You’ve decided to jump on the real estate train and buy your first house. It’s a big decision and one that should be done carefully! Although it’s true that finding something you love enough to sink big money (and sweet equity) into is a plus, the most important first steps to buying a house do not start with the visual process. Finding a reliable mortgage lender and getting pre-approved are actually the first and two of the most important steps to buying a house. Laying out your financial income and outgoing funds helps to understand more about what you can actually afford and how to manage a monthly budget that includes a mortgage, insurance, taxes and maintenance.
Before you even look at what’s on the market, check out these steps to buying a house.
Paperwork and Pre-Approval
Prepare all of the relevant documents before meeting with a mortgage lender. You will need: Identification, W-2 forms, paycheck stubs, an asset list and proof of your current rent or mortgage’s financial obligation. Steps to buying a house include a printout of the previous two years of your financial history (i.e., credit report). Applying for pre-approval is also a part of this process. Getting pre-approved by a lender will help you find out how much money a lender would actually provide for your mortgage based on your finances and creditworthiness. Pre-approval allows you to focus on houses that are actually in your price range and not waste time on something you cannot afford. Credit scores play a big part in the house buying process. Make sure your payments are all up to date and if you have a legal (financial) judgment against you, pay that off as well before applying.
A very important step to buying a house is working with the right mortgage lender. Research lenders online, ask friends for recommendations and check out their online presence. Find the right lender to provide you with the right mortgage for you and who will help you throughout the home buying process.
Real Estate Agents
Real estate agents are hungry; they want your business! You can be sure that once an agent finds out you’re looking to buy, they will want to represent you. Real estate agents typically make their commission from the seller (although not always). Be sure that you understand the terms before signing any contracts.
So now you’ve found something in your price range that you like, another important step to buying a house is to hire a home inspector. Home inspections point out the physical and structural issues of the building, including anything that could become problematic as the home continues to age.
Before making an offer to buy, consider the home’s location and whether it needs improvements. If you are absolutely sold on the place, remember that:
- Down payment amounts are typically at 20% of the purchase price and you will need to have the cash (or certified check) on hand at the closing. Your lender may provide other options, like Private Mortgage Insurance, if you don’t have the entire down payment amount.
- Closing costs vary; your lender will let you know what to expect.
Buying a house is a major life’s step. Be sure to do your homework first and get those financial ducks in a row before the hunt begins. For more information about buying a home, getting pre-approved for a mortgage, and other important facts, download our helpful eBook now!