Buying a home is a huge financial accomplishment. It’s one of the major goals every person attempts to achieve. In fact, buying a home is often the most significant investment a person will make in their lifetime.
If one of your current goals is saving for a house, you may be wondering what are the steps to buying a house. Without this knowledge, buying a home can be challenging and downright confusing.
Therefore, if you want to learn more about the home buying process, these steps will show you how to buy a house in 2021.
Step #1: Check Your Credit Score
The first step in buying a home is checking your credit score. Your credit score is more than three rows of numbers. It’s a sign of your financial trustworthiness. The higher your credit score, the more banks will trust you in giving you a mortgage loan to buy a house.
The minimum credit score for buying a home is 620. Before you start saving for a house, put in the work to improve your credit score by:
- Settling old debts
- Paying your credit card bills on time
- Dealing only with creditors that report to all credit bureaus (Equifax and TransUnion).
Step #2: Save Money for a Down Payment
One of the most substantial costs of buying a home is making the down payment. When applying for a mortgage loan, you may be responsible for paying at least 20% in upfront costs against the total value of the home you’re purchasing.
This means that if you’re buying a home valued at $200,000, you’ll need at least $40,000 in the bank to close on the purchase. You’ll also need to save money for closing costs as well.
For better insight into how much you’ll spend on a down payment, contact your bank for more information.
Step #3: Determine How Much You Can Afford
As you begin to put aside the money for a down payment, you should learn how much home you can afford before going deeper into the mortgage approval process.
If you don’t know where to start, you’re not alone. There isn’t a universal method for deciding upfront how much you’ll need to make to afford a particular home.
This is because affordability is typically very subjective to each person. For an accurate judgment on how much you can afford to spend on a home, you should work with a mortgage loan officer.
This bank employee will let you know how much you can afford to spend on a home based on your income, debt-to-income (DTI), and other factors.
Step #4: Select a Mortgage Lender
After determining how much you can afford to spend on a home, it’s up to you to select the mortgage lender you want to work with.
Different mortgage lenders have various underwriting conditions, regarding your credit score and income. Some may be lenient in lending you the money to buy a home.
Others will be hesitant under specific circumstances. The goal is to choose a mortgage lender that gives you the best opportunity of applying for an affordable mortgage with moderate interest.
Step #5: Gain Preapproval First
As you begin to create a shortlist of mortgage lenders, you should make sure you are preapproved first. There is nothing more disappointing than enduring a thorough mortgage process just to be told that you’re not qualified to close.
The preapproval process will let you know where you stand financially. If you aren’t approved, you can put in the work to buy a home at a later date.
If you are approved, you can receive peace of mind knowing there’s a possibility the mortgage process will work for you.
Step #6: Choose the Right Real Estate Agent
With the mortgage process at a halt, it’s now time to choose the home you can afford. This is arguably the most challenging and important aspect of the home buying process.
If you’re a first-time homebuyer, you may not know how to select a real estate that will have your best interest in mind. Here are some home buying tips for choosing the right realtor:
- Choose a real estate agent that works with home buyers just like you.
- Watch out for common red flags, such as unprofessionalism and inexperience.
- Collect and verify references from any real estate agent you meet.
Step #7: Keep Your Priorities in Order
Now that you’ve hired a real estate agent, you’ll need to give them a list of preferences to help them hunt for the right homes that will interest you.
When creating this list, here are some tips to follow:
- Choose the neighborhoods you want to live in.
- Decide on the type of home you want to live in.
- Let your agent know what size of home you’re looking for.
- Inform your agent about any desired amenities, such as a pool or solar panels.
The more specific you are with your demands, the better your real estate agent can help you.
Step #8: Make an Intelligent Offer
Your real estate agent should get back to you with a shortlist of homes you’re interested in. Once you choose the home you like, it’s time to make an offer.
This seems to be the most stressful part of the home buying process.
A low offer could be ignored and an offer that’s too high can cause financial difficulties down the road. The secret to effective negotiation is determining the level of interest in a particular home and how long it’s been on the market.
Knowing this information, you’ll be able to make a smart offer and win your bid. For this reason, it’s important to speak to your real estate agent for negotiation tips if you’re a first-time home buyer.
These Steps to Buying a House Aren’t Difficult
Now that you know the steps to buying a house, you may be eager to start this process or find out more about how you qualify for a mortgage loan.
If you would like to speak to an expert, contact us today to learn more about how you can negotiate effectively for your dream home.