Buying a home is a big milestone for everyone, and it can seem intimidating when you don’t know what to expect from the process.
Here’s a guide to help get you through the home buying process and on your way to homeownership:
Save for a Down Payment & Closing Costs
The down payment is a one-time payment towards the purchase of the home. Many lenders will require you to have some down payment, but the number could differ depending on the type of loan you get.
Many home buyers believe that a 20% down payment is required, but that isn’t always the case. That number may not be achievable for first-time homebuyers or those who may not be able to afford it. There can be advantages of making a larger down payment, though, like more mortgage options and a smaller monthly payment. Ask a REALTOR® for recommendations on mortgage brokers & programs that may be a good fit for you.
Closing costs are the costs associated with the purchase of a home. These costs can vary depending on the lender you choose, the loan type, and property & transfer taxes. Closing costs are typically about 2% to 7% of the purchase price of your home.
Talk to a local mortgage lender to get pre-qualified and pre-approved before you start looking for a home. This will help you determine the price range for your home purchase and make it easier to negotiate with sellers.
What’s the difference between prequalified and preapproved?
Getting pre-qualified means you’re getting an estimate of what you might be able to borrow based on the information you provide about your finances. This is also an opportunity to learn & ask questions about different mortgages that could be a fit for you.
To get pre-approved, you will complete a mortgage application and the lender will verify the information that you provide. Once you’re pre-approved, you’ll receive a letter that is an offer to lend you a certain amount. When you’re ready to make an offer on a home, this pre-approval letter will provide the seller with security that you will get the loan. It will also solidify you as a legitimate home buyer if you are competing with other buyers.
Find a Local Real Estate Agent
A real estate agent will benefit you in many ways, including:
- Searching for a property – Once you know the features you’re looking for in a home, a real estate agent will search for homes that meet your criteria in the areas that you do (or don’t) want to live in.
- Access to homes – After REALTOR® has narrowed down these options, they can arrange a showing of the homes that stood out to you.
- Price research – Real estate agents have access to information on homes that have sold in the past few years, so they can help you determine if a potential home is priced fairly.
- Negotiating contracts – A real estate agent can help protect your interests and make sure that contracts are not unfair to you.
- Informing you of important details – A REALTOR® will be able to guide you through various issues that can come up when buying a home. This could be anything from making sure timelines are appropriate to offering advice on specific things to look for in older homes.
Start Your House Hunt
Know Your Preferences
Ask yourself some questions when you start your home search. Do you prefer a new home versus an older home? Would you take on a fixer-upper? Will you need to budget for a contractor if you want to make changes to a home?
You’ll also want to think long-term. Your expectations may be different for a starter home compared to a home that will accommodate you for years to come. Are you looking to buy a starter home with hopes of moving up in a few years, or are you looking for a home that you’ll be comfortable in for a long time?
Sort out your negotiables and non-negotiables, because it can help you quickly narrow down options that might fit your needs. However, it’s important that you remain open-minded so that you’re not limiting yourself and missing out on great options.
Areas of Interest
Research areas or neighborhoods that you might want to live in. Check on commute times, school districts, and proximity to other amenities. Or, it may be easier to eliminate areas that you don’t want to live in. Major highways, factories, or areas that will extend your commute times may be areas you want to avoid.
Location & local development are factors to consider when you’re thinking about the future value of your home because you want that value to grow over time. If you’re unsure about amenities or development in your areas of interest, ask your REALTOR® for insight on those things.
Once you have an idea of the areas you like, check with your REALTOR® to get a feel of the available homes in your price range in those areas.
Make an Offer
When you’re ready to make an offer on a home, you must submit an offer letter in writing. This letter is almost always written by your agent on your behalf. It includes details about yourself, the price you’re willing to pay for the home, and a deadline for the seller to respond to your offer.
Your agent will get in contact with the seller or the seller’s agent to submit the offer letter. From here, you can expect the seller to:
- Accept your offer: If they accept, you’re ready to move on to the next step.
- Reject your offer: If they reject your offer, you can choose to submit another one or move on to another home.
- Make a counteroffer: The seller could also come back with a counteroffer, where they may change the purchase price or the terms of the sale. You can accept the counteroffer, reject it, or make another one.
Inspection & Appraisal
Lenders typically don’t require a home inspection, but you may still want to get one before you purchase a property. A home inspection can highlight any issues that you may not have seen (or known about) when you first visited the property.
A home inspector will test electrical systems, appliances, assess the roofing, and more. Once the inspection is complete, you’ll receive a report detailing the issues the inspector found in the home.
Go over this report line by line to see if there are any major issues, like lead paint that can be a health hazard. These are things you can ask the seller to fix before you close on the home. Other major problems, like cracks in the foundation or holes in the roofing, can also be negotiated. Go over these items with your agent and get their thoughts on your options for repair.
An appraisal is an assessment that gives the current value of the property you want to buy. A mortgage lender will require an appraisal because they can’t lend out more money than the home is worth.
Close on Your Home
Now that you have everything in line, you’re ready to close on your new home! Your lender will give you a closing disclosure, which summarizes your loan details and tells you exactly what you need to pay at closing. Once you’ve reviewed this disclosure, it’s time for the closing meeting.
You’ll want to bring an ID, a copy of your closing disclosure, and proof of funds for your closing costs. Expect to sign three documents in this meeting:
- Settlement statement: This lists all of the costs related to the home sale.
- Mortgage note: This states that you promise to repay the loan.
- Mortgage or deed of trust: This secures the mortgage note.
Ready to start the process?
Team Melton is ready to help you with the home buying experience. Our team of professionals has over 50 combined years of real estate experience to assist you through every step of the process.