A real estate agent is on the hunt for your best interest because they want you to find the right home and buy it. Agents get their commission after a home is sold and typically the seller pays the agent. Plus, you have a lot to gain. Agents have expertise in the buying process, neighborhoods, the market, and negotiation. You’ll get through the home buying process more quickly with an agent, too. But how does one find such a trusted agent? Getting referrals from friends and family is a great place to start. If you don’t know anyone who has purchased a home in your area, online reviews can help you identify the best agent for you. And a face-to-face meeting is the best way to finalize your decision.
Get pre-approved for a home loan, so you know what size loan you would qualify for and approximately what interest rate you’d get.
I can recommend a couple of great lenders. Talking to multiple lenders will enable you to fully assess your financing options with no obligation to pick until you’ve found the right one. (Don’t go crazy just do a few, see step 5.)
What you’ll need to provide the lender: bank statements, pay stubs, W-2 forms, 1099 forms, and tax returns.
When you meet with a mortgage lender, the lender will pull your credit score. Although a perfect credit score is 850, all scores 760 and above are considered to be in the best credit score range —meaning you would qualify for the most competitive interest rates.
Great is any score above 760, Good credit score is from 700 to 759, Fair score is from 650 to 699, and a score of 300 to 649 is considered Poor. Your credit score is calculated based on several factors, including your debt payment history, debt-to-credit utilization, and length of credit history.
If you find that your credit score is subpar, you may be able to take steps to boost your score. Just keep in mind that you won’t improve a credit score overnight. Indeed, you may need to postpone your house search for a few months to mend your credit.
You’ll be a more efficient shopper if you know what you’re looking for. How many bedrooms and bathrooms will you need? How much property do you want? Think about location, too. Do you want to live close to work? Extended family? Downtown? The type of neighborhood factors in as well. Do you want a family-friendly neighborhood with good schools? Do you long to walk to shops and restaurants? Split your list into must-have features and nice-to-have features. Once you have an idea of what you want, you can easily trim your list to include only the homes that are a good fit for you.
Be prepared to be overwhelmed with data as you enter this stage. You will likely look at dozens—or even hundreds—of homes online. Your needs and wants list will help you narrow down your options, as well as help you determine if your budget and your home dreams align. To start, make a short list of properties that fit your needs.
With your agent in tow, visit as many properties as you can. Even if you fall in love with the first house you see, commit to seeing as many on your list as possible. Comparison shopping is important, and you’ll learn more about the market with everyone you walk through. And you might just fall more in love with another home.
As your real estate agent, I can guide you on what sort of offer to make based on many factors, such as the home’s asking price, the market, and on how much you want the house. If you’re in a competitive market, some agents will recommend writing a personal note to the seller. If they are in a position to choose amongst several buyers, they may pick someone with a lower bid who seems to love their house as much as they do. The seller might approve your initial offer, or they may engage in negotiations.
If your offer is accepted, it’s time to get official. Being pre-approved for a mortgage means you’re likely to get the mortgage. Go back to your lender, and let them know you’re ready to move forward with the process. Your lender will order an appraisal and have you sign some more paperwork. Your loan application will then enter the underwriting stage before it’s approved.
Some homes can be money pits. Do your due diligence by hiring a housing inspector who can let you know what issues the house has. Every house will have some, but not all problems are deal breakers. Your inspector can’t tell you whether to buy or not, but the inspector’s report will help you decide what to do. Enlist the help of your real estate agent or a trusted homeowner to help guide you.
A bank won’t finance a home for more than it’s worth, so getting your loan depends on the appraisal. An appraisal is an expert determination of a property’s value. If the appraisal comes in at or more than the price you offered to pay, it’s time to celebrate. But if the appraisal comes in lower than your offer, you may need to come up with extra cash, renegotiate the price, or say goodbye to that particular home.
Note: This is where having a financing contingency comes in handy.
You’ve reached the finish line. Well, after you pay closing costs, that is. Closing costs typically represent 2 percent to 5 percent of the home’s purchase price. These costs generally include attorney fees, appraisal fees, your down payment, homeowner’s insurance, and property taxes. You’ll pay these during a meeting—your closing—where you’ll sign all the paperwork and walk away with the keys.
Tip: Don’t Damage Your Credit
When you’re in the process of buying a home, you need to walk the straight and narrow with your finances. Why? Because your loan doesn’t get fully approved until it goes through underwriting—which could take place just a few days before closing. To keep your credit score stable, you’ll want to avoid taking on new debt (e.g., getting an auto loan), opening new credit cards, neglecting student loan payments, or falling behind on credit card payments.
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