The Home-buying Process

This guide will walk you through the process of making one of the most significant financial decisions of your life: purchasing a home.

In becoming a homeowner, there are both highs and lows. Most current homeowners believe that owning a home has been well worth their efforts, if the LIVING ROOM AND FAMILY ROOM as evidenced by the Bank of America 2019 Homebuyer Insights Report. However, for most people, the investment is well worth it. Let’s take a closer look at the process of getting there.

Step 1: Get your finances in order

Be realistic about your budget before you start looking for a home. Be honest about how much money you have coming in and going out. After that, you can use a mortgage calculator to estimate your monthly mortgage payments and home price if you bought it.

Do a debt-to-income analysis and see how much you owe versus how much you earn. An ideal figure for monthly debt payments is less than 36% of your gross monthly income. Each month, your mortgage payment (which includes taxes and insurance) should be manageable for you. For starters, you’ll need money for a down payment and closing costs, which can add up quickly.

Begin the Process of Finding a House

A lot of time will be spent looking at houses on the web. You’ll be flooded with options in the beginning stages of your home search. “House For Sale” magazines and newspaper classified ads are likely to be found near you. Your agent will send listings to your cell phone. Consider driving around town in the late afternoon to check out potential neighbourhoods.

Foreclosures should be on your radar. These methods are great for finding out what’s available and how much it costs. Find out why a home has been on the market for an unusually long period. Depending on your tolerance level, it may have a significant or minor issue.

Step 2: Get pre-approved for a loan

The next step is meeting with a lender to discuss loan options and current interest rates. An official prequalification letter from the lender will let you know how much money you’re eligible to borrow. Getting pre-approved for a mortgage, an offer to lend you a specific amount for a particular period (typically 90 days), may also be something you want to consider. When you’re ready to make an offer, you can use either of these to demonstrate your seriousness to sellers.

Step 3: contact a real estate agent

Save time and effort by limiting your search to properties that meet your financial criteria after determining what you’re eligible for. It’s a good idea to look at properties online before meeting with a real estate agent and ask them only to show you listings that fit your criteria.

Having a real estate agent on your side can help you make the best possible offer when you find a match. An “earnest money” deposit (typically 1% to 3% of the sale price) is drawn up if your offer is accepted and is used to show your commitment to the transaction.

Step 4: Lock in your mortgage rate

Applying for a mortgage becomes necessary after an offer has been accepted. This means you’ll need to act quickly to lock in your interest rate and allow time for a home appraisal, which typically takes between 45 and 60 days.

Your lender will send you an estimate of your loan within three days of receiving your application, including an assessment of your estimated interest rate, monthly payment, and closing costs. Check to see if your interest rate is locked in and if the document details reflect the loan you requested. Verifying your assets and income is a requirement before you can move forward. Comprehensive documentation is needed to reassure the lender that you can repay the loan.

Step 5: Get ready to close

A closing disclosure will be sent to you once your mortgage has been approved and at least three business days before you close. You’ll find a breakdown of the costs, ranging from 2 to 5 percent of the home’s purchase price. If something doesn’t seem right, bring it up with your lender. Bring a copy of your ID and any outstanding payments with you. The person who signed your mortgage as a cosigner must be present.

Once the loan closes, the funds are transferred to the seller, and you receive the keys to your new home!

Conclusion

To buy a house, you should follow these steps. Your local real estate agent, your lender, your attorney, your closing agent, or others helping you complete the home-buying transaction will be able to explain and handle any issues that may arise.

To fully comprehend the home-buying process, you should ask as many questions as necessary. Make sure you know what’s happening at every step because you’re making a long-term commitment and a significant financial investment.