If you’ve been dreaming of buying a house for some time and then are finally getting ready to purchase one, it can be a monumental milestone. In your daydreams, you might have drawn thousands of images about how your perfect house would look and feel. But once you move into the realm of exploring properties, you will find that the entire process is emotional, stressful, and tricky.
By doing your research and carefully balancing a few variables, you can make the home buying process much smoother. Additionally, you should also find the right professional who will guide you through the whole process and remove any obstacles.
So, before you jumpstart your house-hunt, here are a few steps you need to take before you start shopping to avoid some common pitfalls.
Step 1: Know Your Credit and Financials
To qualify for a home loan, you need to have a credit score of at least 620 or higher and a debt-to-income (DTI) ratio of 36 percent or lower.
Your credit score is much like your report card as far as managing your credit is considered. Every time you borrow or finance something, your credit score gets affected. Similarly, whenever you pay off loans and make timely payments, your credit score improves. Any inaccuracies in borrowing and paying off loans will result in significant dents in your score.
Typically, lenders look at your credit report and score to see how well you have kept your spending low and payments high. Once they verify you are financially reliable, they will be more confident in lending you funds for your new house.
So, before beginning the house purchase process, determine your credit score and settle at least a few of the outstanding balances in your report. This way, you can be assured that your application will be assessed fairly, and you get to secure a lower interest rate.
In addition to the good credit score and DTI, lenders will want you to make a deposit that equals 20% of the price of the property you are planning to purchase. Nevertheless, some first-time buyer programs and loans do ease that burden.
Furthermore, you will be responsible for carrying the expenses of closing costs—attorneys, estate agent fees, inspections, and other clerical services. The closing costs often range between one and eight percent of your home’s purchase price.
Lastly, you wouldn’t want to end being house poor. So, take into account the deposits on utilities, furnishings, and other household supplies you will require after moving.
Step 2: Get Pre-Approved for A Home Loan
Getting pre-approved for a home loan is a vital step in your home buying process as it helps remove a lot of guesswork and gets many tasks accomplished at once.
Pre-approval will help you know the houses that are precisely within your budget when you start shopping for homes. After all, the last thing you want is to fall in love with a house only to realize you don’t have enough funds or qualification to make the purchase.
Pre-qualification also gives you an edge over other potential buyers as sellers are usually interested in offers that are likely to follow through with the sale. Additionally, it will fasten the closing process by helping you have all your finances arranged before you start shopping.
Step 3: Find the Best Real Estate Agent
While it’s tempting to walk into an open house or two, it’s always best to have a representation from a qualified real estate agent.
A buyer’s agent does much more than just curating a list of houses for you to tour. They will assist you in every aspect of your home buying journey—gathering a list of must-haves and deal-breakers, helping you negotiate the offer, and navigating the closing process.
When looking for the ideal real estate agent, see if there is a synergy between you and your agent. While licensed professionals have abundant knowledge about the local real estate market and housing industry, what they could be lacking is emotional intelligence. Emotional intelligence is crucial because it will help them tap into your needs and desires and guide you in making the right decision.
Step 4: Finding Your Dream Home
Now that you have your finances in order, your loan in place, and your real estate agent by your side, it is time to jumpstart the house hunt.
Start by discussing with your real estate agent what is and what isn’t realistic for your budget. For instance, you might want a great location, state-of-the-art appliances, a large floor plan, and modern features and fixtures. Ask your agent if a house with all these features can be found at the budget of your choice.
You may need to be willing to make some compromises either with your wish list or your budget to be more lenient with your deal-breakers.
Step 5: Making the Right Offers and Negotiating
Making an offer is often the trickiest part of buying a house, especially when other potential buyers are interested in purchasing the same house you have your eyes on.
The rule of thumb is to keep your emotions apart from your transaction. There is always a chance that the seller will decide to go with another offer over yours. And in some cases, you might be offering the seller less than what they are asking for.
Furthermore, there’s always room for negotiating a lower price when there are more sellers than buyers in the market and plenty of houses to choose from. Nevertheless, remember that negotiating might not be beneficial in a competitive market.
When in doubt, reach out to your real estate agent to get an idea about the realistic offer range that will satisfy both you and the seller.
Step 6: The Closing Process
The closing process demands patience and is often time-consuming. Before purchasing your house, it must undergo a title search, appraisal, and inspection.
The title search ensures that the property isn’t bound by taxes or liens, and the appraisal provides the bank proof that the house you are looking to purchase is worth the amount being loaned. The inspection assures the lender that the property and structure are in good condition and is free from faulty systems and pests.
Suppose unsolvable problems arise during the closing processes. In that case, you have the right to terminate the contract, request repairs before closing, or negotiate a lower price tso that you can fix the issues. Once all the processes are done, the contract will be locked in.
Generally, the closing process takes between 60-90 days or sometimes longer. At the closing table, a meeting will be held at the end of escrow when all papers will be signed, fees will be paid, and the keys to your house will be handed over to you.
Have Questions? Ask Pete Maver!
Your real estate agent is the best source of information about the local community and real estate topics. Give Pete Maver a call today at 248-705-2753 to learn more about local areas, discuss selling a house, or tour available homes for sale.