Buying your first house can be an overwhelming experience. Exciting, yes – but also confusing, stressful, and emotional. You’ve dreamed the dream, and now it’s time to claim your piece of the American pie: home ownership. Knowing what to expect when buying your home can help you navigate the tricky waters of real estate. Here are the six steps to buying.
Credit Scores and Dollar Signs
Your credit score and your debt-to-income ratio determine whether or not you’ll qualify for a home mortgage loan. Before you start the search for the perfect home, before you ring up real estate agents, you must prepare your credit report and debt-to-income ratio.
Your debt-to-income ratio measures the amount of money you owe to creditors vs. the sum of money you bring in. Banks want to make sure you’re not in over your head or over-extending your financial boundaries. Before you begin the exciting journey into home ownership, avoid making any big-ticket purchases on credit. Pay off the balance of any outstanding debts that you can afford to so that you can improve your debt-to-income ratio. Additionally, order copies of your credit report so you can rectify any discrepancies.
With your debt-to-income ratio and credit score both in good standing, it’s time to think about your down payment and other expenses.
When you borrow from a lender for your mortgage, you’ll need to invest 20 percent of the total value of the home you’re buying and the bank loans you the rest. But that’s not all the money you need. Buyers accept the responsibility of closing costs which include services provided during the transaction such as appraisals, inspections, surveys, administrative tasks, etc. You can estimate closing costs anywhere from one percent to eight percent of the home’s total value. You’ll also be paying for homeowner’s insurance, property taxes, and in some cases, HOA fees.
Only when you’ve got your credit, debt-to-income-ratio, and the necessary funds to move forward are you ready to take the next step.
With your financial ducks all in a pretty little row, it’s time to go to the lender and get pre-approved for your home loan. Pre-approval empowers you as a buyer, signals to the real estate agents that you’re prepared to do business, and lets the sellers know you’re ready to act. Pre-approval also helps you determine your true home-buying budget.
Applying for home mortgage loans can take time — time you may not have once you find the ideal house. By completing the loan application process before you shop, you’ve increased your chances of having your offer accepted and lowered the stress level of trying to apply for loans in a desperate rush to the finish line.
Pairing Up with the Right Real Estate Agent & Refining Your Wish List
Interview real estate agents. Not all agents have the same qualifying factors, specialties, certifications, or personalities. Find a real estate agent who specializes in the areas you’re shopping in, and in the type of property you’d like to purchase.
When you find a good match in a real estate agent, ask that agent to help you refine your wish list so that it’s practical and affordable.
Shopping & Offers
Now the fun part begins! This is when you and your agent can pound the pavement in search of your dream house. When you find the home you’re ready to buy, your agent will help you submit an offer and negotiate when necessary.
Patience Through the Process
When the seller accepts your offer, the bank requires that the house is surveyed, inspected, and appraised. Each of these processes takes time. During this time span, the contract is still open for negotiation. However, once the property is deemed in good condition with fair market value, the contract is locked in and you’re well on your way to getting the keys to your future.
This is the moment you’ve been anxiously preparing and waiting for. At the closing meeting, the title is transferred from the seller to you, the service providers are paid, and you get the keys to your new home.
With preparation and patience, you can enjoy the process of house shopping and buying the home you’ve dreamed of.
Your real estate agent is the best source of information about the local community and real estate topics. Give The Pikoff Team a call today at 832-786-1644 to learn more about local areas, discuss selling a house, or tour available homes for sale.