Updated: Mar 9, 2020
Buying a home takes a substantial amount of time, research, and patience as you try to find the home that matches your exact needs and preferences. No matter the general price range you’re interested in, purchasing a home typically makes for one of the largest investments of your life, which is why it’s important that you’re confident with your purchase decision.
While you’ll likely find it difficult to search for the right home and progress through the home buying process, it can be a fulfilling and exciting experience if you properly prepare for the journey ahead. Even before you’ve started searching for the right home, there are a range of things that you can do to make sure that the property you’ve selected is the right one for you and your family. It is very easy to make a misstep or two during this process, which is why it’s highly recommended that you inform yourself and find knowledgeable support to substantially reduce the possibility of making costly mistakes. Knowing what these home buying steps are before you get started on the buying process should also prevent you from becoming overwhelmed at any point in the process.
Step 1. Get your Finances in Order
Before you even consider buying a home, it’s essential that you get your finances in order. Buying a home is among the largest investments that a person can make, which is why it’s unwise to go through this process if your finances aren’t well thought out. In order to obtain a loan, your credit score and credit history needs to be relatively strong, which is why you should obtain a credit report, which will provide you with your current score and an extensive history of your credit. This history can give you the information you need to determine if it’s possible to buy a home and whether or not you’ll be able to acquire favorable loan rates. There could also be errors and fraudulent activity on the report that you should have sorted before lenders look at your credit history.
Take note of any late payments as well, which can be among the most damaging components of a credit history. Your credit score will also be very important for the type of loan you obtain. Higher credit scores make it more likely that you’ll qualify for the loan of choice. Being able to qualify for better loans can provide you with a much lower interest rate and better terms in general, which will save you a substantial sum of money in the long run.
You can obtain a free credit report and score at Credit Karma.
Step 2. Determine Your Budget
Once you’ve taken a look at your credit report and know your financials are in order, you’ll want to determine your budget, of which there are many variables to consider. You should have a reliable estimate on how much your monthly mortgage payments are going to be once you’ve purchased the home of your choice, which is something that you can quickly calculate with mortgage calculators.
There are many costs that you will need to keep in mind when creating your budget. Different types of mortgages come with different minimum down payment requirements, which typically range from 3.5-5%. Higher down payments can provide you with access to better loans and better loan terms. If you want a low interest rate on your mortgage, it’s highly recommended that you make a substantial down payment. A down payment of 20 percent or more typically paves the way for fantastic loan terms.
There will also be numerous closing costs that you will need to take into account, which include everything from title transfer costs to the escrow deposit and home inspection fees. You should expect to pay around 2-5 percent of the price of the home in closing costs. You should obtain a statement that outlines these fees a few days before closing. If you don’t have the furniture that you’re going to need once you move into your new home, it’s important to place these costs into your budget as well. You might also want to do some remodeling once you get into your new home, which is something that you should be able to determine before you make an offer on the home. With a budget in hand, your search for a new home will be a much more focused one.
Step 3. Find Your Lender & Get Pre-Approved
It’s essential that you find the right lender for your mortgage if you want the process to be a smooth one. There are a myriad of lenders available to you, which can make it difficult to select the right one. Lenders can be somewhat eager to accept loan applications if your finances are strong, which is why it’s important to shop around before you fill out too many loan applications. Your Conejo Valley real estate agent should be able to provide you with a good referral if you’re having difficulties finding the right lender. The lender that you choose can make a difference on the customer service you receive as well as the interest rate and loan terms you’re provided with.
Make sure that you obtain loan estimates from several lenders in order to compare any fees and interest rates. You should also get pre-approved for a loan at this point in time, which will help you determine how much you can afford. All you need to do to start this process is to provide the lender with some basic information about your financial situation. They will also use your credit information to determine what kind of loan you can qualify for. With this information, they’ll tell you the price range of homes you should be looking at.
Step 4. Find Your Realtor
After you’ve progressed through the initial financial aspects of purchasing a home, it’s time to find a realtor, which is one of the most important steps in this process. Realtors are beneficial during the home buying process in a litany of ways, the primary of which is that they have extensive expertise in the real estate market that will help you effortlessly navigate through every step of finding and purchasing a home.
