Buying a home is one of the most important investments you can make. It’s an exciting time, but the home buying process can also be overwhelming and intimidating. However, knowing what to expect when starting the home buying process can help you confidently navigate your way toward homeownership.
From getting pre-approved for a mortgage to building a custom home, understanding what lies ahead is critical to making wise decisions that will last a lifetime.
The home buying process starts with knowledge. Before taking the first steps towards homeownership, be sure to grasp the complexities involved in buying a house. How much home you can afford depends on your credit report, debt to income ratio, down payment size, and interest rate on your home loan.
Don’t forget to include other costs associated with homeownership, like homeowners insurance, property taxes, and maintenance, when setting your budget. Understanding how much you can spend on your monthly mortgage payments will make it easier to narrow your search and prioritize what’s most important in a new home.
Real Estate Agents Can Be a Huge Help
Choosing a real estate agent is essential to ensure everything goes smoothly throughout the entire process – from searching for homes to closing on your new property. In addition, having someone knowledgeable by your side will put sellers more at ease since they know they’re dealing with someone financially qualified and serious about purchasing their property.
Real estate agents can also provide local expertise about the area and connect you with various service providers, such as a mortgage lender, who may be able to assist throughout the transaction. With these considerations in mind, take some time to weigh all options before beginning serious shopping for houses; this will ultimately save time and money further down the line.
Knowing Your Budget and Down Payment
The first step when looking for a new home is determining how much house you can afford. You’ll need to consider factors such as your income, debt, down payment size, and interest rate on your loan before deciding on a budget. It’s also essential to account for other costs associated with homeownership, like insurance, property taxes, and maintenance. You don’t want to find your dream home only to find out that the loan payments would exceed your monthly income.
Once you know what you can afford (both as a total sales price and as monthly payments that include your property taxes and homeowners insurance), narrowing your search and deciding which house is right for you will be easier.
Getting Pre-Approved for a Mortgage
Once you’ve decided to purchase a house, the first step is getting pre-approved for a home loan. This means that a mortgage lender considers your income and other factors to determine how much money they will lend you. Next, your lender will walk you through the mortgage application and help explain the pros and cons of different loan programs (conventional, VA, FHA, etc. – this will also help determine your minimum down payment).
Knowing how much house you can afford (total and for your monthly mortgage payment) will help you narrow your home search, and with a preapproval letter, your real estate agent will be able to submit offers when you find the one you love while house hunting.
Choosing a Real Estate Agent
It’s always best to work with a real estate agent during all stages of the home buying process – from searching through online listings to viewing real estate listings and closing on your new property. A good real estate agent will have insight into the local housing market and help ensure that everything goes smoothly and quickly by providing local expertise about the area and connecting you with service providers who may be able to assist throughout the transaction (e.g., mortgage brokers).
In addition, the seller pays most real estate agents a commission when you buy a house, so it won’t cost you anything extra if you choose to work with a real estate agent.
Searching For Properties
Now that you know your budget and have been pre-approved for a loan, it’s time to put the buying process into high gear and find the perfect home. Most home buyers will start by looking online or talking to a real estate agent. It’s important to look at as many options as possible and be open to different neighborhoods and types of homes. You should also ensure that the home meets your needs now and in the future by considering factors like location, size, and amenities.
Making An Offer
After narrowing down some potential houses from those seen while searching, buyers can make offers on the home they feel most suits them. This stage of the home buying process involves negotiations between the parties on items like the sales price and any contingencies (ie, inspections or repair requests that must be completed before closing).
Once everyone agrees on the terms, the home buyers and sellers will sign off on the deal, and the home will be under contract. From here, the agreement will determine the parties’ responsibilities and timelines for everything to occur.
Inspecting and Appraising the Home
Before you close on your new home, it must be inspected and appraised. A home inspection can reveal any potential problems with the property that may not be visible at first glance, while a home appraisal will help ensure that you are paying a fair market price.
The home inspection will usually take place in the first few days – there is typically a home inspection contingency (the names vary from state to state, here in Texas, it falls under the option period) that allows you time to have a home inspection and negotiate with the sellers for any repairs that you want upfront. The seller’s agent will communicate your wishes with their clients, and hopefully, you’ll come to a mutually beneficial agreement.
The appraised value of your home will determine how much your mortgage lender is willing to give you – you may have to increase the down payment on your home loan if the appraised value doesn’t meet the purchase price. Your lender will contract with an appraiser who will go out to the home and compare it to similar homes that have sold in the area.
You will also have a chance to do a final walk-through before you head to the title company or attorney’s office to close on your new home.
Closing on the Home
Once all the paperwork is in order and your loan has been approved, it’s time to close on the house. Depending on your state, this may occur at a title company or an attorney’s office. This involves signing documents and transferring funds (including your closing costs and down payment, plus any prorated taxes or insurance) to finalize the sale. After closing, you’ll officially be a homeowner and can begin making your new home your own.
We recently wrote an in-depth article about closing costs to help you understand the myriad charges on your closing statement. It’s best to know what to expect heading into the closing instead of being thrown off by the closing costs and the various names they fall under.
During the closing portion of the home buying process, don’t be afraid to stop and ask for an explanation of specific closing costs or other terms you don’t understand. This is especially critical for first time buyers who may not know the jargon of the real estate business.
Building A Custom Home
Building one from scratch could also be an option if no existing homes fit the buyer’s criteria. (Obviously, we like this option the most!) Building a custom home may be an option for those looking for something truly unique. This allows you to customize every aspect of your home from the foundation up. You’ll need to work with a builder like McNair Custom Homes to design and construct the house and with your lender to help with your mortgage application and financing.
Congratulations You’ve Bought a Home
Buying a house is an exciting and rewarding experience. You can find the perfect home for all your needs and dreams with patience, dedication, and professional guidance from the right real estate agent. After ensuring everything is in order, you can finally settle into your new house and begin making it your own. Congratulations on taking this big step – you are officially home buyers!
Now that you’ve been through the home buying process, it’s essential to maintain it for years of enjoyment. However, you should also consider consulting with your real estate agent about the best ways to protect your investment, such as obtaining adequate insurance, setting up an emergency fund, and maintaining a realistic budget that doesn’t stretch you too thin.
After the Sale: Making Smart Home Improvements
Once you’ve closed on your new home (and you can officially say you are an expert on the home buying process, you may want to make some improvements or renovations. Making smart investments in your home can increase its value and improve its overall condition. However, before making any changes, it’s important to do research and plan out what you want to accomplish. You may also need to obtain permits from the local government before beginning any major renovations. Additionally, keeping a budget in mind is essential so you don’t overspend and end up with excessive debt.
Good luck with your new home. Enjoy the journey, and remember to have fun along the way. You’ve done a fantastic job of getting to this point—now it’s time to relax and enjoy your new space.