Homebuying 101: 4 Easy Steps
Most people go into buying their first home knowing it will be a multi-step process, but they don’t usually know exactly what to expect. There is definitely a learning curve involved, but that doesn’t mean you should jump right in without doing some research first.
The easiest way to start your research is to go online. Websites like Redfin are dedicated to answering buyers’ top home-buying questions, such as how checking your credit score affects your mortgage options, how to set a home-buying budget, why you need a good real estate agent, and what type of paperwork you’ll need.
To get you started with the process, we’ll break down the basic steps involved, along with how those questions fit into the picture.
I. Address Your Finances First
According to US News, the first thing you should do is pay down debt, and while you’re at it, keep an eye on your credit score. Paying bills on time will help raise your credit score, which is important since this number will impact your eligibility for financing.
The other big part of figuring out finances is to determine your budget. Real estate experts at CNBC caution against buying more home than you can realistically afford. That’s because, in addition to mortgage payments, there are also hidden costs of homeownership, such as taxes, insurance, maintenance, and higher utility bills.
With these costs in mind, the next piece of the puzzle is to find a home loan. While some buyers qualify for special loan options like FHA loans, most buyers will get a conventional mortgage. The advantage of conventional home loans is that they typically have low interest rates, with options to choose an adjustable rate or fixed rate, which gives you flexibility and keeps your costs down. You don’t always need to pay 20 percent down, but the benefit of having at least a 20 percent down payment is that you can avoid purchasing mortgage insurance. A good lender can possibly show you ways around this, however- depending on which loan program you’re eligible for.
II. Use A Professional
If you’re wondering whether it’s worth it to work with a real estate agent, the main thing to know is that they are there to guide you through the entire process. They can make expert recommendations, especially if they’re familiar with the area and the local market. They will also have connections with other professionals you need, such as a real estate attorney, which can save you time and money. If you don’t know where to find someone qualified, ask friends for referrals and check out reviews from your prospective agent’s past clients.
III. Create Your Wish List and Tour Homes
Since you’re looking into buying a home, you probably already have a general idea of what you want. Now is the time to get serious about which features are must-haves and which ones you’re willing to compromise on. A good real estate agent can help you determine which of those demands are realistic based on your budget and the area, but they can only do that if you communicate what you want. Your real estate agent can also help you figure out special situations that pop up, which you may not have thought about. For example, some buyers find that they have to compromise on either size or location if homes that fit your budget in your ideal neighborhood are smaller than those in a different part of town.
IV. Make an Offer
When you’ve found the right home, making an offer and negotiating is another time when you’ll be glad to have a real estate agent! After your offer is accepted, the next steps include getting an inspection and appraisal, and then setting a closing date.
This last step sounds more straightforward than it often is in reality, but hang in there! We know that this process can feel overwhelming at first. Once you’ve found your perfect first home, though, all the work you’ve put into making it happen will be worth the time it takes.
If you’d like more information, let us know right away! We love educating folks on how to achieve their dream home 🙂