Purchasing a house is one of the biggest investments you will most likely make in life. Not only do you need to take your time finding the right home for investment but for your own personal preferences as well. Remember, this is more than just a house.
This will be your home for many years, so it is important that the house gives you everything you need in a home. Before beginning your home shopping process, make sure to put together your house buying checklist. Creating this checklist ahead of time will help you stay organized and know exactly what you are looking for and what fits into your personal budget.
When you are ready to find your dream home, continue reading below. Here are several home buying tips to keep in mind before and during the house buying process!
Calculate Your Budget
Before you begin shopping for a new home, it is beneficial to calculate your budget. Know how much home you can afford in the neighborhood you want to be in before you begin house shopping. The last thing you want to do is start looking at homes and find something you love only for it to be outside of your budget.
There are a lot of expenses to consider when planning to buy a home. The listing price on the home is not the only number to keep in mind. You also need to consider how much the downpayment will be, how much the property taxes will be, how much you will spend on home insurance, repairs, and more.
It is also ideal to know what your current credit score is and how it affects your mortgage. Your credit score can have either a negative or positive effect on your mortgage interest rate, so if you need time to bring your credit score up, then do so before applying for a mortgage.
Save For the Down Payment
The bigger the down payment you make on your new house, the smaller your mortgage loan will be. If you can save up a good amount of money to put down on the house, then you will not need to take out as big of a loan from your lender. In most situations, you want to put down at least 20% of the home's cost.
This will prevent you from having to pay for private mortgage insurance. Most lenders will require this insurance from borrowers who put down less than 20% on the home. The higher your down payment is, the lower your interest rate is in most cases as well.
To start saving for a down payment, you can give yourself a new budget to follow. Compare your income with your monthly expenses and know how much you are able to save each month. You can also consider setting up an automatic savings with your bank.
Choose a specific amount of money to come out each month or each paycheck automatically from your account and into a savings. When you never see the money, it makes it easier to save it.
Find a Lender and Get Preapproved
Once you calculate your budget and begin saving for the down payment, it is time to start searching for a lender. Take your time researching different lender options. When you get preapproved for a mortgage by a lender, you can begin the shopping process knowing exactly what you can afford.
Sellers will also take you more seriously when you have a preapproval letter from your lender. To get preapproved, you will need to provide various documents to the lender, including income documents.
Hire a Real Estate Agent
When shopping for a new home, you will want to hire a real estate agent. A real estate agent can help you throughout the home-buying process in more ways than one. Your real estate agent will be able to find several homes for sale as soon as they are listed on the market.
Agents in your area will also have extensive knowledge of the real estate market and can give you insights needed to find your dream home. Having a real estate agent by your side will also give you access to lots of advice and resources for home buyers. Take your time finding your real estate agent.
Look at reviews, ask for references, and do your research to ensure you find a reputable and trustworthy agent.
Gather All Required Documents
At some point in time during the home-buying process, you will need to provide your lender with various required documents. There will be a lot of financial documentation required, so it is best to start preparing and gathering all of these documents now. You can always contact your lender and ask them to provide you with a list of the documents they require.
Some documents you should prepare to give to the lender are as follows:
- Pay stubs or other income verification for the past two months
- Any bank statements from the past two years
- tax returns from the last two years
- proof of identification
- letter of recommendation from previous landlord
This list is of some of the basic documents you should expect to provide to your lender but this list is not exhaustive.
Create a List of Must-Haves and Wants
As you begin to take all of these necessary steps, you will be closer to the fun part. Creating a list of must-haves and wants in your new home can be a lot of fun for a new homeowner. Think of some of the features you really want your new home to have and some of the features you need in order for the home to be functional for you and your family.
After you sit down and put together this list, you can then pass it along to your real estate agent who will then use it when searching for homes for you.
Understand State Requirements
You should keep in mind that different states will have different requirements. Some states require you to hire a real estate lawyer. Your real estate agent will be able to tell you if your state requires you to hire a real estate lawyer or not.
If you are required to hire a real estate lawyer, then you should take your time choosing one. You do not want to hire the first lawyer you find or the cheapest. Instead, do some research to ensure you find the best lawyer at the fairest price.
Research Comps Before Making an Offer
Although your real estate agent will be able to research comps for you and explain what a fair market value is, it does not hurt to do some research of your own as well. When you research comps in your area, you can get a better idea of what to expect to pay for a new home and sell your current home for.
Look at a wide variety of homes in the neighborhood you want to move to. Then, take their features into consideration. How large are the yards? How many square feet are the homes?
How many bedrooms and bathrooms do the homes have? Compare home prices with features similar to what you are looking for so you have a realistic idea of what you will pay.
Prepare to Negotiate the Price
As a homebuyer, do not hesitate to negotiate the price of the house. Negotiation is expected and an important part of the home-buying process. If you are not sure how to negotiate the price of the house with the seller, then be sure to speak with your real estate agent.
Your real estate agent will know how to negotiate with the seller and get you the best deal possible. The seller can accept the offer, decline it, or counter it. If the seller does decline, then you can always make a counteroffer.
Get a Final Mortgage Approval
The final mortgage approval starts once the seller accepts your offer. As the underwriting process begins, you will most likely need to provide your lender with more documentation. These extra documents required are to ensure you are able to afford the loan and will pay it back as required.
Some extra documents you might need to provide are employment and income verification, assets, personal information, property details, and credit and liabilities. Once you finalize the mortgage, you can start the closing process.
Keep This House Buying Checklist Handy
When preparing to purchase a new home, keep this house buying checklist handy. This list contains all the information you need to ensure you take all the required steps to buy a new home with ease. When you know what to expect from home buying, it makes the entire process much easier.
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