A home is the biggest investment in the life of an average American. The home buying process is emotionally overwhelming and financially stressful. But it is also an extremely exciting journey for the rewards of owning your own house far outnumber the stress and overwhelming responsibilities.
This step-by-step guide will walk you through the home buying process, equipping you with all the information you need to avoid unpleasant surprises.
Step 1: Defining your Dream House
Do you have a mental image of your dream house? What kind of property are you looking for? Singles typically seek studio apartments and city dwellings, while couples and families gravitate towards townhomes and large suburban houses. Your dream home should align with your family’s housing and comfort needs, alongside your budget and affordability.
Step 2: Examine your Financial Health
Examining your financial health and affordability are of the utmost significance. There’s no point in exploring houses and properties that do not align with your budget. After all, your down payment will determine the amount you can obtain in your mortgage loan. Most banks and financial institutions require a down payment that covers at least 20% of the total cost.
While you can always find mortgage options that come with low down payments, the burden of interests will cripple your financial health. Aside from the down payment and monthly mortgage payments, your budget should also account for closing costs, attorney fees, realtor fees, property taxes and homeowner’s insurance.
How can you obtain a good deal on your mortgage to avoid the stress of hefty mortgage payments? It’s essential to maintain a healthy credit score and make active efforts to build your financial strength before approaching the home-ownership process. If you’re currently paying off an auto loan, student debt or credit card bills, it’s wise to put off the home buying process until you’ve cleared all your liabilities.
Step 3: Market Research
Market research is an essential step to help you understand the dynamics of demand and supply in the real estate market you are targeting. You don’t want to end up paying more than the actual market rate of the property you’re buying. Market research will help you make a lucrative investment that will serve as a dynamic asset to generate wealth and secure your future.
Step 4: Mortgage Preapproval
Getting preapproved for the mortgage is a crucial step to avoid any unpleasant surprises that can throw off your entire budget and cripple your financial health. Be sure to sit down with your mortgage consultant or banker to discuss the entire payment plan, interest rates and spending. This will give you a concrete idea of the amount you are spending on homeownership.
You will also have to prepare all your documents, such as bank statements, credit reports and employment history. The lender will evaluate your financial health and debt gearing abilities to determine the loan amount you are eligible to obtain.
Step 5: Hire an Experienced Realtor
Most homeowners believe that they can buy and sell their properties without incurring the additional expense of a realtor. That’s not true at all. Entering the real estate market without the reliable support and expertise of a realtor can expose you to all kinds of frauds, scams and deceptions. Realtors equip their clients with a wealth of knowledge on market rates and lucrative property investments, alongside supporting them on the negotiation table.
Step 6: Let the Home Hunting Begin!
At this step, you and your realtor is ready to start the home hunting process with virtual tours, open houses and exploring different neighborhoods. It’s wise to set your priorities and make a list of all the amenities that you simply cannot compromise on.
This step is drawn-out, exhausting and lengthy, but the more properties you see, the clearer you will be about your needs and preferences. We advise all home-buyers to make lists of pros and cons for each property regard so you can make a well-informed decision that supports your budget and life quality.
Step 7: Putting an Offer
Making an offer is a step that will pit you against several other buyers who are interested in the same property. It’s essential to curate an offer that sets you apart from other buyers, making your option more lucrative for the seller. It’s wise to work closely with your realtor to avoid making an offer that overstates the value of the property.
Making an offer also requires certain legalities and paperwork. You will need an offer letter, proof of funds for your down payment, a preapproval letter for your mortgage and others. It’s wise to add a personal touch to your offer with a handwritten note to share your feelings towards the house with the seller.
Step 8: A Detailed Home Inspection
Once the seller has accepted your offer, it’s time to undertake a detailed home inspection to identify any repairs, maintenance issues or damages that the seller has attempted to hide from your eyes. A home inspection will bring to light all the strengths and weaknesses of the property, giving you a chance to renegotiate the price.
If the inspection reveals major damages, such as water damages or plumbing issues, you can talk to the owner to fix the issue or reduce the price. It’s wise to avoid signing any documents before these issues are settled.
Step 9: Home Appraisal Process
If you’re relying on a mortgage to buy your dream house, you will need to undertake a home appraisal process. Your lender will require you to get the property appraised by an independent third party. The lender can reject your loan if the actual cost of the house is lesser than the loan amount you have requested.
Most buyers are scared of the home appraisal process. It’s an opportunity to determine the actual price of the property and make sure you don’t pay more than the market value.
Step 10: Time for a Final Walk-Through
Be sure to take a final walk-through of the home before you sign the paperwork and seal the deal. This is your last opportunity to negotiate and make any demands you want to before exchanging the money for a new set of keys.
Step 11: Closing the Deal
The final and last step of the home buying process: closing the deal. Your lender will provide a closing disclosure a few days before you close the deal with the seller. You will have to sit down with your realtor, the seller and their agent to sign the mortgage and exchange the funds. You will also have to cover the closing costs and make the down payment.
If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.
As a top producing Realtor and Property Manager; Terry specializes in sales, extensive construction homes, rentals, REO’s, short sales, and all aspects of Real Estate. After graduating the University of Michigan with a master in MBA, Terry continued his endeavor and now has over 15+ years of experience in the Real Estate world. If there is anything that has to do with Real Estate and sales, you can always be sure of Terry to provide important, specialized knowledge.
