Purchasing your first home is usually a big financial step that you will make at least once in your life. This is a decision that you should take seriously for your new home to become a blessing. Below are the basic steps that will ensure your home buying process is a success.
Step 1: Are You Ready?
Compared to renting, home ownership is a lot more expensive. As a homeowner, you will be responsible for added utility costs (water and garbage) and repairs as well. You will also be required to pay for insurance and taxes related to your home.
Such costs can add up fast, and if you’re not financially ready, you will end up in a negative position. Better financial preparation means taking time to get out of debt as well as increasing your emergency fund. Other things you should do before purchasing your first home include clearing your credit card debt.
Step 2: Shop for Loans
Take your time while shopping for a loan, and remember that you will require pre-approval before you can start home shopping. The pre-approved loan will help you know what price range you should be looking at. In addition, consider getting in touch with industry experts to find out about the different loan products available on the market, including what is a USDA home loan.
Step 3: Be Honest About What You Can Afford
In step three, you need to determine how much home you can actually afford. In the best scenario, your taxes, insurance, and mortgage should be about 25 to 30 percent of your income. Some financial experts propose that costs towards your home should be about two and one half your annual salary.
Step 4: Work with a Realtor
Once you have a good idea of what and how much you can spend, and pre-approved, the next step is finding a good realtor. A realtor ought to listen to your requirements carefully. He or she might make a few recommendations or even explain a market that fits your needs.
In addition, the realtor should offer you several different options. When you make your offer, the realtor immediately sets about negotiating terms that you should be happy with. You can find a good realtor through recommendations of colleagues and friends.
Step 5: Request Home Inspection
Another critical step in purchasing a home is a thorough home inspection. A home inspector comes into the premises and inspects it for hidden problems. Through this exercise, you can learn about any current and potential issues that might prevent you from purchasing the home.
In fact, a home inspection can save you thousands of dollars and heartache in repairs later on. Plus, you can negotiate a lower price when you know a home requires new roofing. However, make sure that the home inspector is independent of homeowners.
Step 6: Patience During Escrow
Once you make a bid on a home and the offer is accepted, you get into escrow. An escrow holder ensures that all the documentation, money and necessary information is available before closing. Escrow helps protect the lender, seller, and you – the buyer.
Escrow takes time to complete, with time depending on the circumstances around the purchase. Once you complete everything, you will sign the closing papers.
Closing your home means that you can now move in and make it truly your own by painting, unpacking and enjoying your first dinner. Make sure that you have updated your address information at the bank and other critical accounts. In addition, cancel your old utilities to avoid late payment fees.