To journey to homeownership can feel like a rollercoaster, often with plenty of ups and downs, but for most people, that bumpy ride is worth it. The Bank of America 2019 Homebuyer Insights Report revealed that just 7 percent of homeowners felt that owning a home wasn’t worth the stress and effort it took to achieve.
While it may take time and some challenges to overcome, knowing the steps to buy a house can help make the process smoother and less stressful.
Make Sure Your Finances Are in Order
You’ll want to make sure you can realistically afford to buy a house before you do anything else. Estimate your budget based on your income, savings, debt, and any other financial obligations. The less debt you have, the better, as too much can prevent you from obtaining a loan – in fact, you may want to pay most or all of it off before applying. No matter how much money you make, if you have excessive credit card debt, it will limit how much you can afford to spend on a home and your ability to obtain a mortgage.
Do you have enough for a down payment? Ideally, it should be 20 percent of the home’s price to avoid additional fees, but it is possible for a down payment to be as low as 10, 5, or even 0 percent for some types of home loans. You’ll have to have money for the closing costs too, which typically range from 2 to 5 percent of the purchase price of the home.
In addition to a down payment and closing costs, you’ll need a decent credit score as the lender will check it to estimate the odds that you’ll be able to make those monthly payments. It will determine if you’ll get a loan, as well as how much and at what interest rate. If your score is below 680, it makes better financial sense to improve it before applying for a mortgage.
Research Homes and Prices
Get an idea of what home prices are in the area you’d like to buy, searching for real estate listings on websites. If possible, avoid rushing, taking notes of homes you’re interested in, keeping an eye on them to determine how long they’re on the market. Keep track of changes in prices to get an idea of the housing trends in the neighborhoods you’re interested in moving to.
Get Preapproved For a Home Loan
Before you begin your actual search, you’ll want to get preapproved for a mortgage. It will show sellers that you’re serious about buying, giving you a competitive edge while also providing a more definitive answer as to how much you’ll be able to qualify for. Shop around for a lender, including mortgage companies, commercial banks, and credit unions. Compare details on the same type of loan, term, and loan amount. You’ll also want to find out about the requirements for a down payment, whether or not private mortgage insurance (PMI) is required, what the fees, points, and interest rate will be.
Hire a Great Real Estate Agent
Having a great real estate agent on your side is essential. It won’t cost you a thing, as the fees are typically paid by the seller. You’ll want an agent who is experienced in the area you’re looking to buy in, and one that you have a good personal fit with. The knowledge and support you’ll get with the right agent are incredibly valuable. Try to get referrals from friends, family members, neighbors, or co-workers and then sit down with each one to ask about their experience and determine how comfortable you feel with them.
Once you have an agent, you can begin touring homes. When you find the right one for your budget and needs, the agent will help you make an offer. The house will go into escrow when an agreement is reached, followed by an inspection of the property and an appraisal. The final step is the closing – that’s when everything is signed to complete the process, the lender gives a check to the seller, and you get the keys to the home.
