If you’re thinking about buying a home – congratulations! Whether this is your first home or your fifth, buying a home is a huge life milestone.
From finances to actually choosing your home, buying a home can feel overwhelming and complicated. But here’s the thing, it doesn’t have to be!
In this article, we’ll cover the 10 steps you should be taking when buying a home to help you get started.
Step 1: Decide if it’s the right time to buy a home
Buying a home is a huge decision, you should be confident that it’s the right move for you.
This includes evaluating your finances and your current life situation. You want to be financially ready, but also be in a life situation that makes homeownership possible. Do you plan to move in the next year or two? Are your finances stable? Do you have the time to commit to home maintenance and repairs?
Step 2: Determine your budget
Homes are also a large financial commitment. Before you take the plunge, it’s important to figure out how much house you can actually afford.
How much you can and want to spend will depend on your unique financial situation. It’s typically recommended that you do not spend more than 3-5 times your annual household income.
Many potential home buyers often only consider the basics, such as mortgage payments, when budgeting. Make sure you’ve also taken the financial burden of maintenance and repairs into account.
Step 3: Save for a down payment.
One of the most important steps to buying your home is making sure you have a down payment. A down payment is typically required in order to obtain a mortgage loan.
You may have already begun the process of saving for a down payment. How much you’ll need to save for your down payment will depend on how much you plan to spend on your home. Typically a downpayment is anywhere from between 5% to 20% of the purchase price.
Step 4: Get a mortgage pre-approval
The next step in the home buying process is speaking with a mortgage agent to get a pre-approval. During the pre-approval process, the agent will verify your financial information. This includes details such as your income, assets, and downpayment. They will then submit this to a lender to get you an official pre-approval letter.
A pre-approval letter shows sellers and agents that you’re a serious buyer. Many real estate agents won’t even start the process of house hunting if you don’t have a pre-approval from a lender. In general, pre-approvals are good for 60-90 days!
It’s important to note that a pre-approval is different from a pre-qualification.
Step 5: Find a real estate agent.
Now that you have a pre-approval in hand, you’ll have a firm idea of how much home you can truly afford. Now you can begin the process of finding a real estate agent to help you navigate the house hunting and buying process.
A buyer’s agent doesn’t cost you any money but can help improve your negotiating power. For most buyers, it’s in your best interest to work with an agent. However, it’s critical that you shop around and find an agent that you get along well with. This is a huge life decision, you want to work with someone who you trust and will support you along the way.
Step 6: Go house hunting.
This is the fun part! You finally get to go look at all the amazing homes on the market. Your real estate agent will work closely with you to find homes in your budget, desired area, and that fit your needs.
Many potential home buyers like to skip straight to this step, but it’s important that you’ve checked the previous financial to-dos off your list first. Otherwise, you run the risk of disappointment or looking at homes you simply can’t afford.
Step 7: Make an offer on a house.
Once you’ve found your dream home, you finally get to make an offer! This part can feel exciting but also very scary.
A good real estate agent will be able to help you submit a competitive offer. They’ll walk you through all the details such as conditions, offer price, deposits, and other closing details. In a competitive market, the seller may come back with a counteroffer or they may even go with a different offer. If this happens, don’t get discouraged, your agent will work with you to determine the best next steps!
Step 8: Get a home inspection and appraisal.
Most offers on a home will be contingent on a home inspection and appraisal. During this stage, a professional will evaluate your home for any major issues and put together an appraisal for your lender. This step protects you being blindsided by things like structural issues, or overpaying for your home and not getting your mortgage approved.
In a competitive market, you might find yourself putting an offer in without contingencies. If you choose to do this, make sure you understand the risks of waiving these contingencies. Make sure you’re only putting in offers with conditions that you are comfortable with.
Step 9: Finalize your mortgage and financing.
Once your offer has been accepted, the next step can feel like watching a pot of water boil. During this time, your mortgage lender will crunch all the numbers, review the appraisal, and look through your financials. At this point, they’ll make the decision on approving your loan.
While you might want to celebrate your new purchase, resist the urge to go furniture shopping or buy a new car during this period. Even small changes to your debt or financial situation can potentially affect your loan approval.
Step 10: Close on your dream home!
The day is finally here – closing day! Closing is the final step to officially becoming a homeowner.
On or just before closing day, you’ll work with your real estate agent, mortgage agent, and lawyer to complete all the necessary paperwork and financial transactions. This is a good time to review all the documents and make sure you ask any questions you might have.
Once all the documents are signed and approved, congratulations – you’re now officially a homeowner!
But wait - you don't have to go it alone. Contact the Jersey Mortgage branch location nearest you and schedule a free consultation.