Are you thinking of buying a home? It’s an exciting process, but one that can also be intimidating. This isn’t exactly our first rodeo, so we thought we’d give you a run-down of the steps involved in purchasing a home. Whether it’s been a while since your last home purchase or your a first time home buyer, these 10 steps to home ownership will give you an overview of the process from start to finish.
1. Check your Credit Score
The first step you’ll want to take on your journey towards home ownership is checking your credit score. Legally, you can request your credit score once a year from Annualcreditreport.com. The report gathers data from three major credit-reporting agencies: Equifax, TransUnion and Experian.
Based on your credit report, you are assigned a score by Fair Isaac & Co or FICO. Scores range from 350 to 850. The higher your score, the better the interest rate you can get for your loan. A score of 720 or above will get you a good interest rate on your loan. However, you can likely get an FHA loan with a score as low as 580.
2. Decide on your budget
Another important consideration you’ll want to make before looking for homes is your budget. No matter what you qualify for, you want to get a loan that is within your budget. It is important to determine what you want your monthly payment to be. Then, you can decide on a loan amount and a price range for looking at homes.
3. Get pre-qualified for a loan
The next step towards home ownership is getting pre-qualified for a loan. If you already have a real estate agent, they can probably recommend a reliable local lender. If you haven’t found a real estate agent yet, you can usually find information about good lenders on the internet.
It is best to look for a local lender as they will be available to help when needed. If you give them a call, they will actually answer the phone. It is also wise to shop rates. You can check with your local bank to find out what they offer. However, we also recommend looking at lenders at actual lending companies. Chances are, they will be able to offer you better rates.
4. Find a Real Estate Agent
The next step is to find a real estate agent. Your lender may be able to recommend agents they’ve worked with previously. You can also ask around and see if your friends recommend someone in particular. Another good option is to look at online reviews for realtors in your area.
It’s best to find a realtor with a good amount of experience in the area where you want to purchase your home. They should be familiar with the local market and knowledgeable about homes in the area.
When it comes to real estate agents, you can also take your time and shop around. Interview a few realtors and find out how well they know the area. Learn about their success in real estate and find out if they’ll be a good fit for you.
5. Begin your Home Search
Once you’ve got a loan pre-qualification and real estate agent, you can start your home search in earnest. Most real estate agents will use your criteria to set you up on an automated home search. This ensures that you get updates whenever a property you might be interested in goes on the market.
When you find homes you’re interested in, you can set up a showing with your agent. Your agent will contact the listing agent for the property and set up a time for you to see it. Another way to see homes you’re interested in is by visiting open houses. Many agents host open houses for properties when they come on the market. This is a good way to be one of the first people to see the home.
6. Make an Offer
Once you find a home you like, your agent will help write the offer based on your terms. Your agent will advise you on the terms to make your offer the most attractive based on the market. This can include any contingencies, your home inspection period, or closing costs.
They will also be able to help you decide on an offer price. When you purchase a home, you don’t always end up paying the list price. Based on the market, your agent will be able to tell you whether you should offer at, above, or below the list price.
Your agent will submit your offer and the seller will review with their agent. The seller has the option to decline your offer, counter it, or accept it. If they counter your offer, your agent will help you understand their new terms and negotiate accordingly. If they accept your offer, Yay! It’s on to the inspection period. If you’re offer is declined, you may have the opportunity to write a new offer or it’s back to the drawing board.
7. Get a Home Inspection
Once you have an accepted offer, the next step is getting a home inspection. Again, your agent should be able to recommend a home inspector. Your agent will usually facilitate the process of getting the home inspected.
Once the home inspector completes his inspection, you’ll receive a report with all the nitty-gritty details about the home. Inspection reports can look really scary sometimes. However, your agent can help you understand what is important on the report.
At this point, you’ll have the opportunity to make requests. If there are major repairs noted on the home inspection, you can request that the seller fix the issues before closing. Your agent can help you determine what the seller should fix, if anything, and what you can handle later on.
8. Get insurance and set up utilities
After the inspection is complete and both parties are agreed on the terms of the offer, the home sale is pending. This is a good point to establish insurance for your new home. If you already have home insurance you can simply call your insurance company and explain that you will be moving. They will adjust your insurance accordingly. Mortgage lenders usually require home insurance to process your loan.
Another task you may want to complete at this point is establishing utilities. You can call the utility companies and let them know when you are moving in. Then you can set the date on which you’ll be taking over the utilities.
9. Sign the papers
One of the last steps on your path to home ownership is signing the final paperwork. You’ll meet at the closing office, read over the paperwork, and sign the final documents. Once signed, the closing office records the sale and your purchase is complete.
10. Get the keys and move in. Yay!
Once the closing is complete, your agent will deliver the keys to your new home. The contract will specify when you officially get possession and get to move in. Sometimes that is a certain time on the closing day. Other times, depending on the negotiations, you may get the home a few days after closing.
Yay! It’s time to celebrate…and get started on those moving boxes. You are now, officially a home owner!