Are you ready to buy a new house? Before you jump right in and start visiting potential homes with a real estate agent, you need to make sure you have done everything needed to make an offer on your dream home. Here are the ten steps to buying a new home that you should follow to avoid being disappointed or stressed out during the process.
Research the Area
Most people don’t take the time to research the neighborhood or neighborhoods they’re considering moving to, but it can help you a lot if you have the time to do it. Go online or look at property listings in your local newspaper. Pick out some of your favorite homes in areas you’d like to move to and keep an eye on them for a while. Note how long it takes houses to sell and when or if asking prices drop. This will give you an idea of the housing trends in these areas so you can know what to expect. Knowing if most of the homes in the area sell for a specific amount will help you negotiate later on.
Look at Your Finances
Do you know how much of a mortgage you can afford each month? If you don’t, you may find yourself looking at amazing homes only to learn you can’t afford them. For most people, purchasing a house that is between three and five times what their total household income is the way to go. However, if you have more debt than average, you may find that you can’t afford homes at the higher end of this price range.
Walking into a home with a preapproval letter from a lender shows a seller that you’re serious about making an offer on the property. Being preapproved doesn’t mean you have a loan, but it does mean a lender has looked over your financial information and has determined that you are eligible for a mortgage. The lender will tell you how much you can borrow, giving you a budget for your home search.
Select Your Real Estate Agent
Selecting a real estate agent is similar to choosing a doctor. You want to make sure you’re comfortable with them and that you’re on the same page as far as what you want in a home. Your agent should be knowledgeable about the area and type of home you’re looking for, have strong negotiating skills, and understand everything about buying a home. Don’t be afraid to change agents if you don’t feel like you’re working with the best.
Look and Houses
Now that you know what you can afford, your agent can start finding homes that offer everything you need. This includes price, size, location, and any other item that you include on your “must-have” list. Some people will tell you to not fall in love with the first house you see, but sometimes, it’s the right one. Other times, you may look at dozens of homes before finding one that really speaks to you. Take your time if you can, but also remember that there are very few houses out there that are 100% perfect.
Once you have found a property you love, work with your agent to submit an offer. You and the seller may go back and forth a bit as you negotiate price and other details. Once you’ve come to an agreement, you will enter into the escrow process.
Schedule an Inspection
The first thing that will happen after your offer is accepted is an inspection. You will pay to have a professional inspect the property and list all of the problems they find. Some of these issues may be minor things that are cosmetic in nature. If any significant problems arise, you can either renegotiate your offer with the seller or withdraw your offer depending on how your inspection clause is worded. Sometimes, the issue will be something the seller has to fix in order to sell the property, in which case there shouldn’t be any problem getting them to agree to cover the costs involved.
Finalize Your Loan
Even if you’re pre-approved, you still have to complete the steps necessary to secure a mortgage. You will need to supply your lender with the rest of the paperwork they need in order to offer you a loan officially. Most lenders require the same documents, but you may need to submit additional information if you’re getting a loan that’s backed by FHA, the VA, or a similar program.
Have an Appraisal Done
The home appraisal determined the value of the home. The appraiser has no interest in the home and is unaffiliated with you and the seller so that they will evaluate the home without bias. If the property appraises for less than what you have agreed to pay for it, the lender may not approve your loan and you will need to either renegotiate the price or come up with a larger downpayment.
Complete All of the Paperwork
Before you can close on the home, you’ll need to complete any outstanding paperwork. This includes lining up your homeowners insurance and approving any repairs the seller has made. Prior to closing, you and your agent will do a final walkthrough of the home to make certain the seller completed everything you asked.
Complete the Purchase
Finally, you will go to closing, which is a meeting at the title company. Here, you will complete all of the remaining paperwork and officially take possession of the property. Congratulations, you now own a new home!