10 Steps to Buying a Home
The home buying process can seem like a long race with a lot of hurdles. Like any race it is important to train before the event and get in the best shape possible to go the distance.
This article is part one of multipart series that will enable the first time home buyer or experienced home owner to strategize the race to be in the best condition when they start the race and finish strong. Each topic will be covered in detail in later posts, but like any race you have to strategize your race in stages.
Here is how to start your home purchase
1 – Buy vs. Rent You need to decide whether home ownership is for you. It is not for everyones lifestyle nor does it make financial sense for everyone. There is a variety of online information to help you understand if it financially makes sense for you from places like the Houston Association or Realtors, The Texas Association of Realtors, the National Association of Realtors, mortgage companies and other sources. Keep in mind it is a race with both financial and lifestyle elements.
2 – Build Your Credit Score– Contrary to popular belief, there are a lot of mortgage options in todays market from first time buyers to investment properties. The key to getting the best rate and terms is having a good credit score. There is a lot of information from mortgage companies and credit bureaus to help you. It is not as hard as you think and can happen very quickly.
3 – Start Saving Down payments vary based on the mortgage program, your credit score and your overall financial picture. Veterans programs currently require no down payment while other programs may require 3.5% to 20% or more of the value of the home.
4 – Research a Location or Two Understand where you want to live and why whether it is a neighborhood, a subdivision or a city. Understand what the lifestyle is like, the quality of schools, the tax levels, transportation and all the other lifestyle elements that effect how you will feel about your new address.
5 – Find a Local Realtor Find a Realtor you are comfortable with and can trust. The Realtors job is to represent their clients best interests in the real estate transaction. A Realtor is subject to a strong code of ethics, higher education requirements and is licensed to provide real estate services. A local Realtor with a strong knowledge of the marketplace is essential to avoiding many potential issues in the transaction.
6 – Learn the Process – The home buying process can be confusing and different states may have different rules. Your Realtor will explain and guide you through this process.
7 – Develop a Realistic Wish List Decide what you want and need in your future home. How many bedrooms, how many baths, desired school district, yard size and other amenities. Divide the list into three categories-1.) Must Have-those things you will not compromise on, 2.) Good to Have-those things you would like to have, but are not deal breakers and 3.) Not Important those things you have thought about and have found not to matter in the end. Keep it realistic for your market and price range to avoid disappointment later.
8 – Find a Mortgage Company and Get Pre-Qualified – Most mortgage companies will prequalify applicants for mortgages free of charge. This is a quick interview or on-line application that involves minimal documentation, a credit report and a series of questions. A Pre-qualification letter will tell you what level of mortgage you theoretically should qualify for. Many home sellers today require a minimum of a pre-qualification as part of the initial offer. This amount with your down payment becomes your maximum home buying budget. You Realtor can suggest several loan companies if you ask.
9 – Get a Pre-Approved Loan Pre-approval is a much stronger position for all involved than pre-qualified. Pre-approval means that the mortgage company has verified all the information in your credit history, salaries, employment, savings, etc. and will approve a mortgage up to specific limit provided your financial situation has not significantly changed at closing. This is a very strong position for a home buyer to be in when buying a home.
10 – Decide on a Time Frame The average home search takes from three to six months from the first conversation with a Realtor until purchase closing. You will need to talk to your Realtor to understand what to expect in your market place.
Get in the starting blocks, the race is about to begin