Purchase of a home can be one of the biggest investments you ever make, taking time, savings and effort. Finding your ideal property requires time.
Step one in purchasing your home should be to prepare yourself. This involves setting aside savings for an emergency fund and creating an effective savings plan, while at the same time reviewing and optimizing your credit report and score.
1. Get Pre-Approved for a Mortgage
Becoming pre-approved for a mortgage is an integral step in the homebuying process, helping you determine how much house you can afford and setting you on a fast path to closing once you find your ideal property. Furthermore, pre-approval shows sellers that you are an active buyer with financial means who intends to complete this purchase.
Most lenders require buyers to submit an application, financial documentation such as W-2 statements, tax returns and pay stubs as well as their credit report in order to be pre-approved for a loan. This can be done either in person, over the phone or through their website; online pre-approvals being the quickest and most efficient means.
As soon as you’re ready to look at homes, bring along your pre-approval letter as proof that you are an eligible buyer. This letter typically details loan programs, purchase prices, down payments amounts, interest rates and an agreement by lenders to fund loans if offers are submitted.
Pre-approval letters only last for a specific timeframe – typically 60 or 90 days – after which time, you must get reapproved with all of your latest financial and credit details.
Preapproval can help save the heartache of falling in love with a home outside your budget, as well as provide you with a clear idea of your monthly payments and any issues that need addressing before applying for a mortgage loan.
A lender can refuse you a mortgage if it discovers that you don’t fulfill certain requirements, like being debt free and possessing enough emergency savings to cover six to twelve months of expenses should your job disappear. To prevent this from happening, ensure your finances are in order prior to applying by disputing incorrect data on your credit report or paying down debts before getting pre-approved – any loan amounts given as pre-approvals can change once officially approved!
2. Find a Lender
Finding a mortgage lender can be one of the most daunting steps of home buying, yet choosing one shouldn’t be impossible. By being prepared, asking pertinent questions and considering all available options ahead of time, making this major decision more approachable.
If you are one of the two-thirds of buyers without cash in hand to pay for a home outright, preparation is even more essential. That means improving your credit, minimizing debts, stashing away savings accounts and getting pre-approved from a mortgage lender.
Selecting the ideal lender can be much simpler if your goals and financial situation are well defined. Knowing your budget, home affordability limits, and monthly mortgage payment costs is crucial in selecting an ideal lender and helping narrow down search results to properties within that price range without overspending.
Be honest with yourself about your lifestyle and the amount of work it will require to maintain a new home. If you can’t manage the extra maintenance required, perhaps finding something smaller may be easier to care for or saving up for something bigger in the future may be the better solution.
Be mindful that lenders charge various fees, such as application, origination, processing and underwriting charges that can quickly add up. Look for lenders with low or no fees in order to reduce these expenses and keep more of your hard-earned cash in your own pockets.
If you’re in the market for a new home, now is the time to begin your hunt. First decide on what kind of mortgage loan suits your needs before finding lenders offering competitive rates and terms. After shopping around multiple lenders and getting approved credit and income approval so you can shop with confidence when your perfect house comes along!
3. Start Shopping
Once your credit and lender are in order, it’s time to start shopping for homes. But before doing so, make sure you understand your budget range and how much home you can afford to purchase. “To find out your budget range accurately, meet with a lender for preapproval of mortgage,” notes Quinn. They will take into consideration such things as income, debts, savings accounts and your credit report when selecting the loan that will best meet your needs.
When browsing homes, be honest about your priorities. For instance, if you plan to start a family soon or already have young children at home, buying one with outdoor space and access to schools could be essential. Also don’t underestimate commute length and distance when moving out of a city to suburbs – these factors must all be factored into consideration.
Make sure to consider all monthly costs associated with homeownership, such as property taxes, homeowners insurance premiums and utility bills – these expenses could add up to 2-6 % of the purchase price! If unsure how to estimate these expenses accurately, consult your real estate agent.
Once your search is focused, develop a list of must-haves and want-to-haves for your new house, making sifting through listings more efficient and less frustrating in the long run – as well as saving yourself from time wasted viewing homes that don’t suit your needs.
Don’t fall for houses that look good from the outside and let their paint job or landscaping distract from a thorough assessment of their condition; conduct a professional home inspection before closing on any property to asses its condition and detect problems that could become costly repairs later.
Do not overlook hidden fees and costs when comparing property prices, such as transfer taxes, environmental assessments, seller-financed mortgage assumptions, attorney and title search fees and miscellaneous items. They could add thousands to the final price.
4. Make an Offer
Once you’ve found a home you’re interested in, the next step should be making an offer. While the process can be both exciting and nerve-wracking, take your time crafting an effective offer by being upfront with yourself about budget constraints – otherwise you could end up making too large of payments that overburden you financially!
Your offer terms depend on a variety of factors, such as how competitive the housing market is and the length of time a property has been on the market. In general, it’s advisable to stick close to or slightly above the listing price in a competitive market to capture seller attention; your real estate agent can assist in helping determine how much to offer based on comparable sales data and your budget.
As well as including your purchase price, you should include any contingencies necessary for mortgage approval (such as home inspection or financing). Furthermore, concessions could include paying closing costs or making repairs; sellers will prefer cash offers without contingencies.
If you’re concerned about being outbid, your agent might suggest adding an escalation clause to your offer. Such clauses automatically increase it by an agreed upon amount should another buyer outbid you – however it should be used cautiously as this can spark bidding wars that quickly exceed your budget.
Once your offer is accepted, you’ll sign a contract that outlines its details. Your agent should help guide you through it to ensure its understanding. In addition to signing the contract and scheduling its appraisal and inspection processes, mortgage steps need to be completed as part of this process; once complete you’ll be ready to move into your new home!