How To Buy A House In 7 Steps
Whether you’re buying a home for the 1st time or the fifth, the process can take some time, but it doesn’t have to be overwhelming and take over your life. When you begin, it can feel as though a lot of things are standing in your way of moving into your new home. But the home buying process can be broken down into seven simple steps.
Instead of letting your fear of the unknown get in the way of purchasing a new home. It’s stressful to view purchasing a new home as one gigantic undertaking. But it doesn’t have to be like that. You can make the home buying process far more manageable and less stressful by putting one foot in front of the other.
1. Save For A Down Payment
First one has to save for a down payment. There are two factors in figuring out how much house you can afford, your monthly mortgage payment and you’re down payment. It’s important to have a general idea of this first, since the higher the down payment, the less you’ll need to pay each month in your mortgage, interest and mortgage insurance. The ideal down payment is 20% of the home’s purchase price. Not only will putting 20% down make your monthly payment substantially smaller, it’ll also ensure that you don’t have to pay for PMI or private mirage insurance. 20% can seem like a lot, which is why there are many programs particularly for first-time home buyers that require a much smaller down payment. Talk to your mortgage lender about your options to find the program that’s right for you and your financial situation. If you’re using gift money for your down payment, make sure you understand all the ins and outs, as there are many restrictions involved.
If you’re planning to fund your down payment yourself, it’s time to start saving. Here are a few ideas to help you get started on building up that nest egg to fund your future nest:
- Make automatic transfers: If you’re just saving what’s left at the end of every month, you’re not likely to build up the amount of money you need quickly. Instead, you should pay yourself first, as it’s a lot harder to spend money that’s not in your bank account.
One of the easiest ways to save is to talk to your bank about automatically moving money from your checking account to a special down payment savings account so you’re never tempted to spend those funds.
- Rework your budget: Small expenditures can add up fast. It’s easy to spend all the money you make in any given month and not even know where it went. That’s why having a budget can help keep yourself in check. For example, if you’ve already spent the funds you allocated for dining out, then it’s time to start cooking at home.
If you’re trying to save for a down payment for a home, you might want to take an even sharper pencil to your budget. Once you’ve figured out ways to save, you can allocate those extra dollars to your down payment savings account.
- Remove a big-ticket item: Sure, committing to brown-bagging your lunch and forgoing coffees out can help rack up those extra funds. But when saving for a down payment, you sometimes need to take a step that’s even more drastic.
You might decide to temporarily move to much smaller quarters to slash your housing expense, skip your annual vacation or commit to being a one-car family to build up your savings. Making lifestyle changes can help boost your savings substantially and get you to your goal faster.
- Remember the goal: Austerity isn’t much fun, but it can feel a lot less painful if you constantly remember why you’re committing to being more frugal. Post pictures of your dream home around your current dwelling and workplace as a reminder of what you’re working towards.
Every time you make a sacrifice to fund that down payment, give yourself a pat on the back and remember that it’ll all be worth it when you’re a bonafide homeowner.
2. Get Pre-approved For A Mortgage
Once you’ve determined how much money you can realistically save for a down payment and have done some due diligence on home prices in your area, it’s time to start thinking about financing. Many home buyers don’t start seeking a mortgage until they’ve found their dream home, but that can be a mistake.
In most cases, the amount of money your mortgage lender is willing to give you will dictate which houses you consider in the first place. After all, there’s no reason to look at homes that are outside your price range. And who knows, you might find that you qualify for more money than you were expecting. Besides setting budget parameters, having a Verified ApprovalSM will instantly set you apart as a serious home buyer and make your offer one that the seller is more likely to consider. Keep in mind that a seller doesn’t want to go through the entire process only to find out the potential buyer doesn’t have the funds necessary to close on the house. Getting pre-approved means that you can go the distance. This step will be especially important if you find yourself in a bidding war and have to come up with a better offer to compete with other buyers.
3. Determine What You Want In A House
You’ve finalized your housing budget and received your Verified lenders approval, now comes the fun part, looking at homes for sale.
The number and kind of homes in most areas are vast, which is why the process can seem overwhelming. A great place to start is by writing down all the features of the home that are most important to you and have your partner make a list of their priorities as well.
Divide the various amenities and factors into two categories: “nonnegotiable” and “important to have.” Compare lists with your partner and have a conversation about the various items and the reasoning behind your rankings. Once you’ve discussed, you can create a master list together. This process gives you the foundation you need to start searching for homes, allowing you to see whether further compromises might need to be made. Remember, you’ll likely need to make trade offs, but it’s important to find a house that checks as many boxes as possible. In fact, once you start touring homes, you’ll likely need to compromise in some area almost every buyer does. You might decide that you absolutely need three bedrooms, but you’re willing to look at neighborhoods a little farther out than you had wanted.
On the other hand, your top criteria might be the School districts, and you might decide that your family can make sacrifices in the number of bedrooms. It’s all about your needs; the priorities are different for everyone.
