There’s a lot of confusing information online when it comes to buying a home. And buying a home is a big deal. Where should you start? Do I talk to a Realtor first? Do I need a 760 credit score, or 20% down? Who is FHA? What is a Conventional loan? Well, here are the actual steps you need to take to buying a home. We can dive into each one more, or feel free to contact us with any questions!
Check your credit score and reports
You want to make sure there are no surprises (identity theft, old accounts, inaccuracies)when applying for your mortgage. Clean up or correct anything that needs to be updated. The big ones are Experian, Equifax, and Transunion.
Many lenders can go down to a 580 credit score, but your options will be limited. The higher your credit, the more options you’ll have. But a 700 score or higher is a good place to be.
Create a budget
Make a budget for the new mortgage payment, utilities, and expenses that go with owning a property. Make it realistic, and figure out how much you can afford for the mortgage payment. This will translate into how much you can get approved for.
And for goodness sake- please take the online mortgage calculators with a grain of salt. There are limitations on these, and they may help in giving a rough estimate, they will not be as accurate as your mortgage broker.
Save for a down payment
You don’t have to put 20% down anymore, but it is a good idea to have at least 5%available towards your down payment and closing costs.
5% is a good start, 10% down is better, and consider 20% the “golden standard” of down payments.
Shop for a mortgage
You have many options when it comes to this. My advice is simple. Talk to me. 😊 You want to get approved first so that you know what your budget is, and how much house you can afford. It’s never fun to find the house you love, and scramble to get the loan last minute.
Want to learn more about the different type of lenders? (we’ve worked with them all -so we have the down and dirty on all of them!) Here’s some info
Find a Real Estate Agent
Again you have many options here, there is always someone’s cousin’s boyfriend’s sister that is in Real Estate. Make sure you hire a professional, full-time agent. You are going into a legally binding contract on a very large investment. Don’t hire a part-time agent that closes 1 deal per year. Talk to several people and choose the one that you feel is best for you.
Need help? Here’s a few questions to ask them.
The fun part- house shopping!
Take your trusty approval letter from your broker, and your new best friend (your agent)and look at properties. Write down your must-haves, and your wish list items-here’s a great checklist to take with you. Find the home you love, and make an offer on it- your Real Estate agent will help you negotiate the terms of the contract.
Going under contract- building your loan
Congratulations! You won the home! This is when you complete all of your due diligence, and your lender will build the loan for you. There are many different types of loan programs available to home buyers. Before this point, you will have a specific loan type that you are using. Now you will want to talk about locking your interest rate in, and what costs to anticipate with securing the loan, and make sure you are timely when turning your paperwork for the mortgage.
Always,Always, Always get a home inspection!! Most contracts are contingent upon a home inspection (among other things). This will tell you the condition of the property, and if there are any repairs or major issues to be addressed. This contingency will protect you as a buyer and you can renegotiate or terminate the contract based on your findings.
Not to be confused with an inspection. The appraisal will tell you what the home is worth, based on current market conditions. An appraiser is a third party (not associated with your lender), an unbiased individual that will perform a review of the property and write a report that tells you and your lender that the price is fair for this property.
Once all of the due diligence is complete, you will sign all of your closing paperwork at the title company. Many, many, many pages will be awaiting you to sign. This will be the final paperwork for your loan, the final paperwork for the title insurance and deed, and the final real estate documents. Then it’s a celebration!
With my clients, we bring closing gifts, and drinks to toast (if that’s your jam) your new home! Buying a home is a big step, and we love to celebrate with our clients as we all cross the finish line!