Buying a home is both a major life decision and a complex process. If you’re a first-time homebuyer, these are the steps you can expect to take during the initial stages of your purchase.
1: Determine Your Readiness
Before you contact a realtor, you need to be aware of all costs, risks, and responsibilities that come with purchasing a new home. Your financial situation (income, fixed expenses, debt, credit score, and savings) plays the biggest role in determining your readiness.
2: Become Optimal Mortgage Candidates
Lender requirements are strict these days. The better your credit and finances are, the better your chances of the best rates on a mortgage. Try to pay off any debts or outstanding balances, such as your credit card or a car loan, prior to buying a new home.
3: Get a Pre-Approval Letter
Getting pre-approved means that a loan officer has reviewed your finances and credit report and believes you qualify for a specific loan amount for one or more mortgage programs. The pre-approval letter is a testament to your buying power.
4: Determine Your Budget
Your pre-approval letter will let you know how much the bank is willing to lend you. However, how much you can actually afford is entirely up to you. You need to determine how much you’re willing to spend each month on your mortgage payments.
5: Find a Real Estate Agent
Once you have your finances in order, you can pursue a real estate agent. Though you don’t technically need an agent to purchase a home, it makes the process much more efficient, especially for first time buyers.
6: Choose a Property
What do you want in a home? Whether you’re buying alone or with a partner, sit down and consider everything you’re looking for. Your agent can help arrange showings for properties that suit your preferences. When viewing a new property, be sure to consider any and all changes or repairs that will need to be made.
7: Make an Offer
Placing an offer is a delicate process is will be affected by multiple factors—such as time of year, work needed, market condition, and your budget. You can also negotiate closing costs, necessary repairs, etc. when placing an offer. For first time home buyers, you’ll want to consult your agent about your best options.
8: Inspect the Home
If/When your offer is accepted, it’s customary to schedule a home inspection. This will allow you to get a professional opinion about the condition of the home and determine any red flags.
9: Sign a Purchase Agreement
The purchase agreement is a contract that outlines the specific directions of the transaction, including: the details of the sale, negotiated repairs, fixtures sold with the house, disclosures, etc. The agreement, along with your earnest money, will be held by your attorney or escrow officer.
10: Close the Transaction
This final step can require several weeks to complete. During the closing process, you’ll secure your mortgage, gather financial paperwork, and arrange a lenders’ appraisal of the property. You may also be required to purchase a policy of homeowners insurance, and you will have the option of purchasing title insurance. Once all requirements of purchase agreement have been fulfilled, you’ll be given a final walkthrough to ensure all negotiated repairs are complete. On the closing date, you’ll sign your mortgage documents and receive the keys to your new home!