6 Steps to Buying a House

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It’s not a secret that purchasing a home is one of the most important decisions you’ll ever make in your life. But for many first-time buyers, the process can be daunting. There are six steps involved in the home-buying process, and each one is critical to ensuring a smooth transaction. In this article, we will go over each step in detail and explain what you need to do to make your dream of homeownership a reality.

Your Credit and DTI

Before you even begin to look for a home, it’s important to get your finances in order. Your credit score and DTI (debt-to-income ratio) are two of the most important factors lenders will consider when approving you for a mortgage.

Your credit score is a clear measure of how responsible you have been with your debt. A high credit score will indicate that you’re a low-risk borrower, which will make it easier to get approved for a mortgage. A low credit score could mean you’ll have to pay higher interest rates and may not be eligible for certain loan programs.

DTI is simply a measure of how much debt you have compared with your income. Lenders want to see that your monthly debts (including the mortgage payment) will not exceed more than 43 percent of your monthly income. If your DTI is too far over the mark, you may not be approved for a mortgage, or you could be offered a loan with less favorable terms.

Save For A Down Payment and Closing Costs

To buy a house with a conventional home loan, you’ll need to pay a large deposit and significant closing costs. The down payment is the portion you pay upfront of the purchase price, and closing costs are the fees the lender charges, along with the charges of other professionals involved in the transaction.

For a conventional loan, the typical down payment is estimated at twenty percent, and the closing costs range between two and five percent. That means that a $400,000 house with an estimate of five percent closing costs and a twenty percent down payment would require $100,000 cash-out-of-pocket. But that’s not all.

When you submit an offer on a house, you’ll also have to put down an earnest money deposit, which is between one and three percent of the value of the house. This lets the seller and the bank know that you are serious about moving forward with your purchase.

Don’t forget about moving expenses, too – and it’s wise to think about having an emergency fund set aside for those unforeseen expenses of homeownership, like maintenance and repairs.

Pre-Approval for A Home Mortgage

Before you start your exciting house hunt, it’s important to get pre-approved for a home mortgage. This will give you an idea of how much money you can borrow and what kind of loan terms are available to you.

There are two kinds of mortgage loans: fixed-rate and adjustable-rate. With a fixed-rate mortgage, the interest rate is locked in for the life of the loan, which makes budgeting easier. An adjustable-rate mortgage (ARM) has a lower initial interest rate, but that rate can change (usually upwards) at regular intervals throughout the life of the loan.

Find the Right Agent

Once you’ve determined that buying a house is right for you, it’s time to find a good real estate agent. An experienced professional agent can help you navigate through the process and find your dream home.

Look for an agent who specializes in working with first-time buyers. They’ll have plenty of experience dealing with all the ups and downs of the market and can help make sure your purchase goes as smoothly as possible.

Ask friends and family for referrals or check out online reviews to find the right agent for you.

Make an Offer and Negotiate

Once you’ve found the house of your dreams, it’s time to make an offer. This is where your real estate agent will come in handy, as they will help you put together a proposal that is both fair to the seller and meets your needs as a buyer.

The amount you offer should be based on the market value of the home, minus the down payment and closing costs. You’ll also need to factor in any repairs or updates that may be needed – these are called “contingencies.”

If the seller accepts your offer, congratulations! The next step is negotiating the details of the sale with the help of your agent. This may include the sale price, the closing date, and who pays for which closing costs.

The Closing Process

Once all the details have been finalized, it’s time for the final steps in buying a house – the closing process. This is when you’ll meet with the lender to sign all of the paperwork and officially take ownership of your home.

Conclusion

Buying a house can be a daunting task but following these six simple steps will help make sure things go as smoothly as possible. By being prepared and working with the right professionals, you’ll be on your way to homeownership in no time.

Get your credit and DTI in good shape before you start your journey, and save enough money for a down payment, earnest money deposit, closing costs, moving expenses, and an emergency fund. Get pre-approved for your mortgage, and then find the real estate agent who can best help you through the process. Shop for houses, make a competitive offer, and be prepared to negotiate. Then, be patient through the closing process.

For more information about buying your first house, contact your professional local real estate agent today.

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