In our recent article we discussed selling a home and the aspects that were involved in that process. In this article, we decided to go over what it takes to be on the other end of that transaction! We will cover what it takes to buy a home as well as some guidelines for the process!
Buying a home can be just as an emotional experience as selling one. You will be looking for a place that can accomodate your dreams and future ambitions whether a family is involved or not. Because of this, your going to be very critical right off the bat, and sometimes drained from the experience and time it takes to find the home your looking for.
When it comes to buying a house, there are seven steps that are involved. These steps will help you long past the purchasing stage. When buying a home you can have a result that gives nothing but a warm and accomplished feeling through the years, or something that feels like a brick tied to your feet, holding you back. Don’t let your rush of excitement ruin your future home owning experience.
Step 1: Saving for a downpayment
You need to seriously consider your financial situation before delving into such an expensive endeavor. This means ensuring all forms of debt are paid off, college, credit card, everything you can think of. This will result in an easier time keeping up with the needs of your home after the initial purchasing stage. Remember, when you don’t have a landlord, you have to pay for all the repairs that are in need.
Once all your debt is paid off, start an emergency fund. Not a fun Sunday fund, but an emergency fund. Start this and see it through for at least 3-6 months to have a strong cushion should the unexpected occur.
Make a 20% downpayment on your home. This will avoid the need of PMI (private mortgage insurance) that is added on to your mortgage payments but doesn’t count toward your mortgage balance.
Think about the side costs of moving. Moving vans, hired help, all of that will require money, and diving into your emergency fund is not a good idea. This is where an extra amount of money is necessary and should be accounted for before even finding a home to buy. The price of these needs will vary based on how much your moving and how far, so prepare for the worst so that the best is better.
Step 2: Get pre-approved for a mortgage
Through a relatively fast process you can become pre-qualified to purchase a home, just answer a couple questions involving your income, assets, and down payments. However to get pre-approved you will need a lender to verify your financial information and submit a loan for preliminary underwriting. Doing this will be tremendous help when searching for a home because it shows you to be a serious buyer.
There are multiple options for mortgage types you can choose from, and it is best to research which ones work best for you.
- Fixed-rate conventional loan
- 15-year term
- Monthly payment consisting of no more than 25% of your monthly take-home pay.
This will help you assess just how much you can spend on your home, and will even help reinforce your saving habits.
Step 3: Finding the right Real Estate Agent
As mentioned in the past article involved in selling a home, it states the importance of a Real Estate Agent. The same hold true while buying a home!
Real Estate Agents have the necessary experience for locating a home within your allowed costs range, and use their connections and understanding of the market and process to even talk down the price. Agents are essential, and sometimes they can even find a home that hasn’t hit the listings yet so you can be the very first to see it and lay claim to the property!
Step 4: Go house hunting!
The most enjoyable part of this whole process aside from actually buying a home is when your looking at a ton of different homes and imagining your lives in them!
Once your pre-approved for a mortgage, and your finances are in order and an emergency fund is readily available for all things, start checking those home listings!
Make a list of what you deem as a must in your home before going to do some walkthroughs. This will help eliminate distractions and keep you focused on what you actually care for! Share your list with your real estate agent so they know what your looking for as well, and they can be of more help to you!
When looking at properties, don’t make any compromises on location or layout of the home. These two aspects cannot be changed and need to be something you love, otherwise you will criticize your decision the rest of the time your in that home. Also while looking through homes, you may come across a wall color or room design you don’t enjoy, but that’s ok! All forms of decoration can be altered when you own the home, so don’t let a great home pass you by because of something so miniscule.
Finally, do some research on the surrounding environment. If your planning a family, check out the school district. This will make life easier for you in the future, and help you evaluate if this is truly the location you desire for your home!
Step 6: Get a home inspected and appraised
People can make homes look nice. Really, really nice. This can actually be an issue. A home inspection is a must before the purchase to rule out any structural integrity problems or some seriously expensive fixes that may have been hidden during the walkthrough process. If there are major issues, you may ask the seller to fix the problem, and if they refuse, you talk down the price or walk out. Don’t allow yourself to be taken advantage of in the process of your excitement. Stay vigilant all the way through the buying process and you will be better off!
As for the appraisal, if your getting a home loan, your lender will require an appraisal of the home to evaluate the value of the property. This process if great because it can protect you from paying more than what a home is worth. Your agent will be essential in this matter because they can guide you on what you should do if the appraisal value is lower than the asking price.
Step 7: Close the home! You have done it!
This is the feast of accomplishment you have been waiting for! Those months of planning and energy have paid off! literally!
The final hurdle is nothing but a swoop of the pen…well maybe a lot of swoops.
This is where the final costs come in quick, so don’t be blindsided. The possible remaining costs will include:
- Closing costs
- Prorated property tax
- Homeowner’s association fees
- Homeowner’s insurance
If you have any questions at this time, don’t hesitate to ask! It’s is important you know everything that is involved with your home and your financials! That’s it, your done! Your officially an owner of a home! Well, at the end of this process anyway. It is time to follow the information you just learned and put it to use while looking for a home!
Whether your a first time home buyer or a seasoned veteran, we at Kontor can help you stay ahead of the curve and present you with options you are sure to love! Give us a call or shoot us an email and let’s find you a home!