The steps to buying a house may feel daunting in the beginning. Unquestionably, hiring a dream team of professionals is the key. In essence, the ideal initial step in the home-buying process begins with homebuyers connecting with the right real estate agent and an iron-clad mortgage lender. Although certain situations require flexibility, the entire process goes something like this. Secondly, buyers find their perfect home and make an offer.
Next, they make an earnest money deposit, followed by hiring a trustworthy home inspector and an escrow and title company to seal the deal. From this point, the house hunting is over, and it’s time to negotiate counteroffers if they come in. Lastly, purchase agreements are signed, borrowers take the final walkthrough in person, and ultimately, keys to a new dream home are in hand. Naturally, it all sounds relatively straightforward.
If only it went that smoothly. So why do so many transactions go awry, and why are many homeowners unsatisfied with their homes and real estate purchasing experiences? The answer is simple: poor planning and impulsive decision-making. Let’s dive into a preventative step-by-step checklist for streamlining home-buying. From first-time homebuyers to seasoned homeowners looking for their next top-notch home purchase experience, stay tuned because we’re about to uncover the answers you’ve been waiting for.
1. Steps to Buying a House
Location is paramount in all of the steps to buying a house. Indeed, “location, location, location” resides as the premier rolling catchphrase of every travel blog and real estate post to date. Admittedly, there is a good reason for it! Purchasing a new home simply because it fits well within the scope of affordability is ill-advised. More often than not, easily affordable purchase prices often come with long commutes, safety concerns, and lower overall neighborhood desirability.
Predominately, when a location aligns with a buyer’s lifestyle and values, the risk of a higher initial home price and monthly mortgage payment transition from simply paying a bill into a fruitful investment. The truth is homeownership often outlasts jobs, spouses, children living at home, and many other unforeseen lifelong adjustments. As a result, planning for the unexpected is crucial. Consider factors like proximity to work, local schools, public transportation availability, closest hospitals, weather conditions, and natural disasters the area is prone to.
The future value of investing in the right home in the perfect location will yield a higher resale value than a lower initial upfront price on a home in a less-than-desirable neighborhood. So, checking out areas in desired housing markets is advised. Keep an eye out for open houses in great neighborhoods. Additionally, do a deep dive into the future development plans in not only the district a buyer is interested in but also surrounding areas. Commonly, realtors know all about anticipated development plans. Therefore, inquiring can help make a location more or less desirable based on future growth.
2. Prioritize Long-term Goals, both financially and with property investments.
Naturally, long-term property goals are important. For example, there may be better options than purchasing a top-floor flat in the heart of bustling New York for a buyer with an unescapable affinity for large dogs. In this case, a single level with a yard may be a better long-term option. On the other hand, a buyer may have small children, yet as we all know, children grow up. Consequently, what works today may become undesirable in the future.
3. Long-term Financial Goals
Let’s talk about credit. In general, prioritizing personal finance and practicing fiscal responsibility today is the essential step in preparing for a better future. As a result, lenders take a good look at a borrower’s credit score. Timely credit card payments, low monthly debt, and consistent monthly income are all factors for mortgage preapproval.
Likewise, when underwriting looks at a mortgage application, good credit plays a significant role in determining the interest rate and terms of a mortgage. Generally speaking, a credit score of 760 or above is ideal, while a minimum FICO score of 620 is usually necessary; of course, there are exceptions. Ultimately, the higher the credit score, the more favorable the terms a buyer is likely to receive.
4. Here are four tips to improve credit scores:
Pay all bills on time.
Keep an eye on your credit score and fix any errors that arise. (Soft-check only.)
Reduce all outstanding debt possible to lower debt-to-income ratios.
Avoid opening new lines of credit since hard credit report checks lower credit scores, and new debt is frowned upon.
5. What will a lender need from their homebuyers?
Down payment and closing costs.
Tax returns and pay stubs.
A solid credit history and a credit score of 620 or higher.
Proof of consistent work history
6. Long-term Property Goals
Just as long-term goals apply to location and finances, they also apply to the condition and features of potential property. Understanding what type of home a buyer wants to purchase is a crucial factor. Buyers must ask themselves if they want to live within a community with a homeowners association. While many people enjoy the tidiness and perfection of an HOA-ran community, others prefer the freedom to paint, display individuality, or store boats and RVs on their property. Altogether, resale value should always be at the forefront of a homeowner’s mind, and managed neighborhoods typically hold a higher value.
