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10 Steps to Buying Your First Home

Buying a house takes a lot of time and effort, and can be an intimidating process, if you let it!  The below 10 steps can help make your home buying process more controllable and help you make the best possible choices.

Step 1: Gentlemen, start your search engines!

As soon as possible, start reading websites, newspapers, and magazines that have real estate listings. Note, star or circle certain homes you’re interested in and keep track of how long they stay on the market. Also, watch for any changes in asking prices and write those down. This will give you a sense of the housing trends in certain areas where you want to live.

Step 2: Ask yourself – “How much house can I afford?”

Lenders usually suggest that future home buyers look for a home that will cost a maximum of 3 to 5 times their annual household income (a fancy way of saying what you and your spouse make in a year).  This is if you’re looking to put down 20% and have a reasonable amount of debt. 
Always keep the question at the top of this step in mind when figuring out your debts and your mortgage payment – “How much house can I afford?”
 
Step 3: How much can I spend?  Getting prequalified and preapproved for your mortgage

Before you start looking for a home, you’ll need to know how much you can actually spend. The best way to find out is to get prequalified and then preapproved.

How do I get prequalified?

To get prequalified, all you need to do is to give some financial information to your mortgage lender / banker, like your income and how much you have saved and invested (401K, stocks, bonds, etc.). The lender will look at this information to let you know how much they can lend you. This will tell you the price range of the homes you should be looking at.

How do I get preapproved?

The next step is to get preapproved, which involves giving your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) to your lender so they can check your financial status and credit.

Step 4: Find the Right Real Estate Agent

Real estate agents are going to be important partners in buying or selling your home. A good agent should have a strong knowledge of the home buying process, be able to negotiate well, be familiar with the area you want to live in, and - most importantly - be accessible (meaning they pick up the phone when you call them!).  They can give you helpful information on homes and neighborhoods that isn’t readily available to the public. And best of all, it doesn’t cost you anything to use an agent – they’re paid from the commission paid by the seller of the house.

Step 5: Shop, turn on the water, open, close, “Make an offer they can’t refuse”

Jump in the car, grab a mug of coffee, and start looking!  Check around for the homes in your price range. Keep in mind: you’ll see a lot of houses!  Take notes on all the homes you see. It can be hard to remember everything about them, so take pictures and/or video also to help you remember your likes and dislikes about each home you visit.

Make sure to check out the “little things” of each house, such as:

·         Open and close windows and doors to make sure they work
·         Test electrical system by turning switches on and off
·         Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
 
It’s important to take a look around the neighborhood and make a note of certain details like:

·         How much traffic does the street get? A little?  A lot?
·         How do the other houses look? Are they well kept?  Any abandoned homes in the area?
·         Is the house close to places of interest like: shopping centers, schools, parks, restaurants, public transportation?
·         Is there enough street parking for your family and guests?
 
Take your time to find the right home.  Okay, Godfather time...work with your agent to negotiate a fair offer based on the value of “comps” (comparable homes) in the same neighborhood.  Once you and the seller have settled on a price, the house will go into escrow (the period of time it takes to complete all of the remaining steps in the home buying process).

Step 6: Get a Home Inspection

Usually purchase offers are based on a home inspection of the property to check for signs of structural damage or things that need fixing.  Your real estate agent will help you arrange to have the inspection done within a few days of the seller accepting your offer. This protects you by giving you a chance to re-negotiate your offer or withdraw it without being penalized in case the inspection shows major material damage.

Both you and the seller will get a report on the home inspector’s findings. You can then choose if you want to ask the seller to fix anything on the property before closing the sale. Before it closes, you will have a final walk-through of the house, which gives you the chance to make sure any agreed-upon repairs have been done.

Step 7: WIIFM Radio – What’s In It For Me?  Work with a mortgage lender to choose the right loan for you

Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments low. Others are interested in making sure that their monthly payments never go up. And still others pick a loan based on the knowledge they will be moving again in just a few years.
Lenders have a wide range of competitively priced loan programs. You will have a TON of questions when you’re buying a home.  Make sure that your loan officer is experienced, able to answer your questions, responsive, and most important of all, has your best interests in mind.
 
Step 8: What’s the value?  Have the Home Appraised

Lenders should coordinate with an appraiser to give an independent estimate of the home’s value that you’re buying. The appraiser is a member of a third party company and is not directly linked with the lender. The appraisal will let everyone involved know that the price you’re paying for the home is a fair one.

Step 9: Coordinate the Paperwork

As you can probably guess, there’s a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and verify that the seller is the rightful owner of the house you’re buying.

Step 10: CLOSE IT!  Close the Sale

At closing, you’ll sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, congratulations, you’re ready to move into your new home!