Buying a home can be a complicated and stressful process, but these 10 steps can help make the home buying process manageable. You could swap the order of a few early steps – you can get pre-approved before finding an agent, for example. But you don’t want to find the perfect place first, only to have a better-prepared buyer swoop in and snag it.
Step 1: Check Your Credit Report And Score
Before contacting a lender, it is always best to check your credit. A credit report will be a score based on these factors:
• Payment history: Have you paid your bills on time?
• Amounts owed: What is your overall debt?
• Length of credit history: How long have you been borrowing money? Mortgage lenders like to see a long credit history.
• New credit: Have you applied for new credit?
• Types of credit: Lenders like to see a variety of types such as bank cards, car loans and student loans.
Many people wonder what is a good credit score? You can expect a good mortgage rate at anything above 720. However, the minimum credit score varies by lender. Home buyers who pursue an FHA loan can usually secure a loan if their credit is 580 or over. Conventional loans usually require at least 620. The minimum credit scores fluctuate, so it is best to speak with a loan officer who knows the current mortgage requirements.
Step 2: Figure Out How Much You Can Afford
Or better yet, decide how much you’re willing to pay for your mortgage payment each month. Just because you can qualify for a larger mortgage doesn’t mean you want to have that kind of payment each month.
Step 3: Find A Real Estate Agent
Your REALTOR will be your lifeline and chief advocate throughout the process. During your initial consultation with an agent, you should use this time to ask the agent all the questions you have about the buying process.
Step 4: Get Pre-Approved By A Lender
The next step is to get pre-approved for a loan. Pre-approval requires the lender to pull the credit information and assess your current financial situation. The lender will then give you a letter that states the amount they would be willing to lend you. If you get in a multiple-offer scenario, being pre-approved may give you an edge because the seller will have more confidence that you will be approved for a loan large enough to purchase their home.
Step 5: Start Viewing Homes
Here comes the fun part! By now you’ve talked things over with your agent and you both know what your requirements are. Armed with this, your price range and knowledge of the local area, your agent will present you with listings that you can tour. There’s a good chance you’ll discover some new things to love or hate about homes and refine your search.
Step 6: Make An Offer
For most buyers, this is when the butterflies really show up. Once you’ve found a home you want your agent will work with you write up your first offer. Your agent will understand the market and help guide you to make the best offer based on the current market conditions. Once you’ve submitted the offer, you wait. You may get neither a simple yes or no but a counteroffer to consider. It can be something of a dance. If you get a solid “no,” it’s back to Step 5. If you get to a “yes,” celebrate!
Step 7: Home Inspection Day
If your offer called for a home inspection, this is a big day. Sure, you get to have a home inspector look over the home to make sure there are no unseen defects you want to negotiate to have fixed.
Step 8: Homeowners Insurance and Turn On Utilities
If you already own a home, simply call your insurance agent and let them know you’re buying a new home. They will handle writing a new policy. If you don’t have an insurance agent, now’s the time to find one because your lender will require it. Even if you don’t have a mortgage, insurance is a critical part of protecting your investment.
Step 9: Closing Day
Closing Day! The closing process itself can take several hours. It involves reading and signing a lot of papers. Even though you’re just sitting around a table, it can be exhausting.
Step 10: Get The Keys To Your New Home!
That’s it! You are now a homeowner! You’ve just ended the adventure of home buying and started the adventure of homeownership.