There’s an order to things; when you understand the order, the tasks at hand become simplified, rhythmic. But when you don’t understand the order, or you play one-two-skip-a-few with responsibilities and preparations, you may find yourself coming apart at the seams with stress, anxiety, and breaking dreams. This is as true in the journey to home ownership as it is any other situation. Know in advance what you need to do and the order in which you need to do it to ensure a successful home-buying experience. Here are the six steps to buying.
Step One: Credit and Savings
Excitement has everything and nothing to do with it. Your daily life is infused and charged with ideas of what owning your home will be like. You spend valuable time decorating daydreams with interior designs that may or may not ever come to fruition. That excitement propels you forward, but don’t try to run before you can walk. No matter how excited you are, if you’re not financially prepared, you’re not ready to move yet from thought to action. You need more time to get yourself and your piggy bank situated.
You’ll need a 20 percent down payment on the home you plan to purchase. Additionally, you’ll pay closing costs out-of-pocket at the end of the transaction, which will run another two to eight percent of the property’s value. On top of that, you’ll obtain homeowners insurance, pay property taxes, and possibly HOA fees. In other words, you need thousands and thousands of dollars in savings before you put your foot on the starting line.
Even with a fat piggy bank and plenty of dough to roll in, you’ll need a pristine credit score and a healthy debt-to-income ratio to qualify for a home mortgage loan. Order copies of your credit reports so you can identify and rectify problem areas before you apply for your home mortgage loan.
Step Two: Put Your Money Where Your Mouth Is
Before you ever let your eyes bulge at one online property, before your mouth ever cracks a grin born of temptation at a “for sale” sign in a yard, get your home mortgage loan preapproved.
Pre-approval qualifies you as a serious buyer. Your home mortgage loan approval sets your house-buying budget. And, getting that deed done off the cuff sends a signal to real estate agents and sellers that you are in it to win it and ready to play hardball.
Step Three: Real Estate Agents and Wish Lists
With your financial ducks all patiently waiting in their well-aligned little row, it’s time to start interviewing real estate agents and discussing what you’re looking for in a home.
First time buyers rarely have a realistic idea of how far their home buying budget will stretch. There’s not as much leeway as people hope. Before setting out with your agent to tour properties, talk about your budget, what you envision, and what you can expect realistically from the housing market.
Step Four: House Hunts, Offers, and Negotiations
When touring homes with your agent, be mindful of open house etiquette. Don’t get carried away by loose-lipped excitement and begin popping off critiques as if you’re the host of a daytime home network home improvement interior design reality show.
Be patient and look at as many houses as you need before making an offer, but be aware of shifting market trends and available inventory. Waiting too long could give someone else time to snatch up what would have been the perfect house.
Trust your real estate agent to help you comprise and submit a compelling offer, who will also then help you negotiate if needed.
Step Five: Time-Consuming Steps
To satisfy your lender, the house you’re buying has to be surveyed, inspected, and appraised. These steps take time, involve multiple independent contractors, and their fees are included in closing costs. During this phase, the contract and terms are still somewhat negotiable, pending inspection results, etc. But once all systems get green checks to go, it’s all systems forward to closing day.
Step Six: The Closing Table
Everyone has had time to tend to their tasks in the transaction. The lender has put forth the funds. The appraiser, inspector, and surveyor have all completed their assessments. The title has been deemed clear and transferred from seller to buyer, pending final signatures. The seller has all of his or her belongings removed from the property, and by the time this day is done, you’ll have the keys to your new house.
Your real estate agent is the best source of information about the local community and real estate topics. Give Jeremy Mellick a call today at 206-260-1260 to learn more about local areas, discuss selling a house, or tour available homes for sale.