If you attempt to purchase a home without the help of a realtor, you’ll likely discover how easy it is to make a costly mistake while doing so. Realtors know what you should be looking for and can help you find the home of your dreams through extensive real estate networks and local market insight. A real estate agent will also understand the copious amounts of forms, reports, and technical documents that can play a part in the purchase of a home. Realtors typically have deep connections in the surrounding real estate community and know what it takes to negotiate a good deal — often saving you more than the cost of a real estate agent’s services. When you’re thinking about searching for a new home to buy, reach out to our team at Nicki & Karen Southern California Real Estate so that we can facilitate your home-buying experience.
Step 5. Find Your Dream Home
After you’ve selected a realtor, the next and usually most exciting aspect of the home buying process is finding your dream home. The best way to search for the right home is to use our website, through which you’ll be able to browse our homes by community, budget, and home type.
This search feature provides you with access to the entire MLS database of homes for sale, which includes homes throughout all of Southern California. From this database, you’ll be able to pinpoint the home that matches your exact specifications.
Step 6. Consult Your Realtor and Make an Offer
Once you’ve found a home with the amenities and features that you want at a price that you can afford, it’s time to consult your realtor and make an offer. This can be a very tense period of the home buying process for new buyers, which is why you’ll want the assistance of a realtor to negotiate a favorable purchase price and terms of purchase. Even if you can afford the listing price of the home you’re interested in, this is only a starting point in your home buying journey. If you’ve looked through the home yourself or with a home inspector, you might find that there are some issues that will need to be tended to once you’ve moved in, which could help you negotiate a lower offer than the listing price.
A realtor will be able to help you get the best deal and can facilitate the entire negotiation process. Once you make an offer, the price will likely be negotiated until both parties can reach an agreement. In an ideal situation, these negotiations should only last 1-3 days.
Step 7. Choosing the Right Mortgage for You
When you’re buying real estate, a mortgage loan will give you the funds necessary to purchase the home that you’ve made an offer on. The loan you choose determines the amount of payments you make each month after you’ve moved into the home. There are several types of mortgages loans for you to consider, which include adjustable-rate, fixed-rate, and interest-only loans. Fixed-rate mortgages are traditional loans that are meant to be repaid over a period of 10, 15, 20, or 30 years. The interest rate you obtain at the beginning of the loan will stay the same throughout, which gives you security in the event that market rates rise over time.
Adjustable-rate mortgages come with lower initial rates than fixed-rate mortgages. However, these rates can be adjusted over time with the market. The rate may stay fixed for five years before being adjusted annually until the loan has been repaid. Interest-only mortgages are ones that allow you to only pay interest on the mortgage for a period of five years or so, which keeps your payments low at the beginning and allows you to avoid paying the principal of the loan — this option is typically used by first-time buyers.
Step 8. Finalize the Deal and Close on Your New Home
After the offer has been made and your mortgage loan has been approved, it’s now time to finalize the deal. It’s during this portion of the home buying process that you should get a home inspection, which will alert you to any hidden issues with the home that may need to be addressed before the deal is finalized. If significant damaged is revealed, you may be able to renegotiate your offer for better terms. If the findings of the inspection are to your liking, you can then focus on signing the final paperwork necessary to close on the house, which will occur on the date that you’ve set for closing.
Step 9. Move Into the Home of Your Dreams!
You’re finally through this lengthy and often emotional process and can move into the home of your dreams! All that’s left is to transport your belongings to the home, which could be done by reputable movers if you want to make sure that your possessions are handled with care. You could also do this yourself if you don’t have too many belongings or would rather rent a truck.
Becoming a homeowner is a thrilling process that can be made into a much more enjoyable experience if you choose the right realtor and the best lender to provide you with the best possible home buying experience. If you’ve made the right decisions and informed yourself going in to the process, you should feel much more comfortable knowing what you’re getting into, which allows you to enjoy the exciting search for the home of your dreams!