When you start the process of buying a house, the road ahead may seem daunting. If you break everything down, however, you’ll find that there are actually ten simple steps that you need to complete in order to find and buy the home of your dreams.
Follow this simple home-buying checklist to ensure that you’re prepared each step of the way.
1. Assess Your Financial Situation
When you’ve made the decision to purchase a house, take the time to truly assess your financial situation before you move forward. Make sure your credit score is at least 620 or better in order to qualify for the maximum financing, and take the time if necessary to get it higher so you can qualify for a lower interest rate and fewer fees.
If you don’t have at least 20 percent to put down on a home, you’ll probably have to pay private mortgage insurance (PMI) for the first few years, which will raise your monthly payment.
Most financial institutions have fairly standard back-end and front-end debt-to-income ratios that you’ll need to meet in order to qualify for a mortgage. The front-end ratio divides your total expected housing expense by your monthly gross income, and most lenders will look for this to be no more than 28 percent. The back-end ratio also takes fixed debts into consideration as well as your housing expense, and this should not exceed 36 percent.
There are online calculators available to help you determine whether you meet these numbers.
2. Choose the Right Timing
Unless your move is due to an expiring lease or a job relocation, give careful thought to the timing of your purchase.
A 2015 research study conducted by RealtyTrac concluded that October is the best month for buying a house. In fact, home buyers who purchased in October realized an average 2.6 percent discount on the fair market value of the property compared to other months throughout the year.
There are other considerations besides just price. You may find the inventory of available properties is more scarce than during the summer months, leaving you fewer options in what you buy. If you’re moving to a part of the country that’s prone to hurricanes, an October or November move can be risky.
Finally, if you have children, you’ll have to weigh all of the other considerations against the possibility of having them start a new school after the school year begins.
3. Shop Around for a Mortgage
It’s smart to get pre-approved for a mortgage before you start the process of buying a house. Don’t just approach one bank; shop around to find the financial institution that’s most willing to work with you. A private mortgage broker can take a lot of the burden off of you by doing all of the leg work in finding you the best deal.
4. Research Neighborhoods
You probably have already pinned down the general area you want to move to, but you need to take the time to research individual neighborhoods. If you have children, take the school systems into consideration as well as parks and other youth activities.
Research the neighborhood crime rates, availability of mass transportation, tax mill rates, proximity to stores and restaurants and the demographics of the locals to be sure the area is a good fit for you and your lifestyle.
5. Determine What You Need versus What You Want
While you may have the picture of your dream home etched into your mind, it’s wise to separate the must-haves from the nice-to-haves before you start your home search. Most people already have an idea of the number of rooms they want, an approximate lot size and whether they need a multi-car garage, but there are several other important factors to consider.
Let’s say you’re looking for a lot that’s at least an acre in size. If you want something that large just for privacy, then size is all that matters. If you need space for the children to play and for you to entertain, then you need to consider how much of the lot is cleared and how steep the grade is.
If central air conditioning is a must-have, then you’ll need to look for homes that either have central air built in or that have a forced hot air heating system now so that you can use the existing ductwork to install a new central air unit.
6. Start Shopping for a Home
Once you’ve got all of the background work done, it’s time to start shopping for a home. Like most home buyers, you’ll probably start searching online, but you still need to decide whether you need a real estate agent to represent you. A combination of online searches, keeping up with the local newspaper’s real estate section and using a real estate agent will give you the best chance of finding exactly what you want.
7. Make an Offer
While your real estate agent can advise you, the decision-making in the offer and negotiating the ultimate home price falls on your shoulders. Do some research and find out whether you’re dealing with a buyer’s or seller’s market at that particular time, as that will have the most impact on the negotiations.
It also helps if you can ferret out the seller’s motivation for moving. Someone who is moving due to a job relocation is usually more open to negotiations. Finally, don’t make the mistake of basing an offer on the home’s list price; use the home’s market value as your baseline instead.
8. Get an Inspection
As soon as your offer is accepted, schedule a home inspection. Hopefully, the seller has been open about any issues with the home and the inspection will go through without problems, but that’s not always the case.
If the inspection turns up any major issues, such as a leaking roof or inadequate heating system, that doesn’t mean that you’re in a position to renegotiate the offer. You can ask for the seller to make the necessary repairs before the closing or, as happens in most cases, the seller will grant credits so that you can make the repairs yourself when you move in.
9. Hire an Attorney
Even if you live in a state that doesn’t require you to hire a licensed attorney for the closing, retaining a good real estate attorney is a wise move. The lawyer will look out for your best interests and ensure that everything that needs taking care of is completed legally so you won’t have problems later on. If you don’t know any good attorneys, ask your friends and family for a referral or call the local Bar Association.
10. Shop for Movers
Though you may be inclined to choose a mover based on price, you should give more weight to the movers’ reputations and reliability. Remember that you are entrusting them with your most precious possessions, and you want to make sure that they arrive at your new home intact. If you’re on a tight time frame for moving, you also want to be sure that the mover you choose will show up when scheduled.
2 Point Highlight
While you may have the picture of your dream home etched into your mind, it’s wise to separate the must-haves from the nice-to-haves before you start your home search.
A 2015 research study conducted by RealtyTrac concluded that October is the best month for buying a house.
