In this guide, you’ll learn the steps you should take before purchasing your home. Whether it’s your first time in the real estate market or you’re an experienced homeowner who wants to brush up on your skills, this is everything you need to know!
Step 1: Start saving a down payment.
One of the essential steps to buying a house for the first time is understanding what you can afford and saving for the down payment.
Buying a new home requires a mortgage, where a lender loans you the money, and you pay it back over time.
To get a mortgage, you’ll need a down payment to prove you are responsible and will pay it back. Ideally, a down payment on a mortgage should be 20% of the home’s price. Alternatively, you could explore the option of a mortgage buydown.
Step 2: Check your credit score
In addition to a down payment, a first-time home buyer must have a decent credit score. Did you forget to pay off a couple of credit cards? Unfortunately, that will affect your credit score. A lender will check your score and credit report to estimate the odds that you will also deliver your monthly payment. The lender will use this information to decide whether or not to loan you money and how much they should. It is also crucial to determine what type of mortgage you are looking to take out, such as assumable mortgages or adjustable-rate mortgages, just to name a few.
Step 3: Get pre-approved for a mortgage.
Another important first-time home buyer step is seeking pre-approval from a lender for a home loan. This is when you will meet a loan officer from various mortgage companies. Each mortgage lender will scrutinize your financial background and use this info to determine whether to loan you money and what size monthly payment you can afford.
Step 5: Go shop for a home and make an offer.
This is the fun part! As a home buyer, you can peruse thousands of real estate listings and then ask your agent to set up appointments to see your favorites. Since this process can be overwhelming, it’s best to list your must-haves from those features you’d like but don’t need. Once you’ve found your dream home, it will be time to make an offer to the seller.
Step 6: Get a home inspection.
Once you find a home, a home inspection is a crucial step to ensure there are no issues that aren’t noticeable to the naked eye. You will hire a home inspector to check out the house from top to bottom to determine if any problems might make you think twice about moving forward. This can be anything from termites, faulty foundation, mold, asbestos, etc.
Step 7: Get a home appraisal.
Even though you were pre-approved for the home loan, the lender wants to conduct a home appraisal to ensure it is a good investment. The lender will look around your home, similar to the home inspection, to determine if any problems might make them think twice about lending
Step 8: Head to closing
Lastly, closing, which can also be known as settlement or escrow, brings together a variety of parties who are part of the transaction. This includes the buyer, seller, mortgage representative, real estate agent, and more. Closing is the day you officially get the keys to your new home and when all the stress and worry finally pays off.