Purchasing a home is one of the biggest things you can do in your life. A lot of things in my blog are geared toward you being able to get ahead financially in life. And buying a home at the right time is key to getting ahead in life.
I’m going to share with you the steps it takes to buy a home. From just the thought of owning real estate, to actually signing on the dotted line. Understanding this process first will make the home buying experience much better when you’re in the thick of it. So sit back, relax, and take notes.
The video for the blog is below. Please revisit as needed
Check Your Credit Score
I have touched on this matter plenty of times before. But I am going to bring it up again to show you just how important it is. You need to check your credit score before starting the process of purchasing a home.
A blemish on your credit could stop you from buying the home of your dreams. If you need help increasing your score then check out my other post on this topic. The bottom line, good credit is going to help you obtain the loan amount you will need for this future house.
Find out How Much You Can Afford
What you can afford could be broken down into a lot of different factors. You can have your own personal tolerance for the price of the home you want. Or the bank could tell you how much they are going to lend to you.
Most of the time if you are going the mortgage route. The bank is going to take into consideration your Credit Rating, Monthly Income, Down Payment Amount, and Interest Rates. Some of these are going to weigh more heavily than others when they crunch the numbers.
If you had to focus on one thing from this section I suggest looking at your “Debt to Income Ratio”. Banks do not want you having a lot of debt when purchasing a home. You could become overwhelmed with so much debt that you start missing payments on your home. Which is not a good thing. So try to keep that debt to income ratio at a reasonable number.
Get Pre-Approved
When you go to shop around for a mortgage lender. Oftentimes they will give you a letter of preapproval. This will give you an idea of what price range you should be looking at when searching for the homes.
I personally like using a mortgage broker to shop around to find the best interest rates for me. But this letter is almost like having the funds in hand when shopping for your future residence. That being said. It is not official and the number on that preapproval letter tends to fluctuate before the actual approval letter comes in for closing.
Find a Real Estate Agent
Your Real Estate agent is your ride or die. They are going to act as your representative when it’s time to handle business. That being said, you need to look for an agent that best suits you. I would interview at least three different agents before deciding on one.
You can find these agents from referrals or even reviews online. But when you have an agent ask them some of these questions to make sure they are a good fit for you. These are just starter questions, and I suggest adding your own when the time comes.
- How long have they been working as an agent
- What makes them stand out from others
- How many clients do they have
Start Searching for Your Dream Home
There are a lot of factors that go into deciding on a home. You need to be able to categorize some of the Wants vs the Needs that you have. This list will help you narrow down the search while also giving your agent something to browse their inventory with.
- Pre-Existing vs New Build
- Price
- Style
- The Neighborhood
- Commute to Work/City
- School District.
This can go on and on. But what you should do is list the categories you come up with by importance. This will give your agent a better idea of what you want, and it will help you make that ultimate decision.
Looking at pictures on the app can only get you so far. You need to physically see the property before making any serious inquiries about it. Most of the time you will find something that the pictures missed.
Lastly, take pictures of the property when you are there. These can be crucial when you are attempting to recall information about homes you visited in the past.
Make an Offer
Once you decide on a home to tackle, your agent should pull some comparative sales in the area to see if the asking price makes sense. Once you all decide on a number your agent will send it over. Don’t low ball the offer too much. This can seem like a sign of disrespect if the offer is too low. They might not even get back with you sometimes.
When you are making them an offer you can put these things called contingencies in there. Contingencies can be anything from “fix the leaky roof” to “if I don’t get a loan I rescind my offer”. Contingences are something that the buyer puts into the offer to cover them if something doesn’t go right. Like I said earlier they can be just about anything, Mortgage, Inspection, Home Sale. Your agent will go through the details with you in case you need to add some to your offer.
Home Inspection
This is one step that you do not want to skip. You want to have an inspection done of the house to make sure there aren’t any major issues with the property. This is done by someone the buyer hires.
The reason you want an inspection down is because after closing of the house whatever happens to the property you will be liable to fix it. A Lot of times you aren’t looking at every little detail of the home, but an inspector will.
When the inspector is finished they will give you a list, and you can either set a contingency with the seller to fix said issue. Or you can adjust your offer considering the new information.
Home Appraisal
An appraisal is done by looking at comparable sales, market trends, public records, and the home inspection. This is usually done a couple of days before closing. By this time a lot of the contingencies were already addressed and everything is looking good. This appraisal more than likely comes back as expected with the offer of the home. However there are two other major outcomes of an appraisal.
The appraisal can come back lower than the loan amount of the mortgage. If this happens you will have to negotiate a different price with the seller. Because the lender is not going to loan out more money than the home is worth.
The appraisal can come back higher than the price of the home. This comes out to favor the buyer, because it means that the buyer is going to already have equity in the home as soon as you sign on the dotted line.
Conduct Final Walkthrough
The final walkthrough happens the day before closing, or even the day of closing if it’s early enough. This is the last time to check to make sure all of the changes are made that were agreed upon by both parties. Also you can verify if the previous owner left any belongings, if there are bugs in the home, and to make sure the appliances, plumbing, and electricity are still working.
Closing
Ladies and Gentlemen, the moment we have all been waiting for. You have done all of the work to get to this point. The only thing that is left is signing a lot of papers. Make sure you bring plenty of pens because you are going to be signing your name and initials everywhere during this part. You will also be paying the closing cost fees that are associated with it.
Rob’s Opinion
First off I want to say congratulations on purchasing your new home. I know it takes a lot of work to get to this point, and I want you to know that I do not take it lightly. This process can become overwhelming very fast. But if you follow the steps in this blog it will streamline you through the entire thing.
There are going to be other tips that I drop in the home buying process later. And I am even going to share my experience with purchasing my first home. There is a lot of great content coming up so make sure you don’t miss it. If this blog helped you start the process of purchasing a home please comment below to let others know that this is the place to be.
