Homebuying is no easy-peasy process. There are quite a few hoops to jump through, but you can make it easier by breaking down the 7 steps to buy a house. We’ve got your back. Let’s dive in!
1. Review your finances and get organized.
You won’t get pre-approved for any type of mortgage if you don’t have your financial stuff together. What does this include? Well, for starters, you better know your credit score. Many credit card companies and banks will show you your credit score for free monthly without impacting the score itself.
Then, use an online calculator to figure out your debt-to-income ratio, or DTI for short. Conventional loans will require a DTI of less than 40% or so, but other options may allow as high as 50%. The lower the better.
Second, review your savings, earnings, and spending. You should know how much money is coming in every month and what kind of mortgage payment you can afford without leaving your bank account at zero. If your income is still too low to handle a mortgage, consider picking up a side gig. We made a post to help called, “How to Make Money Online without Paying Anything.”
Also, make sure you have access to the last year or two’s pay stubs. You’ll also likely need your W-2 forms and tax returns for the past two years, bank statements, and an employment verification letter from your employer.
2. Research the city you’re interested in.
Pinpoint the area you want to buy in and start researching. Your first point of information will be Zillow or Redfin to see the cost of houses in the area. Check out homes that have the square footage and details you are looking for to know the prices to expect. Check out other stats like crime rates, school districts, future developments in the area, risks of natural disasters, property value trends, and community amenities.
3. Get pre-approved for a mortgage.
A pre-approval letter is the first step to viewing homes with a realtor, especially so that they can work within your budget. The most efficient way to do this is arguably through a mortgage broker. This is a middleman who helps you find and secure a mortgage through a third party that best suits your situation. They have access to multiple lenders, share personal advice based on your financial situation, save you a ton of time, and help with paperwork – all for free. Yep, you heard me right. They are paid by the lenders, not the borrowers, so take advantage of the help of these mortgage pros!
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4. Choose your real estate agent carefully.
Your real estate agent needs to be your bro, bestie, go-to gal or guy for your home-buying process. Trust and experience are key. Look for an agent with experience in your area and with what you’re looking for. A good agent will listen to your preferences and negotiate on your behalf, not push an agenda. Consider interviewing a few agents to find one who clicks with you and has your best interest at heart.
5. Get to know the neighborhood.
Your neighborhood could make or break your home-buying experience. Spend some time in the area before signing on the dotted line. Check it out at night if you can, especially on a weekend. Talk to a neighbor or two if they’re outside to get a gist of the community vibes. Pay close attention to those houses directly to the side and behind the home you’re eyeing. A bad neighbor is like a rotten apple – it could ruin the whole bunch on the street.
6. Trust the inspection.
In most cases, you’ll be getting a home inspection done before going under contract. If you’re new to the homebuying game, I would highly advise you to avoid any homes that ask you to waive the inspection. Inspections are where you find out about big-ticket issues like foundation problems, leaking roofs, HVAC issues, termites, and the like. Skipping out could cost you tens of thousands of bucks down the line. Trust. The. Inspection.
Now, as an added note, it’s important to remember that all inspections are going to find faults. This is literally the job of the inspector, and no home is perfect – not even new builds. That being said, don’t get scared of your inspection report either. Some things are easy fixes. For example, in my home, the inspection included a few fire alarms with no batteries, a leaky shower head, and some cracked tiles. All things I could take care of fairly cheaply. Get the inspection, focus on the big items, and make a decision based on facts and finances – not emotions.
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7. Take the plunge!
You’ve homed in on your neighborhood. You’ve secured financing and your real estate agent has brought a gem of a home to your attention. You love it. The inspection comes back pretty solid. The neighborhood is stable. Ok, you know what that means! It’s time to take the plunge with your offer! There will always be a bit of fear or nervousness when making your first property offer, but it’s time to trust your instincts and the process. You took your time and did your research. Your agent is on board. It’s go time!
Once your offer is accepted, you’ll go through closing, where all the paperwork is finalized. This process could take a bit and require some more documents on your part, but the waiting game is normal. Before you know it, you’re going to be holding the keys to your new home and inviting me to your housewarming party! At least, if you want to. Can’t wait to hear about it! As always, thanks for watching.