Are you tired of renting a house or an apartment? Ready to move into a home of your own? If so, you aren't alone. Approximately 72% of renters are making the transition into homeownership each year. Before you make that jump from renting into being a full-blown homeowner, there are some things you should know.
To make sure you are well prepared to purchase the home of your dreams, it helps to have a home buying process checklist on hand—no need to worry about making that checklist on your own, though; we've got you covered. Continue reading below to find out what you need to know before you hit the open housing market and where you can go to find the best real estate agents to partner with.
Home Buying Process Checklist
Buying a home is a huge investment that you should not take lightly. Before you embark on this exciting journey, you should make a home buying process checklist to ensure you are ready. If you've been someone renting an apartment or a house, you may be used to a few luxuries, such as calling maintenance when you have a plumbing issue.
When you buy a house, if your home requires any repairs, you must pay for them out of pocket. You also want to ensure that buying a house makes sense for your short-term goals. For example, do you foresee yourself relocating for work in a couple of years?
Do you plan on starting a family soon? These types of questions can help you decide if buying a house right now is the right choice.
1. Check In With Your Finances
If you've decided that buying a home is the right move, you next want to check your finances. You can use an online home affordability calculator to determine how much you can afford to spend each month on a mortgage. You should also take a look at your credit score.
If you plan on using financing to buy the house, you should ensure your credit score is above 650. If you wish to use an FHA, which is reserved for first-time homebuyers, you only need to have a 580 to qualify.
2. Save for Your Down Payment
If you don't already have money saved for a down payment, you should start now! In general, it is recommended that you save at least 20% of the home's purchase price to use as a down payment. For example, if you wish to purchase a home that costs about $350,000, you should save at least $60,000.
Of course, if you plan on using an FHA loan, you only need to put down about 3.5% of the home's purchase price. So instead of putting down $60,000, you only need to put down about $10,500. Remember that if you put down less than 20%, you will need to pay for mortgage insurance.
3. Write Down Your “Must-haves”
House hunting can be extremely overwhelming if you aren't sure what you're looking for. Before you start touring open houses, make sure to make a list of "must-haves."
What do you want your home to have? Three bedrooms?
A pool? Two floors? Once you write down what your house must have, you can then sort and filter out which homes to look at.
4. Choose the Right Mortgage Type
As mentioned earlier, you can apply for an FHA loan if you are a first-time buyer. The Federal Housing Administration backs FHA loans, and they are typically easier to qualify for than a conventional loan.
Conventional Loans
The government does not back conventional loans, but they come with lower minimum down payment options if you qualify. There are stricter requirements, such as needing to have a certain credit score and debt-to-income ratio. Consider looking into a conventional loan if you have a high credit score and low debt.
VA Loans
If you are an active or former service member, you can apply for a loan from the Department of Veterans Affairs. If you are a spouse of a former or active member, you qualify as well. You can purchase a house without a down payment if you are eligible.
5. Get Preapproved
Once you know how much house you can afford and what type of loan you want to use, it's time to get preapproved! The preapproval process allows you to see what a lender is willing to provide you without the hard credit pull.
You have the option to visit a local bank, or you can go to an online lender and submit your information for preapproval. Please make sure you pay attention to their sample rates and how they compare to the current market rates.
6. Consider Additional Fees
In addition to putting down a down payment for your house, you also need to consider closing costs. Closing costs are associated with the services required to finalize a mortgage.
Most clients pay about 2% of the loan amount in closing cost fees. You also want to consider the appraisal fee.
When you use mortgage financing to purchase a house, a lender will need you to have the house appraised to ensure the property is worth the money they're lending you. The cost of a home appraisal ranges from $200 to $500.
7. Find an Agent
Although you technically don't need a real estate agent to purchase a home, it is best to partner with one, especially if this is your first time buying a house. Buying a house is not as simple as buying a pair of shoes. Buying a house comes with many legal contracts and commitments you must be aware of.
Real estate agents have knowledge of the neighborhoods you wish to move into. If you want to move into a specific area, they can get you connected to the right homeowners.
Your agent will also represent you in the home transaction. If you want to pay less than the listing price, your agent will negotiate on your behalf to try to get the home into your budget range.
8. Find Your Dream Home
With your trusted agent by your side, you are ready to search for the house of your dreams. Make sure to tell your agent about your must-haves and the location in which you wish to move into.
Looking through houses online is a great way to filter out which houses to see in person. If you choose to see them in person, make sure to take photos so you can use them to jog your memory later before you pick a house to make an offer on.
Make sure to make any notes of any issues that come up during your tour. For example, if there is a crack or uneven surface, make sure to take photos or conversate with your agent about it.
It is best to have a home inspector look at the house before making an offer. There could be underlying issues you may not be able to see from an initial look.
9. Submit an Offer
Once you've found the house you can see yourself living in for quite some time, it's time to make an offer. Your agent can submit the offer on your behalf, and they will be in contact with the seller and their agent. If the homeowner rejects your offer, you have the option to either make a counteroffer, or you can walk away.
It is always best to at least have three different home options just in case one homeowner declines your bid, or someone outbids you. Once you have an accepted offer, you can celebrate!
There are just a few more steps you have to take. During this time, you shouldn't make any big purchases before the sale goes through.
Buying a car during this time can significantly affect your debt-to-income ratio, possibly disqualifying you from your loan. The lender will also need to appraise the house to ensure there are no issues and the home value matches the purchase price.
As long as everything looks good, the lender will release the funds to purchase the house, and you can get the keys to your home! Your agent will collect their fee from the home sale.
Buy Your Home With Ease
Buying a house is an exciting time, especially if this is your first time buying a home! Making sure you have a home buying process checklist on hand will help make the process smoother. Partnering with a reputable agent makes the process even easier. If you are ready to purchase a house or need help finding the right real estate agent to work with, check out our website today!