Finding and financing your dream home can seem like a daunting task. Especially if you are a first time home buyer. The process of buying a home requires a lot of time and effort, which is why we put together this easy to follow home buying checklist. Using this as your guide you will be well on your way to finding and buying your dream home.
The 10-Step Home Buying Checklist
1. Start Your Research Early
Long before you intend to buy you should start researching as much as you can. Here are a few places to start:
- Google your questions and find answers
- Download apps like Trulia and Zillow and set up automatic notifications
- Talk to your friends and family that have already bought a home
Get to know the markets you are interested in. When the time comes to actually start looking for homes, you will be better prepared to identify good deals. During this phase be sure to make a list of questions that you want to ask your realtor as well. We can’t trust Google for everything.
2. Be Realistic with What You Can Afford
How much can you afford? Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt.
This is a great place to start, but it is important to determine how much you can afford based on your specific financial situation.
Use this mortgage calculator to help with your calculations. Also, keep in mind that you can put down less than a 20% down payment, however, there are downsides to this.
3. Get Pre-Qualified
We recommend that you never start seriously looking for homes without first getting pre-qualified for a mortgage loan. Getting pre-qualified will once and for all answer the question “how much can I afford?”. Before you get pre-qualified we recommend taking measures to improve your credit score. Doing so will help you secure better terms which could mean $50,000+ in savings over the lifetime of your mortgage.
Once you have improved your credit and are ready to get pre-qualified the process is fairly simple. You will need to provide your mortgage banker with some financial information such as your W2 and credit history. Your lender will tell you how much they are willing to lend you and at what terms. If you notice the number you calculated that you can afford is much lower than the maximum loan you are eligible for, stick with your calculation. After all, you need to be comfortable moving forward with this big decision.
4. Find the Right Real Estate Agent
A real estate agent is your partner in the home buying journey. Armed with years of experience they will help you avoid mistakes and will negotiate on your behalf the best deal possible. Look for a reputable real estate agent that has operated in your desired neighborhood for at least a couple of years. Their familiarity with the area and the market prices will save you a lot of stress and time.
Once you find a real estate agent it is time to dust off your list of questions. There are no dumb questions when it comes to buying a home. The more clarity you can get, the better chance you have of finding your dream home.
5. Make An Offer
As you begin to look at homes with your realtor the real excitement starts to set in. Whether you are a first time home buyer or a seasoned real estate professional, the search for the perfect property is always filled with excitement. It is important to not let this cloud your judgment.
Pay close attention to the details in the homes you are touring. A few things to look for are:
- Cracks in the ceilings or walls
- Water stains
- Light switches that don’t work
- Street noise
- The condition of the windows
Take your time during your tours. While some of the items above will be caught during a home inspection, more on that soon, doing your own due diligence is important. Once you do find your dream house it is time to make an offer! Your real estate agent will help you submit a competitive offer, taking into account the selling prices of homes in the area. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.
6. Get A Home Inspection
Now in escrow, it is time to get a home inspection. Typically your offer will be contingent on a home inspection, meaning you aren’t obligated to buy the house if a home inspection finds major damages or concerns. Many times the buyer and seller will have to renegotiate after a home inspection has been completed, including some of the repairs in the new offer or lowering the offer altogether.
7. Get A Loan
Once you have agreed to close on the house, it is time to get a loan. There are many different types of loans available and you will probably have a lot of questions that need answers. Our specialist here at Discount Loans would love to answer any and all of your loan related questions. We understand that every home buyer has their own priorities when choosing a mortgage loan. Our goal is to uncover these priorities with you and then find a loan to match.
8. Have Home Appraised
Your lender will arrange for your home to be appraised, which results in an estimated value of your home. It is important to note that the appraiser has no affiliation with the lender. Their job is simply to let all parties involved know what the fair price is for your home.
9. Coordinate Paperwork
Remember all the paperwork you had to sign when you bought your first car? Buying a house will make that process seem easy. All joking aside, there is a lot of paperwork involved when buying a house and rightfully so. The good news is you are one step away from moving into your home.
10. Close the Sale
At closing, you will finalize all of your paperwork, including your loan documents. It generally takes a few days for this to be processed. Be patient. Once your payment is successfully transferred to the seller, you are ready to move into your home!
Buying a home can be difficult, but it doesn’t have to be. With this checklist, we hope the process becomes much easier for you.