Generally speaking, a good home inspection and home appraisal should point out any hidden issues or needed repairs; however, from time to time, unforeseen repairs are inevitable. In many cases, sellers often offer a home warranty, which is incredibly beneficial. Additionally, preparing for the unexpected is the safest bet. Regarding budget and affordability, ongoing expenses such as property taxes, homeowners insurance, utilities, and unforeseen maintenance costs can add up. Given these points, financing a mortgage well within a borrower’s maximum capacity and setting a realistic budget helps to keep the balance of life and homeownership well grounded.
7. Find the Right Lender and Loan
While understanding how much house a buyer can afford is easy with a home affordability calculator, there is far more to consider when it comes to mortgage finance. For many new homebuyers, collecting enough earnest money upfront for a downpayment and closing costs for a home in their price range is their utmost priority. Buyers should be prepared for private mortgage insurance (PMI) if they cannot put 20% of the loan amount as a down payment. However, there are far more considerations beyond getting a preapproval letter in hand.
Mortgage lending is a personalized business, and homebuyers need a financial powerhouse in their corner. In truth, finding a trustworthy and experienced lender can make or break the mortgage process. Consequently, finding an accomplished lender with the experience and know-how to foresee and avoid potential problems, with a keen eye for accuracy, is crucial. Naturally, a buyer’s optimal financial team delivers on time and understands their loan products and processes from beginning to end. Once a buyer has narrowed down lender options, it’s time to get preapproved.
8. How to Find a Reputable Lender
Start collecting recommendations for a lender early in the process — the right agent will serve as an invaluable guide, and we recommend these tips for finding someone you can trust.
Reach out to your local bank.
Check online portals.
Seek out local mortgage brokers.
Talk to your realtor and ask if they have a preferred lender.
Don’t hesitate to ask friends, family, and anyone within social networks.
Talk to neighbors and homeowners in the area.
9. Find the Ideal Loan
One important aspect when going through the steps to buying a house is to discover what loan products work best for different property types and financial situations. Just as every property is unique, so are lending solutions. Specifically, asking each lender what loans they can offer and why it is the best loan product for a buyer’s specific needs will help buyers better understand the prices available in the marketplace.
Most importantly, this broad-net approach will educate the homebuyer and allow them to negotiate. In addition to finding a reputable lender, be sure to research and understand the various types of mortgages available. Some examples of popular loan products are fixed-rate, adjustable-rate, and government-backed conventional loans like FHA loans or VA loans. By and large, a suitable lender can assist their clients in choosing the mortgage that aligns with their financial situation and goals.
Unquestionably, getting the best mortgage will require a buyer to read and understand the fine print, including the terms and conditions of the loan. If something doesn’t make sense, don’t be afraid to ask for clarification. Seeking advice from a financial advisor or a real estate professional is advised to ensure buyers are making informed decisions. Above all, a great lender can speak to every aspect of their loan products and mortgage rates and have set deadlines for closing dates, title, and escrow dates.
Frequently, borrowers obtain pre-approvals from at least a couple of lenders to have a clear idea of their options. Commonly, borrowers shop around and compare offers from multiple lenders, including banks, credit unions, and mortgage brokers. From this point, buyers should consider interest rates, closing costs, and loan terms. In the end, simply shopping around can save a significant amount of money over the life of a mortgage. In the end, if a borrower receives a loan that seems too good to be true, always ask another lender in person if they can meet or beat their competitors.
Now that you know the steps to buying a house, here is a lender who can help.
The steps are simple:
1. Schedule a Call: An experienced loan officer can discuss your needs and guide you through the possibilities.
2. Get Approved: We’ll help you through the application process and facilitate the steps for approval.
3. Exhale: Put your feet up and feel secure knowing you made the best decisions about your home loan.
With proper guidance, you can get your first home, accommodate your growing family, and start that renovation project—whatever goal is on the horizon. An alliance with Mortgage Insiders will give you the confidence to know that your mortgage loan is setting you up for financial success. Mortgage Insiders offers today’s latest financial news and mortgage trends. Check out their channel for current events.
