If you are considering buying your first home, you might be feeling overwhelmed by the process. What should you do first? How long will it take? While each individual home buying experience is unique, there is a basic 10-step process every new homebuyer should follow.
As soon as you’ve made the decision to buy a home, you’ll need to get a feel for the housing market in your desired area. Begin reading web sites, newspapers, and magazines for real estate listings. Make note of homes you are interested in learning more about and keep track of how long they stay on the market and if there are any fluctuations in the asking prices.
There are several easy to use calculators available online to help you get a quick idea of what your budget is, but for a more detailed look at what you can swing, follow the 28/36 rule, which states that your total housing costs should not exceed 28% of your total monthly gross income and that your total debt payments should not exceed 38%.
To find out exactly how much you can spend on a home, apply for mortgage preapproval. A mortgage banker can help you compile all of your necessary financial information and calculate how much of a loan you are approved for.
Your realtor will become your partner in the home buying process, so it is important that you find one you can work with. An agent’s compensation comes from the commissions paid by the house seller, so it won’t cost you anything to shop around until you find the right fit.
After you’ve gotten your financials squared away and found a real estate agent, it’s time to start shopping for homes. Begin touring homes in your price range to get an idea of what your options are and make sure to take notes on each property you see. This will help you narrow down your choice. Once you’ve taken your time finding the right fit for you, extend an offer to the seller via your realtor. When a price has been agreed upon, the house will then go into escrow while you complete the remaining steps in the process.
More often than not, offers are contingent on a home inspection. An inspector will look for signs of any structural damage or other repairs that may need to be made. This contingency will protect you from getting stuck with a house that is not in as good of shape as it may appear on the outside and will allow you to renegotiate or withdraw your offer without penalty if serious damage is discovered.
Determining which loan is right for you will depend on what your priorities are. Your lender can help you select the best option based on whether or not you need low monthly payments or fixed higher payments that will never increase.
An appraiser is a third party agent who will determine whether or not the price of the home is fair for all parties involved.
The amount of paperwork involved in a home purchase can be daunting. Your real estate agent will work with you to help you find a title company that can handle keeping all of the necessary papers organized.
Closing consists of signing all of the paperwork for both the house and the loan. After everything has been signed, it will take a few days for the loan funding to be released. Once the seller has received payment, you’ll be ready to move into your new home!