Buying a new home for the first time can be an intimidating prospect. The project can take months of preparation and work and cost hundreds of thousands of dollars, if not more. These seven steps will help ensure you have a smoother process without any big surprises.
Understand Your Credit History
Well over 50% of home buyers have a mortgage, and the number is even higher for first time buyers. Getting approved for a mortgage is not a simple process, and one of the biggest factors in getting approved is your credit.
Most people don’t understand how their credit works. Before you start shopping around, read a good primer on what makes up your credit score and get your free credit report and free credit score.
The Federal government gives you a free credit report from each of the three major credit reporting bureaus annually. You can get that free report at annualcreditreport.com. Don’t use any other sites, as they charge fees for something you can get for free!
Shop for Lenders
After you understand your credit situation, start looking around for a mortgage lender. Most banks and credit unions offer some sort of mortgage, but each has different rates, rules, policies, and customer service.
Make sure you get the best mortgage that fits your needs. The most popular mortgage in the United States is the traditional 30 year fixed loan, which has near historic low rates as of this writing.
Get Pre-Approved for a Mortgage
Once you have found the bank that you want to use, get pre-approved. The pre-approval process allows you to go buy a home knowing confidently that you can afford it and have a bank that will provide financing when the time is right.
Going through the pre-approval process will help you understand the top range of home you can afford and what types of homes you want to look at. A pre-approval letter is also useful when you are trying to buy a home in a competitive market. When fielding multiple offers, sellers often pick the potential buyer with a pre-approval over another buyer, even with a lower offer.
Create a Home Buying Budget
The cost of buying a home doesn’t end the day you close, that is just one big event of a long line of costs. Typical monthly recurring costs include a mortgage payment, escrow payment for taxes and insurance, and any required homeowner’s association dues.
Based on your pre-approval, you can use a mortgage calculator to estimate your monthly costs going forward and build a new budget for your family in your new home.
Understand Your Deal Breakers
Do you absolutely need to have a two car garage? How about a separate laundry room? Fenced in backyard?
There are lots of deal breakers when buying a condo or house. When I was looking for my last condo, my deal breakers were in-unit washer and dryer and an off-street parking spot. I ended up giving in on one of them because everything else was perfect for me, but some people have more conviction than I do.
You can list out your deal breakers and share them with your agent so you know you are not wasting your time looking at homes that will never be a good fit.
Pick the Best Real Estate Agent
Your real estate agent is a big deal. That is the person who will help you through the entire buying process from start to finish, and will give you guidance on the home and the transaction.
Think About Resale Value
While some people do live in their homes for a very, very long time, but in reality people are moving around all the time for a variety of reasons. To ensure you get the best long-term outcome from your home, buy it thinking about resale.
The exact things that you look are when you buy a home will occur to others as they view your home to buy it in the future. Think of curb appeal, amenities, remodeling, and other aspects of your home and how it will sell down the road. You might be able to make a fortune on your home, but you might lose if you don’t think ahead.