Before your buy a new home, it's a good idea to have a helpful home buying checklist.
Out of every two hundred homes sold, one will be a foreclosure.
Let's think about that for a minute. The National Association of REALTORS® reported that 5.34 million homes were sold in 2018. That means that out of all the homes sold in 2018, 26,700 will get foreclosed on in the future.
But you don't have to be one of those people. A huge part of homeowner success is preparation and a good understanding of what to expect.
So if you are ready for the next big step in your life, take a look at this home buying checklist first and avoid heartache down the road.
Prepare Your Finances
You're about to make a huge investment and it's important to plan ahead so you can succeed. Here are some things you need to do before you even start thinking about buying a new home.
Start Saving for Your Deposit
A good deposit amount is 20% of the loan amount you take out. Don't expect to pay in cash. The bank needs a paper trail showing the money is yours.
Move your deposit money into one account at least three months before closing. If it's in several accounts, you may run into issues when it comes time to buy.
Create a Budget
You probably already have a budget and that's great. But in this case, we mean a budget for what your finances will look like after you buy your new home.
When you rent a house, rent is pretty much all you have to worry about outside of monthly utilities. When you buy, there are other expenses to consider:
- Home owner's insurance
- Savings for repair
- HOA fees
Making a budget for the future will help you determine how much you can afford to pay per month for your mortgage.
Determine Which Type of Mortgage Best Suits Your Needs
The type of mortgage you choose will tell you a lot about what you need to prepare for. It can also help you save money on closing fees, interest or the final cost of your home.
Some loan types to consider are as follows:
- Conventional loans not insured by the government
- Government-backed loans including FHA, VA and USDA loans
- Fixed-Rate Mortgages that keep your interest rate the same over the course of your loan
- Adjustable-Rate Mortgages that go up and down depending on market fluctuations.
Find the Right Mortgage Lender
Lenders want to be competitive, so mortgage rates are about the same wherever you go. Currently, the average rate is 3.70% for a 30-year fixed-rate mortgage.
The fees, however, vary drastically. So when you pick your mortgage lender it's still important to shop around.
When you get a quote from a lender, they have to include a breakdown of their fees as well. So get a quote from three to four different lenders and compare their fees.
As a bonus, you can also use the quote to negotiate lower fee prices.
Get Preapproved for Your Mortgage
Once you have chosen your financial institution, it's time to get pre-approved. This is important. It lets sellers know that you are:
A.) Serious about buying.
B.) If you make an offer you can back it up with more than just words.
You need the following for the pre-approval process:
- Proof of income and assets
- Good credit
- Proof of employment
- Valid photo ID
Pick Your Real Estate Agent
When you choose a real estate agent it's important to get someone with experience in the area you want to move to.
It's equally important you find someone you trust.
These 11 tips for picking the best real estate agent will give you more guidance in this area.
Choose Your Property
This is where everyone gets excited.
But it's also one of the most vital decisions you make during the whole process. This is where you are going to live for the next ten to twenty years. So here are some things you can do to help make the best choice.
- Decide which area you want to live in first. This narrows your search significantly and gives you a better idea of your price point.
- Write a list of things you cannot live without and a list of things you absolutely don't want. Use this list to quickly compare homes, and only tour the ones that check your boxes.
- Write a list of things you would like to have, but aren't that important. This list lets you compare homes from the previous list so you can see which ones meet more of your preferences. It's also a reminder that you don't really need the things on this list.
Just know that you won't really know what you want until you see it.
Make an Offer
After you have chosen the home you want, it's time to make an offer. Remember that it needs to be fair for both you and the seller.
If you make an offer that is too low, they may not look twice at your bid. If you make your offer too high, you will eventually regret it.
Talk to your agent about the bid you plan to make. They may have some information you don't, for example:
- Whether other people looked at the home that same day
- If other offers were made and rejected
- How quickly the seller needs to sell
Get a Home Inspection
A survey conducted by the American Society of Home Inspectors shows 90% of the participants thought their home inspection was mandatory. But it wasn't.
Required or not, it's still a really good idea. The home inspection goes beyond aesthetics. It looks at key points in your home, like the roof and the foundation.
It serves as an awesome checklist of things you need to work on after you move in. But more importantly, it's a great way to tell if you are biting off more than you can chew.
Get the Appraisal
Unlike the home inspection, the appraisal is a requirement. It's how the bank knows they are giving you money for a home that is worth what you want to borrow.
Things taken into account during the appraisal include:
- A comparison of other similar homes in the immediate area
- The home's square footage and appearance
- Special features of the home like a fireplace, garage, and washer and dryer hookups
- The condition of the home
Renegotiate Your Original Offer
You may not need to renegotiate if there are no major issues and the bank is happy with the appraisal. That said, if you want to ask the seller to pay for any repairs or go down on the cost of the home, now is the time.
If the seller refuses to alter their selling price, be ready to walk away. There are times when the home isn't worth it.
You have a limited amount of time to change your offer after it gets accepted. The exact amount of time varies depending on the location of the home. Discuss this with your real estate agent so you know what to expect and don't get caught unawares.
Submit your Mortgage Application
The hard part is over. You have already been pre-approved, now you just have to make it official. The bank will do a more thorough dive into your finances so be ready with the following.
- W-2 or 1099 forms and Federal Tax Returns from the past two years
- Paystubs from the past 30 days
- Proof of income from any other income sources
- Recent bank statements
- Information about your long-term debts, i.e. car loans, student loans, and other home loans
- Valid Photo ID and Social Security Card
Close on Your New Home!
You have made it this far and there is only one last step to go! It's time to sign your life away.
There will be many papers you have to put your signature on. Some of the big ones include the Settlement Statement, Deed, Promissory Note and Deed of Trust.
Home Buying Checklist: Are You Ready?
Now that you have your home buying checklist it's time to ask yourself a big question: Are you ready to buy a house?
This is not a question to take lightly. It's something that many people spend most of their lives saving for and a goal that some never achieve.
Those who do succeed at buying a new home, need to prepare so they get to keep the home. There is little worse than getting your dream home only to get forced out of it a couple of years later because you can't handle the payments.
If you plan to buy a new home, Hommati wants to help. Sign up today so you can download brochures, contact agents and use the Hommati App to help find your new home. You can also use the comments below should you have any questions.
We look forward to hearing from you soon!