With mortgage rates at record lows, it’s obvious why so many people are hoping to buy a house this year. However, you must consider several factors before making such a large purchase, and time is of the essence. Believe it or not, there’s more to house hunting than looking at online listings.
Take these eight steps if you’re looking to buy a house this year.
1. Start Saving and Acknowledge Special Expenses
The first step to buying a house is to start saving. Put any money you can spare into a savings account that you do not touch. If possible, dedicate a percentage of your salary to be sent to that account automatically. That way, it’s out of sight and out of mind.
If you have other financial goals for this year, such as having a baby, you should consider their value. You’ll need to decide what to prioritize if you want to reach your targets for the year. Also, make sure to contemplate unusual expenses so you do not overextend your income.
2. Evaluate Your Budget
You’ll need to evaluate your salary and expenses to determine a budget. To simplify the process, make a spreadsheet, and decide what percentage of your income you can dedicate to buying a house.
Plan to review any promotions or job changes you can predict for the upcoming year. While these changes may not be finalized, it’s worth considering how much they could change your overall budget. You should also examine your credit score because it impacts lender approval.
3. Check For Assistance Programs
Before contacting a lender, research housing assistance programs. You may be eligible to apply for special assistance depending on your situation. These programs often vary by state and may have financial eligibility requirements.
Standard housing assistance programs include:
- VA home loans
- First-time homebuyers
- Indian Home Loan Guarantee Program
- Good Neighbor Next Door
Once you determine your eligibility, you’ll be able to evaluate loan requirements accurately.
3. Find a Lender and Get Preapproved for a Loan
Spend time researching lenders and their requirements. Some may require a lower housing deposit than others. After choosing the best option, try to get pre-approved for a loan. While this step is not necessary, it can increase your buying power. With pre-approval, you’ll be able to determine precisely how much you’re eligible to borrow — without any guessing involved.
4. Choose a Real Estate Agent
While many families choose to investigate the housing market independently, it’s beneficial to choose a real estate agent. Your real estate agent will be able to guide you through the process and handle the legal transactions. They’ll also have more knowledge of the market, which can help you stay informed. Before hiring a real estate agent, be sure to discuss their subsequent fees and services.
5. Determine Your Priorities and Begin the Hunt
Now that you have determined a budget, found a lender and chosen a real estate agent, it’s time to think about the house itself. To start, you must identify your priorities. Only after analyzing your preferences can you accurately begin to hunt for your dream family home.
Common priorities include:
- Location
- Number of bedrooms and bathrooms
- Amenities
- Updates required
Make a list and share it with your real estate agent. They’ll be able to show you the houses that fit within your budget and meet the greatest number of items on your wishlist. Make sure to visit the listings in person, as the photos online may be inaccurate.
6. Make an Offer
Once you find your ideal property, it’s time to make an offer. Analyze the listing to put forward a competitive proposal. When you submit an offer, you must include contingencies.
Important contingencies include:
- Earnest money deposit: This ensures you get your deposit back should the sale fall through.
- Inspection: You can negotiate your offer after the housing inspection or break the agreement entirely.
- Home sale: If you are selling your current home to gain the capital required for purchasing, you must include a contingency, should your home not sell.
- Mortgage: Without obtaining a mortgage, you won’t be able to afford the house, so this allows you to back out should your financing back out.
You can always add contingencies as you see fit, but too many may scare the seller and lead them to choose another buyer’s offer.
7. Get an Inspection and Appraisal
You should always get the house inspected and appraised before closing. Plan to hire a professional, third-party inspector to examine the house. They will identify areas of concern that require renovations. If you discover significant damages, you can request that the seller handle these issues before closing. Alternatively, you can renegotiate your original offer to account for the additional cost of renovations.
You’ll need to get an official appraisal completed for your lender to prove you’re buying the property at fair market value. This appraisal compares other sales in the area, the state of the property and market trends.
8. Close on Your Home
Once you have completed these seven steps, it’s time to close on your new home. Your real estate agent will walk you through the property and make sure everything is as agreed. At that time, you will review your contract and the subsequent costs. Following this check, the property title will pass to you, and both parties will sign the required documents.
Trust Your Instincts
Buying a new home can feel like an extremely complex process, but these eight steps will guide you. Remember to trust your instincts and choose a property that you can maintain on your income. If you want to find the perfect home for your family, you’ll need to be honest with yourself as you complete each step. By following these measures, you’ll reach your homeownership goal for the year.
