Purchasing a new home can be an intimidating and big life experience. We can help.
The first steps to purchasing your own home are to get your financial situation sorted out and make sure your credit is in order. Once pre-qualified for a mortgage, the home search process (the fun part) begins. We can help connect you with a Realtor expert to make this process as seamless as possible.
It is important to keep some things in mind before you settle down. Is the neighborhood great? Is the area appreciating? Does the home have the room you need for family growth? How is the job market in the area and how close are your favorite hot spots? Consider these when going through the home search process.
Here is a breakdown of the steps to take when buying a new home:
Step 1: Polish your credit
Good credit can lower your mortgage interest rates, potentially saving you hundreds of dollars a month. The first step is to know where you currently stand. Order a credit report, which is free online. You can dispute any mistakes, and the most important thing is to build up good credit from here out.
Step 2: Start saving for a down payment and closing costs
Home buyers traditionally had to put up a 20% down payment. Now it’s more like 5-10%. Until you’ve paid for 20% of your home, you will probably be required to buy mortgage insurance. The buyer also has to come up with closing costs, which are typically about 1-2% of the price.
Step 3: Calculate how much house you can afford
As a rule of thumb, buyers should spend 25-30% of their pre-tax income on housing. That translates roughly to a home price of 3 to 4 times your salary. These are general estimates, it’s necessary to consider your entire budget: How much is your credit card bill, student loan or kids’ tuition? How much will your new palace cost to maintain? Will you get a big break on your taxes from the mortgage interest rate deduction? What other bills do you have monthly?
Step 4: Get pre-approved – Shop for a mortgage
The amount of new finance options make it easier to buy a home, but harder to pick which mortgage is right for you. Our mortgage experts help you navigate the options and choose the best mortgage for you. Your lender will help you by calculating your monthly expenses, including principal, interest, taxes, and insurance. A pre-approval will let you pounce on the right house.
Step 5: Shop for a home
Make a list of the features you want and don’t want and include your whole family in this process. This will help eliminate homes that you shouldn’t even consider. Having a real estate agent represent your interests is critical and helps to narrow down possibilities.
First Option Mortgage can help connect you with one of our preferred Realtor partners to ease the decision making process. Typically, the seller pays the sale commission, which generally runs 5-7%, split between the listing agent and the selling agent representing the buyer.
Step 6: Make an offer
This part is where your realtor can help you greatly. They should evaluate market conditions, look at how much similar homes nearby sold for, and help you make a reasonable offer. Other things to consider when making an offer are how long the house has been on the market and does the home need upgrades?
Step 7: Sign a contract
You will sign and pay a deposit that is held by a neutral third party. This is commonly referred to as being in escrow. In some states, you’ll want a real estate lawyer to go over the deal with you.
Step 8: Get a home inspection
Make sure your contract is contingent on a home inspection that includes a detailed, objective evaluation of your home’s infrastructure. After the inspection, you or your realtor will negotiate the price of the home with the seller over needed repairs and items found in the home inspection. Be sure the title of the house is free of any liens.
Step 9: Shop for homeowners insurance
Shop around, but usually the company you have your car or life insurance through will give you a good package deal. As always, a higher deductible saves you money.
Step 10: Sign papers
You’ll meet at your local First Option office, lawyer’s office, or Title Company to sign papers. Then congratulations, you just bought a house and you will receive the keys to your new home!