February 16th, 2019 2:20 PM by Jackie A. Graves
FREEHomePurchaseAnalysis FREEFHAHomePurchaseAnalysis FREEVAHomePurchaseAnalysis
steps to buy a house might seem complicated at first—particularly if
you're a first-time home buyer dipping a toe into real estate for the very
first time. Between mortgage rates, property taxes, negotiating with sellers,
and closing the deal, it's easy to feel overwhelmed. There's so much at stake!
if you familiarize yourself with what it takes to buy your first home
beforehand, it can help you navigate the real estate market with ease. So let's
get started! In this step-by-step guide, you'll learn what it takes to buy your
first home from beginning to end. Whether it's your first time in the real
estate market or you're an experienced homeowner who wants to brush up on their
skills, this list has you covered.
Step 1: Start gathering a down payment
very first step every first-time home buyer should tackle is to figure out
their finances. Buying a home (particularly for the first time) requires a
mortgage, where a lender fronts you the money and you pay them back over time.
However, in order to get a mortgage, you'll need to put down some sort of down
how much do you need? Ideally a down payment on a mortgage should be 20% of the
home's price to avoid added fees, but if you don't have that much, don't worry.
A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types
of mortgages like VA loans or a USDA loan.
to having a down payment, a first-time home buyer will need a decent credit
score. This three-digit number is a numerical summary of your credit
report, a detailed document outlining how well you've paid off past debts like
for credit cards and college student loans. A lender will check your score and
report in order to estimate the odds that you will deliver your monthly payment
to them, too. In turn, they will use this info to decide whether or not to
loan you money, as well as how much, and at what interest rate.
If a lender sees some late payments or other
blemishes in your credit report, this can lower your odds of getting a loan
with a great interest rate, or perhaps even jeopardize your chances of getting
any loan at all. So, it's essential to know your score, and take steps now if
necessary to bring it up to snuff. Here's more on how to check
your credit score and what
number is best to buy a home.
head out home buying, you should seek pre-approval from a
lender for a home loan. This is where you meet with a loan officer, ideally a
few at various mortgage companies. Each mortgage lender will scrutinize your
financial background—such as your debt-to-income ratioand
assets—and use this info to determine whether they're willing to loan you
money, and what size monthly payment you can realistically afford. This will
help you target homes in your price range. And that's good, since a purchase
price that's beyond your financial reach will make you sweat your mortgage
payment and puts you at risk of defaulting on your loan.
As a buyer,
just keep in mind that mortgage pre-approval is different from mortgage
pre-qualification. Pre-qualify, and you're undergoing a much simpler process
that can give you a ballpark figure of what you can afford to borrow, but with
no promise from the lender. Getting pre-approved is more of a pain since you'll
have to provide tons of paperwork, but it's worth the trouble since it
guarantees you're creditworthy and can truly buy a home.
even meet with a lender, one step home buyers can take to begin understanding
what they can afford as a monthly mortgage payment is to plug their info into
an online home affordability calculator.
This will calculate the maximum amount you can afford as a monthly payment.
Want a trusty
home-buying guide by your side? Most first-timers will want a great real estate
agent—specifically a buyer's agent, who will help you find the right houses,
negotiate a great real estate deal, and explain all the nuances of home buying
along the way. The best part? Their services are free to first-time home buyers
(since the seller pays the sales commission). Here's how to find a real estate agent in your
is a subtle difference between a real estate agent and a Realtor®; the latter
is a member of the National Association of Realtors® and adheres to a code of
ethics. Consider having a Realtor additional insurance that you'll get the help
you need to ace the home-buying process.
This is the
fun part! As a buyer, you can peruse thousands of real estate listings on sites
such as realtor.com, then ask your agent to set up
appointments to see your favorites in person. Since the sheer number of homes
can become overwhelming, it's best to separate your must-haves from those
features you'd like, but don't really need. Do you really want a new home or do
you prefer a fixer-upper? Make a list of your wants and needs to get started,
and whittle down your options.
dream home? Then it's time to make an offer to the seller. Here's more on how to make an offer on a house that a
seller can't refuse.
inspection is where you hire a home inspector to
check out the house from top to bottom to determine if there are any problems
with it that might make you think twice about moving forward. Think: termites,
faulty foundation, mold, asbestos, etc. Sure, a lot can go wrong, but rest
assured that most problems are fixable.
Even if you
got pre-approved for your home loan, your lender will want to conduct a
home appraisal. This is where they check out the house to make sure it's a good
investment. It's similar to a home inspection, but for your lender. Here's more
about the home appraisal process and what to expect
as a buyer.
which in different parts of the country is also known as “settlement” or
“escrow,” brings together a variety of parties who are part of the real estate
transaction, including the buyer, seller, mortgage representative, and others.
the day you officially get the keys to your new home—and pay all the various
parties involved. That will include your down payment for your loan, plus
closing costs, the extra fees you pay to process your loan. Closing costs can
be sizable, averaging anywhere from 2% to 7% of the home
price. Here's more on closing costs for home buyers.
closing? Got your loan? Congratulations, you've officially graduated from
a buyer to a homeowner! See, the home-buying process wasn't so scary after all,
right? Now it's time to kick back and enjoy the many benefits of becoming a homeowner.
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