Buying a home for the first time can be stressful, especially during these difficult times, but knowing the needed information can make all the difference. Although the pandemic has affected purchasing and building markets worldwide, specific financial key steps remain the same. By understanding these steps, you can make your dream of having a house possible.
Decide on Your Budget
Many homebuyers make the mistake of buying impulsively, often from excitement over a flashy property. If you purchase a home beyond your budget, it may negatively impact your finances and future happiness. Be realistic about how much home you can afford that allows you to live comfortably and financially free in the long run.
Pre-approval is an integral part of the homebuying process. It gauges your qualification to borrow and that you’ve been approved to take out a loan. If you don’t get a pre-approval, you may end up overspending on the house just to discover that your credit or employment history holds off the loan approval. Such issues can make you lose your money deposit, including your dream house.
Market experts agree that when the seller knows you’re pre-approved for purchasing their home, they are more likely to work with you in finding a price they’re comfortable with. You’ll also encounter fewer surprises along the way with your lender once you know that you’re pre-approved.
Consider Hiring a Real Estate Agent
Most buyers find professional real estate agents helpful while they’re in the process of buying homes. According to a Zillow Group Consumer Housing Trends Report, 85% of buyers used an agent during their home search in 2020.
A real estate professional can show you properties according to your budget and needs and can help you decide how much to offer for a property. They can also submit an offer letter for you and help you negotiate with the seller after making an offer.
Start Your Home Search
Start your home search as soon as you’re ready to begin house hunting. Browse as many listings as possible, and remember that it only takes one home to make you happy. Begin with the must-haves. Think about the house’s location, size, number of bedrooms and bathrooms, architectural details, and so on—before prioritizing your wants.
List down what you wish to have, like a garage, one extra room on the second floor, a spacious living room with an open kitchen. As you tour properties, think about what you can put up with and what’s essential. Sometimes an older home may seem like a bargain, but the fixtures and appliances may not go with your vision or be easy to replace. Do remember that you should be open to possible renovations since no house might have all your complete list of needs and wants.
For example, if the house has marble floors and you wish to change them, you can opt for hardwood floor installation to have more durable floors in your chosen home.
Make an Offer
When you find a house that you’re interested in buying, it’s time to consider making an offer. Work with your real estate agent to run a comparative market analysis for the area. This will help determine what the fair market value of the house is. You’ll have more power to negotiate if few buyers are interested or if it hasn’t sold quickly.
Talk to your real estate agent about whether it’s necessary to include contingencies in your offer. People are afraid to make sales offers with contingencies because there is a risk that the other party will back out, leaving them with nothing. However, some contingencies are often worth making, despite the risk of losing the sale.
- Mortgage contingency: To protect you from the expense of moving if you cannot obtain a mortgage, buyers should include a mortgage contingency in their offer. This will allow you the opportunity to back out of your offer.
- Home sale contingency: If you’re planning to sell your home and buy a new one, ask about a home sale contingency. It gives you a chance to back out of the purchase if you cannot sell your own home within a certain period.
- Inspection contingency: When you’re ready to move on your home purchase, be sure that you get it inspected. You can get an inspection contingency that will protect you if any needed repairs are found. It also means you can back out of the deal without penalty if the property needs more work than you can handle.
Apply for a Mortgage
When buying a home, it’s best to know what you’re getting yourself into. The mortgage you choose will have a lot of factors that affect your loan amount and how you pay them back. Making the right choice can shorten the length of the loan and help reduce interest over time.
Here are some loans that you can consider:
- Conventional loans: These loans offer lower down payments and easier lending qualification requirements, but they do carry higher interest rates.
- Jumbo loans: If your dream home costs more than the average house, a jumbo loan may be the right fit for you though the downside is a larger down payment with a higher credit score.
- FHA loans: FHA loans are easier to qualify for than conventional loans but require mortgage insurance. They’re designed to be more accessible to first-time homebuyers and people with low credit scores.
Purchase a Homeowners Insurance
To pick up the keys to your new home, you’ll need proof of homeowners insurance. If you already have a policy, let your current agent know about the new property so that they can do the necessary paperwork.
If you don’t have a policy yet, start shopping for one right away. Your lender can help you coordinate a policy through your monthly escrow account, making the process easy and seamless.
The initial step to buying your next home is to gather all the information you can. It’s something you must do carefully. But as long as you follow the process, you will be able to take the best steps possible to find your dream home.