you want to know more. Also, you can ask your agent some questions to grasp a concept.
8. Close on the house
Closing on the house is the final step in the homebuying process. This is when you sign all of the paperwork and officially become the owner of the house. There are some legally required steps left such as recording the title, but don’t worry, usually your agent will deal with it and what you all need to do is enjoying your success.
Congratulations on your new home!
Buying a house is a big accomplishment. I hope this guide has helped you through the process. If you have any questions, please feel free to contact me.
Additional tips for first-time homebuyers
Don't be afraid to ask for help. There are many people who can help you through the homebuying process, such as your real estate agent, your lender, and your inspector.
Be patient. It may take some time to find the right house. Don't get discouraged if you don't find it right away.
Be flexible. You may need to be flexible on your must-have list in order to find a house that you can afford.
Have fun! Buying a house should be an exciting experience. Enjoy the process!
I hope this blog post has been helpful. If you have any questions, please feel free to leave a comment below.
Happy house hunting!
I would also like to add that it is important to be realistic about your budget and not to get overextended. It is also important to remember that owning a house is a big responsibility. You will need to be prepared for the costs of maintenance and repairs.