There are six not-so -simple steps to buying your first home. Many first-time home buyers have no idea what’s in store for them on their journey to home ownership. Jumping in without foresight could lead to heartache and broken dreams, whereas a bit of prep and planning could have you sitting pretty in your new living room! Here are the six steps to buying a home.
Step One: Credit Counts (a lot!) and Money Matters
Chances are, you’re going to need a home mortgage loan to finance the purchase of your house. Banks and lenders are going to scrutinize your credit. They’ll look critically into every debt and your payment history. The bank wants to satisfy itself of your ability to repay your home mortgage loan. Take the time to review your credit reports. Clear up any past due payments, derogatory statements, or disputes.
As a buyer, you’ll likely be responsible for closing costs on the home you buy. Closing costs cover services such as appraisal and inspection, lending fees, clerical fees, and real estate agents’ fees, among other things. Closing costs can be estimated at about 1-8 percent of the total value of the home you’re buying. Know ahead of time that aside from your down payment and earnest money (a check you write to ensure the seller that your’e serious about an offer), you’ll need additional cash out of pocket for closing costs.
Step Two: Pre-Approval Before Shopping
This is where many first time home buyers make a major faux pas. Do not shop for houses before you get pre-approved for your home loan, and here’s why: Your home loan approval indicates what your actual budget for buying a house should be. It presents you as a serious contender to sellers, assures your real estate agent that you’re ready to purchase, and can give you a leading edge when making your offer. If you wait until after you find a house, you could lose the house while your home loan application is processed, or to someone who was already pre-approved.
Step Three: Shop Until You Drop, but be Realistic
Your real estate agent will help you find homes that fit within your budget and your neighborhood. But many first-time home buyers have unrealistic expectations of what they’ll get for their money. Consider this your starter home and be willing to make compromises on size, features, finishes, or location. Don’t get caught up by curb appeal or fancy frosting. Houses are staged to sell, meaning they’re made pretty to make you fall in love. Inspect carefully and thoroughly so you don’t have buyer’s remorse.
Step Four: Offers and Negotiations
When you find a home you adore, you’ll put in an offer with your real estate agent’s guidance. You may offer at asking price, below, or if there’s serious interest from other buyers, above the asking price. You may also include closing costs in your offer wherein the seller pays the closing costs. But be careful and cautious with your contingencies because they could cost you the deal in the long run.
Step Five: Appraisal, Inspection, and Title:
Your bank wants to know the house you’re buying is valued at what you’re borrowing, so they’ll order an appraisal. Your bank also wants to verify that there’s no damage to the structure of the house, such as leaky roofs, electrical or plumbing problems, or termite infestations. For this reason, an inspection must be done. This presents the last opportunities for negotiations or calling off the transaction. The bank also needs to know that the title is free and clear, meaning there are no liens or tax holds. If there are liens or tax holds, the property cannot be legally sold until those issues have been resolved.
Step Six: Closing Day – You Just Bought a House!
By the time you get to the closing date, you might feel like it’s been forever in the waiting. The processes are time consuming and often stressful. The closing table is where all debts are settled, meaning the closing costs are paid. The title is transferred from previous owner to you, and you get your keys. By this point, the seller has evacuated the dwelling and you’re welcome to go home.
Call John Harper at 760-902-8437 or Shaun Waters at 760-636-3404 to tour available homes for sale in the Palm Springs area.