One of the major milestones someone achieves is buying their first home. It takes a lot of responsibility to purchase your own home and for first time buyers, the process can be a little intimidating. There are many factors that go into buying a home and you want to make sure that doing so is the right decision for you financially.
Here are some steps that highlight the process of buying a home.
- Check Your Credit Score
Before getting a mortgage or any kind of loan, it is best to check your credit score. Get a copy of your credit report and look it over to see if the information is accurate. Most scores usually range from between 300 to 850. The higher your score, the better chance you have at getting a loan.
- Figure out Expenses
The biggest expense that will come with buying a home is usually going to be the mortgage. There are also other monthly expenses to consider. Some of these expenses are:
Household: groceries, clothing, house maintenance, children (if applicable).
Entertainment: dining out, magazines, television, travelling.
Loans/Debts: credit cards, lines of credit, mortgages, student loans (if applicable).
Make sure that you know what you can afford. Find out what would be a good affordable monthly payment. Also make sure to factor in a down payment, closing costs, remodeling etc.
- Find the Right Lender and Real Estate Agent
Don’t just choose the first one that you see, take your time to explore all the options that you have. Get some recommendations from friends and family. Talk to at least three to four mortgage lenders and ask any questions you may have.
Once you have chosen a right lender or real estate agent, make sure to get a pre-approval (which means that the lender determined how much you can borrow, the loan programs you can qualify for etc.). By getting your mortgage pre-approved, you will automatically look more desirable when buying a home because your finances are guaranteed.
- Find a Home
To find a home that is suitable for you, make a checklist of what you must have in your home.
- How many bedrooms?
- How many bathrooms?
- Do you need a lot of closet space?
- How big do you want the kitchen to be?
- What type of neighborhood do you want?
- Are there schools nearby? (for kids)
- Local shopping areas?
- How long is your work commute?
Take into account the answers to the questions listed above and base your choice of home on that. At the very least, it will narrow down some options.
- Make an Offer
Once you found your desired home, it’s time to make an offer. This process usually involves some haggling since the original price might be too high. It’s recommended that for a starting offer to go five percent below the asking price. Also, search the prices of comparable homes and put that against the price your desired home is going for.
- Find out the Right Mortgage for You
There are various types of mortgage programs out there but it can be narrowed down to three basic ones.
- Fixed Rate Mortgage: there is a fixed monthly payment that doesn’t change for a long period of time. This is good for people who plan to stay in the home for a long time.
- Adjustable Rate Mortgage: the mortgage is fixed for a short period of time until the interest rate can go up and down depending on the market. This is good for people who don’t plan on staying in the home long term.
- Interest Only Mortgage: during the duration of your mortgage, you are allowed to only pay the interest portion of your payment.
- Close on Your Home
Before closing, make sure to conduct a home inspection to ensure the structure of your home is sound and that everything is in good condition. Next is to pay any closing fees as well as decide on a closing date that is good for both yourself and the owner of the home you plan to buy (if it is not brand new).
Once the preliminary work is done, the next step after that is to MOVE IN.