Home buying can be one of the most exciting moments of your life, yet there are numerous considerations that need to be addressed before taking that big leap.
Before embarking on your homebuying process, it’s helpful to gain an understanding of which factors determine its value and how to navigate the mortgage process.
Find a Lender
Finding a lender is often one of the first steps buyers take in the homebuying process, as they determine which loans or mortgages may be suitable to you based on factors like credit, income and finances.
Once your credit has been improved and savings secured for a down payment, the best time to begin searching for homes should be once you have an accurate understanding of how much loan amount you can afford. In addition, it’s wise to continue working and earning income during this process so as to prevent any complications with work which might delay your closing or cause you to abandon it entirely.
Review reviews online of lenders you are considering before making your choice. However, keep in mind that people tend to leave negative reviews more often than positive ones so read with some skepticism in mind.
Once you’ve selected a lender, the next step in getting preapproved will be gathering financial documents, including W-2s and 1099s from previous years; bank and retirement account statements; pay stubs; records of debt payments etc. to submit. Doing this early will make the preapproval process faster as well.
Once approved, you can start searching for houses. Keep in mind that most houses have some flaws; therefore it is essential that you make an assessment as to what issues constitute deal breakers for you and be open-minded when discussing repairs with sellers; this will enable you to purchase the perfect home without stretching yourself financially too far.
Pre-qualifying for your mortgage is one of the key steps in the home buying process, enabling you to shop confidently and make strong offers when the time comes. Furthermore, pre-approval will reveal any issues which might impede financing – giving you time to address them before they cause more difficulties later on.
There are various methods available for getting pre-approved for a mortgage, with traditional lenders typically offering in-person meetings with loan officers and online preapprovals with automated approvals as two primary approaches. Traditional approaches typically require that you complete and submit full mortgage applications and financial documentation; online preapprovals typically allow buyers to verify their information quickly and are available 24/7.
Once preapproved, lenders will issue a letter that lasts from 60 to 90 days and details your approved loan amount. Keep in mind that preapproval does not represent official approval and final loan approval will only occur once you’ve found a suitable property, filled out an extensive loan application with supporting documents submitted, had the home appraised, and signed the purchase contract.
Change of jobs during your home purchasing process? Your preapproval process could need to be renewed as many mortgage approvals depend on debt-to-income ratio (DTI). An increase in income could drastically decrease loan amounts available.
Pre-approval by multiple lenders and comparison of interest rates should also be an integral component of homebuying, with homebuyer brokers often being helpful with this aspect. They should have some insight as to which lenders offer more favorable terms and options for specific financing types.
Make an Offer
Once you have found the house of your dreams, it’s time to make an offer. Your real estate agent will help you determine an acceptable offer based on recent comparable sales and your budget. Once an offer has been accepted, the next step will be deciding how you’ll pay – cash or mortgage and determining how much of a down payment to put down; some markets require buyers to submit what’s called an earnest money deposit as evidence that they intend to buy the property; this deposit typically goes toward covering costs such as closing costs or down payments at closing time.
Your offer to the seller will either be accepted or declined, initiating negotiations between both parties and agents involved. In reality, most offers require at least some back and forth before reaching an agreement; there may also be counteroffers by both buyers and sellers with agents helping in negotiations between each side.
Your agent will assist in negotiating terms such as sale price, contingencies (home inspections and appraisals, for instance) and closing date. Depending on the market conditions, waiving certain contingencies could allow you to compete more successfully for the home. But doing so may come with risks should it turn out that there were issues you hadn’t anticipated or planned for with it.
Once you and the seller reach an agreement on terms, you’ll sign a purchase and sale contract and submit it to your mortgage lender for processing. When your loan closes successfully, you can move in! It may take up to six weeks from when you find your ideal home until moving day arrives!
Get an Inspection
When purchasing a home, a professional home inspection should always be performed. Failure to do so could cause costly repairs after closing and may force you to reconsider your purchase decision altogether.
If the cost of home inspection concerns you, your lender may offer to cover some or all of it through your loan agreement. Now is also an ideal time to inquire with your real estate agent whether the seller will cover necessary repair costs such as pest or foundation issues according to Greenblatt.
At a home inspection, it’s a good idea to run through your list of issues and take note of any that need fixing. Furthermore, walking with an inspector around the home can be an invaluable opportunity to gain more insight into how its systems operate.
Though it might be tempting to settle for an affordable home that doesn’t fulfill all your needs, don’t make this compromise; you could regret it later. Take your time in finding a property suitable for both yourself and your family.
When your inspector gives their report, it’s essential that you listen carefully. But keep in mind that inspection reports often exaggerate problems beyond their actual severity; for example, cracks in walls or roof tend to appear worse than they actually are.
Based on the results of your inspection, you may decide to negotiate a lower price, request that certain repairs are completed, or cancel the sale altogether. Be sure to bring along your inspection checklist as well as any supporting documentation such as receipts from completed repair jobs for final walkthrough before closing.
Closing is the meeting in which all legal documents related to your purchase and money exchange occur, often at an escrow/title agency/attorney’s office. As part of this process, you’ll also conduct a walk-through inspection of the property to make sure all agreed upon items such as appliances are still present; your real estate agent should guide this step for you.
There may be several complications between making an offer and closing on it, such as issues with credit or finances, lack of equity in the home, or market changes that arise between making and accepting an offer and closing. Therefore, it is vital that you inform your lender of all payments and expenses so there are no surprises that might impede closing on a loan loan agreement.
As these costs can quickly add up, having some savings aside or borrowing against retirement plans to pay the down payment and closing costs is wise. Negotiate seller-paid closing costs or lower interest rates as possible to help offset some of these expenses.
Before closing, make sure you’ve changed your address on all relevant documents like driver’s licenses, credit cards and bank accounts. Also notify subscription services, creditors and acquaintances of your new address as well as setting up mail forwarding services. Also remember to collect manuals for any appliances being left behind as well as making arrangements to shut off water valves before you depart; this will prevent leaks between when you move out and when new owners take possession.