Purchasing a house will be one of the major financial decisions you’ll make in a lifetime, with a ton of details involved throughout the process. It is quite challenging to navigate and the process has changed even further amid the pandemic.
So, what can you do to make this a less complex decision to help you narrow down your choices efficiently and wisely? Whether it’s your first time purchasing a house or plan to upgrade or downsize, read on for helpful tips to see what the entire process is like.
Determine your budget
It can feel disappointing to tour the perfect house, only for you to find out that it’s out of budget.
Save yourself time and disappointment by figuring out how much you can afford. The common rule of thumb is to spend nothing over 2.5x your yearly salary. There are online calculators you can refer to so you can identify a suitable home budget range that works for you.
Make sure to check other expenses from your bank statements to see what you can lessen your spending on, such as cable bills, gas, entertainment, groceries, and the like.
Get pre-approved for a mortgage
The best way to get the edge in the competitive sellers’ market is to be pre-approved for a mortgage instead of only being pre-qualified. Pre-qualification would mean that lenders estimated how much a homebuyer can afford based on information they were given by the buyer.
Pre-approval refers to when lenders have verified the buyer’s (borrower’s) income stream, assets, and credit score to see how much they can lend. While pre-approval is not considered a loan commitment, it would speed up the loan approval and underwriting process!
Begin house hunting
A real estate agent can be hired to help you look for houses within budget. It’s best to list down your top priorities, such as the size of your house, whether it’s a starter home or a forever home. Thinking of becoming a real estate agent yourself? We can help!
Here are other things to consider when you are looking for a house to further narrow down the selections:
- Square footage
- Number of bedrooms and bathrooms
- Backyard and/or pool
- Overall house condition and repair needs
- Accessibility to public transportation
- School district ranking
- Overall location and nearby attractions
- Property value trends
- The property and/or real estate taxes
Rank the priorities from least to most important for your agent, who will show you a list of homes fitting your specific criteria.
Consider sleeper costs
For the first-time hours’ owners, you might not know what sleeper costs are. These are expenses that have been overlooked as you calculated your budget. It’s a mistake to focus only on the mortgage payment and not those sleeper costs, which may add up quickly!
Sleeper costs would include the homeowner’s insurance, property taxes, association dues, yard maintenance, utilities, repairs, and the like. If you don’t budget for these costs, it cuts the disposable income, hindering the ability to pay a mortgage.
Limit credit use
Think twice before you apply for store credit or use your credit card when purchasing things. Your lending institution can run your credit any time until they close the loan. This would mean that any abnormal or huge financial activity may break the chances of your deal!
If ever an unavoidable situation or emergency happens, talk with your loan officer to learn how it might have affected the application.
Get a home inspection
Lenders won’t require home inspections to get a loan, though it’s still a necessary step before purchasing a property. During home inspections, a professional will review the house, looking for any existing or potential issues.
They will test the electrical systems, check the roofing’s safety, ensure the appliances work as advertised, and do a lot more checking. Once finished, you’ll receive a list of problems that were identified.
Check the list carefully and look for any major issues or serious health hazards. Contact the seller and have them correct the issue before closing a deal, such as broken shutters that companies like Shutters Brisbane can replace. If things don’t go well, then move on to another house.
If you don’t undergo a home inspection, you may be stuck with major repairs, which you’ll be liable for after closing the sale.
Get a home appraisal
Home appraisals are reviews giving you the property’s current value. You will need an appraisal before purchasing a house with a mortgage loan.
Lenders will require this since they can’t lend out any more money than a house is worth. If ever the appraised value is lower than the offer, you might have an issue when getting financing.
Buyers also need an appraisal contingency when making an offer, which can allow buyers to back out or negotiate the price without losing earnest money deposit in case the appraisal is less than the price of the house.
Ask for repairs
After checking the house inspection results, you will need to ask your seller to correct the issues identified. You may do this by:
- Asking for a discounted purchase price
- Request the seller gives credits to cover the closing costs
- Asking the seller to fix all the problems before closing the sale
List the issues and what you ask for, which your agent will submit to the seller’s agent. Or, you can negotiate with the seller directly.
The Bottom Line
Understandably, the excitement of investing in a hew house can go down because of the hassling home-buying process. Once you are familiar with the process and what it entails, it can help you feel a bit calmer knowing what the next steps are. That way, you can collect yourself and make a wise decision on what house to get and enjoy it after the big purchase!
I hope that this article about the home-buying process helped you immensely. If you are in the process of purchasing a home, keep these steps in mind to navigate through the journey a bit better. Good luck!