4. Find An Agent
You may have started the process on your own, but enlisting the services of an experienced real estate agent is a huge asset when buying a home. If the home you’re interested in is being sold by a seller’s agent, you’re going to want someone who represents your best interests when it comes to issues like price and terms.
What many first-time home buyers don’t realize is that retaining the services of an agent is essentially free for the home buyer. The reason is that the seller pays both agents’ commissions out of the sales price of the home. As a buyer, you won’t have to contribute a penny out of your pocket for the exceptional service and peace of mind that a Buyer Agent like Telluride Realty & Investment can offer.
Still not sure you need an agent? Don’t dismiss the idea without thinking it through. Even if you believe you can find a new home on your own, there are a slew of other services that agents can perform, which can make the home buying process simpler and more successful. Real estate agents can:
- Find additional listings through the Multiple Listing Service – and even hear about pocket listings,homes that have not hit the market yet.
- Arrange showings and find out about open houses.
- Provide insight into different neighborhoods, up-and-coming areas and regional price differences.
- Give unbiased advice.
- Help you write and submit a strong offer.
- Negotiate with the seller or seller’s agent on your behalf.
- Oversee the home inspection.
- Guide you through the paperwork and closing.
Real estate agents perform an extremely valuable service. By drawing on their experience and skills, you can take the stress out of the process.
5. Tour The Homes
After you’ve shared your wish list with your real estate agent, it’s time to go take a look at what’s on the market that fits your criteria. Visiting a wide variety of properties can help you decide whether you’ll need to rethink your priorities. For example, you might decide that buying a small property in the neighborhood you’ve been coveting isn’t going to work. Instead, you might want to trade in the neighborhood for more bedrooms or a larger plot of land. Or you might realize that a fireplace in your bedroom or brand-new kitchen appliances is a dream that will have to be put on hold for the time being. As you tour houses, remember to focus on the elements that you can’t change, such as a home’s location and general layout. Try not to get distracted by the decor. Cosmetic changes can always be made in the future.
The goal is to overlook the design flaws and concentrate on the “bones” of the house that is, the major aspects that can’t be fixed or will cost a fortune to try to change. Here are some of the more important factors to consider as you tour each house.
- How much longer will the roof last?
- Are any of the floors sagging?
- Are there any strong odors that may indicate problems with mold or mildew?
- Are the electrical and plumbing systems up to date?
- Is the foundation slipping?
- Are the trees healthy and safely located?
- Are the appliances and HVAC systems in good working condition?
These factors are important to assess, as they are the most difficult to fix. In general, you want to make sure that the home looks like it’s been well-maintained over the years. As you get further into the process, feel free to ask questions and request maintenance records. Getting a solid home inspection before you purchase a house will also help you determine if there’s anything to worry about. Since it’s often difficult to remember the differences between homes when you tour a lot of them, it’s useful to take pictures and notes during each showing. Recording what you liked and didn’t like will go a long way in helping you remember which house is which as you narrow down your search.
6. Make An Offer
Once you’ve decided on “the one,” it’s time to make an offer. This step is where having a real estate agent truly comes in handy. Agents’ knowledge of the market can help you make an offer that the seller will view as serious and appealing. After all, buying a home is a stressful process, and you don’t want to miss the right home for you because of a technicality.
Your official offer will likely include the following.
- The price you’re offering.
- The date you intend to close.
- Your Verified ApprovalSM letter, which will help show that you’re serious about purchasing the home.
- Any contingencies that you need to close, such as a relatively clean inspection or the sale of your current home.
- Your earnest money deposit, which solidifies your intention to purchase the house.
7. Close On The House
You’ve gotten through the hard part. The house is about to be yours! But before you receive the title and keys, you must fill out a lot of paperwork and transfer funds to the seller. These last steps will be taken care of at closing.Your agent will provide you with a detailed list of what you need to bring to the closing table. However, you should be prepared with your ID and enough money to pay for the down payment and closing costs. Your closing costs will most likely include:
- Loan origination fee
- Appraisal fee
- Credit report fee
- Documentation prep fee
- Recording fee
- Property taxes
- Title insurance
- HOA fees
Each fee amount varies, but your real estate agent and mortgage lender will walk you through what you need to know so there are no surprises at closing. After you write checks or wire the funds and sign all the documents, you’ll be able to collect the keys to your new home and rejoice. You’ll officially be a homeowner.
The Bottom Line On Buying A House
You can take the stress out of the home buying process by following the seven simple steps described above. Remember, you must start by saving for a down payment and getting your mortgage pre-approval letter. These steps will help you figure out the size and type of house that you can afford, which will allow you to start thinking about your priorities. Once you hire a real estate agent, the rest of the process will fall into place. Your real estate agent will find properties based on your priorities, arrange tours, help you write a strong offer and guide you through closing.
Telluride Realty & Investment is your number one source for all thing real estate. Contact us today
Phone or Text: (970) 728-3205