There’s a good reason society has coined the phrase, “hindsight is 2020.” People always wish they knew then what they know now. The same is true with home buying. We spend our whole lives dreaming about the day we can own a home. We imagine the interior layout, the decor, the holiday decorations. But it’s impossible to imagine ahead of time all the steps you’ll have to go through when you purchase your first property. Here’s a peek, then, into the six steps to buying a home.
Money and Numbers
Your home-buying budget depends on a few factors. First, how much savings do you have for a down payment? It should total 20 percent of the value of the home you’re buying. Do you have enough money for closing costs? Also based on a percentage of value, closing costs can range from one percent to eight percent of the price of the home you’re buying. You should also have savings set aside for property taxes, homeowner’s insurance, and possible HOA fees.
The second contributing factor to your house-buying budget is what you’ll be able to afford each month for your mortgage payment. But remember, you’re paying the principal on the loan, interest, homeowners insurance, HOA fees, and most likely higher utility bills than what you’ve had in the past.
Third, your home-buying budget depends on the amount of money financial institutions are willing to let you borrow. The amount the lender will loan you depends on your credit score, your total income, and your debt-to-income ratio, in addition to your sufficient down payment.
Before applying for a home mortgage loan, spend some time cleaning up your credit reports, so you’ve got a healthy credit score. Debt-to-income ratio, or DTI, determines the amount of money you have coming in vs. the amount of money you have going out. These numbers help the lender gauge your credit history and your ability to pay your expenses without over extending yourself financially.
Pre-Approval for the Home Mortgage Loan
When you’re sure you’ve satisfied all of the requirements of establishing savings, preparing your credit reports, and strengthening your debt-to-income ratio, it’s time to seek that pre-approval for your home mortgage loan. Pre-approval is necessary for a few reasons.
Pre-approval for your home mortgage loan cements your home-buying budget. You only have access to X amount, so there’s no point shopping homes in other price brackets. But remember, you don’t have to accept the full amount you’re offered, either, if your monthly payments won’t align.
Another reason your loan approval matters is that it signals to real estate agents that you’re an empowered buyer, ready to take action when you find the right house.
Finally, pre-approval can give you credence with sellers who want to know you can move forward without delay. You may also have the edge over other offers competing with yours that don’t have pre-approval.
Find the Right Agent
Real estate agents share an industry, but that’s about all they share. Their certifications, specialties, techniques, personalities, and other traits differ tremendously from one agent to another. Interview agents to find the best match for you.
Trust your agent to help you refine your wish list, so it’s practical. When touring homes, use proper open-house etiquette. Do not emotionally attach to any properties. Even if you’ve found the perfect house, there’s no guarantee you’ll close on that property. Your agent will help you submit and negotiate offers until you’ve found the right house, the right seller, and the right offer to move forward.
Required Time-Consuming Processes
To satisfy the lender, the house you’re buying has to be surveyed, appraised, and inspected. Each of these processes takes significant time and comes with stress because any one of those processes could reveal problems that might be deal-breakers.
The concluding session is when you pay closing costs, service providers are paid, the title to the property is transferred, and you receive the keys to your new home.
Buying a Home – It’s Time!
By knowing the steps and the order in which to take them, you can be more prepared for your home-buying journey. Follow the steps in order to ensure a happy experience on the road to home ownership.
Your real estate agent is the best source of information about the local community and real estate topics. Give PEG Ramsey a call today at 818-809-3658 to learn more about local areas, discuss selling a house, or tour available homes for sale.