Home buying is often a long and arduous process that may overwhelm first timers. It pays to know what must be done ahead of time, and which things should come first. So save yourself from the headache and let this handy guide help you on your home buying journey.
1. Know your financial status. Gather your financial documents including bank statements, tax returns, credit information, and proof of income. Determine your debt-to-income ratio by calculating your income versus your debts and other expenses. A lot of lender-approved financing websites offer free affordability calculators to help you determine your mortgage payment capacity.
2. Find a real estate agent. Most websites would tell you to find a mortgage lender first, implying that agents will not talk to you unless you’re pre-approved. On the other hand, a reliable, local agent will gladly welcome requests for lender referrals. A mortgage lender who has worked with your agent in the past will likely give you a more honest rate and will not delay on processing the documents and funds that you need.
3. Talk to the lender. Once you start talking to lenders, each one will pull your credit history. Doing so will lower your credit score. To lessen the impact, shop for a mortgage within 30 days. The credit bureaus will count the credit checks as one, knowing that you are in the home buying process.
4. Seek pre-approval. Mortgage experts recommend pre-approval versus pre-qualification. A pre-qualification is just a light summary that you may get the loan, while a pre-approval (comes with a letter) signifies that the lender is now committed to grant you the loan, if your credit standing remains stable throughout the home buying process. Sellers usually require a preapproval letter before accepting offers.
5. List your ideal home criteria. What are the non-negotiable features? Take location, square footage, and design into consideration. The age of the property also matters. Are you willing to make a few upgrades and renovations to achieve the perfect home? Most importantly, set a price range and stick to it.
6. Start looking for homes. Nowadays, it is easy to search online for available homes. However, your real estate agent will usually have access to homes which are not yet listed on the market, and the ones which are still negotiable. Schedule home visits with your agent, so you can personally see the properties.
7. Make your best offer. A local real estate agent is updated with the housing trends in your chosen area. This local knowledge includes the current home values which will enable you to make a competitive offer.
8. Review and negotiate the sales contract. Your real estate agent will help you understand the terms on the purchase agreement. Upon consulting a real estate attorney, make sure that there will be clauses on the contract for contingencies.
8. Prepare earnest money. You need to deposit funds into an escrow account as a sign of good faith. The earnest money will be used to pay for the closing costs and will also be applied to your down payment.
9. Hire a professional home inspector. Home inspections and appraisal will help you determine the actual value of the property. Depending on the terms of your contract, and how well your agent has negotiated for you. Ideally, it is better to ask the seller for credits to fund the needed repairs instead of having them fix the issues. This way, you can ensure that the repairs are done to your satisfaction.
10. Finish the closing process. During the closing process, avoid making any other big purchases that will hurt your credit score. The title company will be there to oversee the signing of the documents which includes the loan estimate, disclosure, escrow, lender documents, and other closing forms. Afterward, the seller receives the payment and you will receive the keys to your new home.
Looking for a home in Oklahoma? Let us show you around Bryan County, OK. Call or email us today.