Buying a home is something we all dream about, but when the day finally arrives, it’s hard to know where to start. There’s a lot to learn and do before you can call yourself a homeowner, and the process often seems overwhelming at first. To simplify the homebuying experience, check out this 9-step guide to buying your first home.
Check your credit report
Buyers with credit scores of 620 and above receive the most favorable mortgage rates. Since it takes time to resolve credit problems, make pulling your free credit report the first thing you do. With your credit report in hand, you can dispute errors and identify areas for improvement. As NPR points out, if your credit score isn’t satisfactory, simply paying bills in a timely manner can make a positive difference.
Determine what you can afford
Lenders normally recommend you cap your housing costs at 28 percent of your overall budget. Rather than setting a budget based on what banks will lend, calculate a housing budget that reflects your overall finances. Consider your current housing costs and whether you can afford to spend more or would prefer to pay less.
Keep in mind that unlike renting, buying a home comes with costs beyond the mortgage, and you can always take the opportunity to reduce your loan by paying points on your mortgage. As you formulate your budget, include ongoing expenses like maintenance, insurance, and taxes as well as closing costs and the down payment in your calculations to avoid overspending.
Research your mortgage options
Buyers with credit scores of 620 or higher can typically use a conventional loan. Buyers who don’t meet the stringent lending requirements for a conventional loan — the case for many first-time buyers — can still buy with an FHA loan. An FHA loan requires less down and lower credit ratings than conventional loans. Similarly, a VA loan is an affordable option for veterans; as Forbes notes, no down payment is required and there is no minimum credit score.
When shopping around, keep in mind that lenders can typically offer several options to fit your mortgage needs.
Get preapproved for a loan
After deciding how you’ll buy your home, complete the prequalification process with several lenders to compare terms before choosing a lender and getting preapproved. Shopping with a preapproval in hand shows sellers that you’re a serious buyer.
Hire a real estate agent
You and your agent will be partners in the home buying process, so it’s important to hire someone you’re happy working alongside. Look at someone’s track record as you sort the possibilities.
Look at homes
Taking a look at listings in your price range can give you a solid idea of what to expect as you begin the hunt. Having your budget already prepped will confirm for you whether that fits your situation or if you need to look elsewhere.
Make an offer on a home
This is where your agent’s expertise really comes in, helping you craft an offer that’s attractive enough to be accepted without giving up too much. In addition to your offer price, this includes contingencies, concessions, earnest money, and a proposed closing date. Keep in mind that sellers may negotiate any of these points before accepting an offer.
Complete the home inspection
There’s one contingency you may not want to waive. Architectural Digest explains inspection contingencies give buyers the option to renegotiate or walk away from a sale if a home inspection turns up major issues.
Close on your new home
You’re finally here: closing day. The closing day is when you’ll finalize your home purchase, pay closing costs, and receive the keys to your new home. Expect to spend a couple of hours signing paperwork, but when you’re done, you’ll be a homeowner!
Buying a home may seem overwhelming right now, but the process goes by faster than you think. Before stepping into the housing market, make sure you’ve taken the necessary steps to prepare your finances. With everything in place, you can buy your first home with confidence.
Make sure you have a plan in place for moving day as well. Contact MoveMeWithCare.com for all your moving needs – 877-963-SAVE(7283).
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