Jan 16, 2018
Updated Jan 26, 2018
Ready to buy a house? Look no further than our "10 Simple Steps to Buying a Home" guide to help you navigate the home buying process. Buying a house might be a bit daughnting.....but our 1 thru 10 Simple Steps to Buying a House will be certain to get you on the right track of purchasing your house today! Let's get started.....
STEP #1 - Are you REALLY ready to buy a home?
Not sure??? Well let's take a look....The first step to buying a home is determining whether or not you are ready. When deciding if you are ready, take some time to consider the following: Your lifestyle (what type of house will fit your needs), Debts (eliminating and/or mitigating your debt is crucial), Income/Savings/Fixed Expenses (a lender looks at all these things to determine how much they are willing to lend you), Future Plans (will a house you buy today fulfill your needs in 5 years?). Evaluating these items will help you determine your readiness for buying a house.
STEP #2 - Becoming the IDEAL Candidate
The 2nd step in buying a home is ensuring that you set yourself up to be an ideal candidate for the lender. While criteria for lenders vary, it is almost certain that a lender will not offer a loan to a "less than ideal" loan applicant. That is why you want to ensure that you have done the following: 1.) Examine your creditworthiness (request your free annual credit report from one of the 3 major credit bureaus: Equifax, Experian or TransUnion). The better your credit score, the better interest rate and terms your lender will offer. 2.) Pay down debts. Decreasing your debt is a sure-fire way to increase your appeal as a loan candidate. Lenders rely heavily on a prospective borrowers debt-to-income ratio. Focus on paying down "bad" debts that carry high interest rates such as credit cards and personal loans. Paying down your bad debts will help to improve the interest rate on your mortgage and, possibly, the amount a lender is willing to offer you for the purchase of a house.
STEP #3 - Get a Pre-Approval Letter
Prior to starting your search for a home, visit a lender or lenders of your choosing to get Pre-Approved. We highly advise getting Pre-Approved vs. getting Pre-Qualified. The reason being, a Pre-Qualification is a "ballpark" estimate by a lender based on very basic information (monthly income, debts) you provide about your financial situation. Whereas, getting Pre-Approved is more in-depth and the lender will actually start to verify your financial background. Additionally, the Pre-Approval process gives you a much more accurate idea of how much you'd be able to borrow. Without a Pre-Approval from a lender you risk looking at homes that aren't in your budget and possibly missing out on homes that would be a perfect fit for you. So, avoid the potential headaches in your search for a home and get Pre-Approved. We have a list of all the local lenders and would be happy to provide you this information, simply email us at firstname.lastname@example.org with your request and we will forward a list of local lenders.
STEP #4 - Determine Your Budget
A standard rule of thumb is to look at buying a home that is 2.5x your annual salary/income. This will allow you to remain comfortable with your mortgage payment even if you experience a hardship. Take into account other lifestyle factors the help determine what you're comfortable spending. Some people want to keep their monthly mortgage payment as low as possible so they can put money into savings, others view their home as a retreat for family and friends and are more comfortable with a larger monthly mortgage. At the end of the day, it's all about what you'll feel comfortable spending on a mortgage payment and the lifestyle factors that are important to you. So spend some time writing out why you are buying and what your ultimate objective is in purchasing a house.
STEP #5 - Find a Real Estate Agent
You may not need an agent, but having an agent who represents you will make navigating the processing of buying a home much more smooth (especially if you're a First Time Home Buyer). Approximately 88% of home buyers purchase their home through a real estate agent. It's because most people realize that finding an agent who can handle their purchasing needs will alleviate a lot of headaches and ensure they get the best deal possible. That's why it's worthwhile to spend some time finding an agent that fits your needs and who will put your interests first. We pride ourselves on being quick to listen to our buyer clients, as we understand that purchasing a home is much more than finding a place to live. It's typically the single largest purchase most people will make in their lifetime and, for that, you need an agent and company you can rely on. So take the time and make sure you find an agent you are comfortable with, it'll make your search for a home much more enjoyable.
STEP #6 - View and Select a Property
This is probably the 2nd most exciting step in purchasing a home (1st is closing on your new home!). At this point in the process you've been scouring the internet and jotting down addresses with For Sale signs that peak your interest and now it's finally here...your time to tour all those properties you've been waiting to see. Things to keep in-mind during this step are that you'll likely look at many homes before you finally settle on "The One", and it may take some time to find "The One". We liken it to dating, you don't just simply go out and find the first person that crosses your path and ask them on a date. Rather, you spend time whittling down your list until you find the one that peaks your interest, then you ask them on a date. Same is true when searching for a property. There will be many that aren't worth a second glance, but eventually you'll find one that you just can't resist.
STEP #7 - Make an Offer
You've found the perfect home, now it's time to make an offer. For most buyers, their offer will reflect their budget, the current market conditions, the condition of the home and terms of closing costs. Additionally, you'll want to keep in-mind that your initial offer won't likely be accepted (at least not without a few changes to minors terms of the offer). So when your agent calls to tell you that you've received a counter-offer, don't feel disappointed. Instead, see it as an opportunity and a sign that the seller is willing to make some concessions on the sale of their property. This is where you take some time to decide what you're able to offer the seller that will entice them to accept your offer. Don't be afraid to get creative either, it's not always about price for many sellers. Take into consideration terms of their counter-offer that don't relate to price and play upon those items. You'll be surprised at the deal you can get when you pay attention to the minor deal points in a counter-offer.
STEP #8 - Sign a Purchase Agreement
After the seller accepts your offer you will then proceed with signing a purchase agreement. In some states (and specifically in New Mexico) your offer is written up in the form of a purchase agreement and once it is accepted it becomes a legally binding contract between yourself (the buyer) and the seller of the property. When signing the purchase agreement don't hesitate to ask your realtor any questions you may have. The dumbest question is the one that goes unasked. By fully understanding the terms of the purchase agreement you'll feel much more comfortable during the contract/escrow phase of your purchase.
STEP #9 - Inspect the House
Once you're offer has been accepted by the seller and you've signed a purchase agreement, one of the next steps is to work with your real estate agent to schedule an inspection of the home. Roughly 77% of home buyers order a home inspection prior to closing on the purchase of their home, and for good reason. A home inspection can help you determine any red flags or other issues that can be negotiated into the purchase agreement (within reason of-course). It is the home inspection contingency that allows you the chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage. With that in mind, be sure to make note of anything that catches your eye during your tour of the property. That way you can make sure the home inspector looks those items over to determine whether or not it is a significant issue or something that is more cosmetic in nature.
STEP #10 - Close the Transaction
CONGRATULATIONS!!!! You've made it to the closing table and are now ready to sign all the closing documents for the purchase of your new home!! This is the time when all the required events of the purchase agreement have been fulfilled and funds from your lender are ready to be transferred to the escrow/title company for disbursement. Your real estate agent and the escrow/title company will schedule a date and time for you to go to their office to sign all the documents necessary for closing. Once you and the seller have signed all the documents, title has been recorded and funds disbursed, you will be the proud owner of your new home. Take your keys and starting making the property feel like your home!