Buying a home is a big step, but for first-time buyers who aren’t familiar with the home buying process, it may be just as intimidating as it is exciting. In these uncertain times of high list prices and low rates, the decision to buy a home may seem even more difficult, but we’re here to help.
In this blog, we’ll walk you through each of the important steps in the home buying process so you know exactly what you’re getting yourself into and how to prepare.
Step 1: Set a budget (and stick to it)
You don’t want to end up with a house you can’t afford. So be honest with yourself, your real estate agent, and your mortgage lender about your budget. Calculate how much you’ll be able to afford each month, taking into account maintenance costs and allowing for unexpected expenses. Consider what would happen if one of your income streams disappeared, either by choice or due to a layoff or other unforeseen circumstances, if you’re buying with a partner or spouse and you each have an income.
Step 2: Contact at least three lenders for quotations.
One of the most critical tasks in obtaining a mortgage is to shop around. Compare all of the terms offered by each lender, including the APR (annual percentage rate), fees, and other closing costs.
Step 3: Acquire a mortgage preapproval.
Before you start looking for a property, be preapproved for a mortgage with the lender you’ve chosen. A preapproval shows vendors that you’re serious about buying and allows you to shop with confidence within a set budget. In order to preapprove you for a loan, a lender will probe into all elements of your financial life. (Keep in mind that a preapproval isn’t a guarantee that you’ll be authorized for a loan; that won’t happen until you’ve been approved by the underwriter.)
Step 4: Find a trustworthy realtor.
Working with a realtor who is familiar with the area you want to buy in will be quite valuable to your search. You want an agent who can assist you in finding the ideal home, negotiating the best deal, and referring you to other professionals for any needs you may have after you move in.
Step 5: Go House Hunting
Make sure your realtor understands what you’re looking for, and do your homework on the properties you’ll be seeing as well as the community. It’s a good idea to visit the neighborhood you’ll be moving to at different times of day, on weekdays and weekends, and speak with neighbors — and never buy a house without seeing it first. Check flood, earthquake, and fire hazard maps as well.
Step 6: Make a proposal
Discuss a reasonable offer with your realtor, and be prepared for some back-and-forth with the seller. Because the home market is so competitive these days, you’ll almost certainly have to haggle with other potential purchasers. Nonetheless, it’s critical not to go overboard with your spending. It’s easy to let your emotions get the best of you at this point. Be prepared to walk away from a home no matter how much you love it if the finances don’t work out in the end.
Step 7: Arrange for closing costs to be negotiated.
Any real estate transaction entails closing expenses, which can be paid in a variety of ways. They could be folded into your loan (which tends to be more expensive in the long run), or the seller could pay some of your expenses. Don’t overlook this part of the home buying process; you might be able to get waived fees and decrease overall prices by negotiating.
Step 8: Hire the services of a home inspector.
When you find a property you like and make an offer on it, have it inspected properly. You want to check sure your new home doesn’t have any structural difficulties or anything else that could make it difficult to live in. Inspections often take a few hours and range in price from a few hundred to a few thousand dollars, depending on the size of the home. However, the expense is well worth it; skipping this step would be a mistake.
Step 9: Get homeowner’s insurance and finalize your move-in agreements.
The mortgage lender will almost always require homeowners insurance to protect your investment. Get quotes from various firms or deal with an insurance broker who can shop prices for you, much like you did with your mortgage. You’ll also need flood insurance if your house is in a federally designated flood zone. Make sure the policy is binding and in force on the closing date. Contact your local utility, cable, and internet providers to schedule new service for your move-in date as you prepare for move-in day. Don’t overlook the most crucial tasks: finding a competent mover and packing your belongings.
Step 10: Close the deal at the closing table.
Just before closing, you’ll need to receive updated pay stubs and other financial documents to show that your employment situation hasn’t changed and that you’ll be able to make your mortgage payments. You’ll typically undertake a final tour of the property within 24 hours of closing to ensure that any necessary repairs have been made and that the home is vacant.
You’ll sign paperwork to settle the financing and transfer ownership of the home from the seller to you at the closing table. You must also bring a cashier’s cheque made payable to the escrow business. Also, don’t forget to bring your photo ID. You’ll be handed the keys to your new house after signing the closing documents, and you’ll be a first-time homeowner.
Are you prepared to begin the home buying process?
Being a first-time home buyer might be frightening, but it doesn’t have to be if you have the right information and resources on the home buying process. You may concentrate on what matters most by following the home buying process indicated in this article and working with a reputable real estate agent.