Do you have goals of becoming a homeowner this year? This can be one of the most exciting times of your life, but before you begin your search, it’s important to understand the key steps involved in the home-buying process. Here’s a breakdown of each step so you know exactly what to expect and how to prepare.
Think about your homeownership goals. How much space do you need and what are your “must-haves”? This will help you determine exactly what you’re looking for when you begin your search. This is also a good time to organize your finances and determine how much house you can afford, so you can start saving for expenses throughout the home-buying process, such as:
In order to get a mortgage, especially one with a low interest rate, you need to have a strong credit score. If you don’t know what your score is, it’s a good idea to check it well before you plan to purchase a home. This involves pulling credit reports from each of the three credit bureaus (Experian, TransUnion, and Equifax), which is free to do once a year. Make sure to check them for accuracy and dispute any errors that would decrease your score.
A mortgage pre-approval shows you how much home you qualify for, so you have a good idea of how much house you can afford. When you’re pre-approved, you get a commitment from the lender to provide a mortgage for up to a certain amount as long as there are no major changes in your financial situation or problems with the home. A pre-approval is a great way to let sellers know you are a serious buyer, but know that it does not guarantee your mortgage approval or interest rate, and typically expires after 90 days.
Once you are pre-approved for a mortgage, you are ready to start your home search. Having a real estate agent makes the homebuying process easier and can provide you with a valuable resource on housing issues specific to the areas in which you are looking. They can find available homes for you, arrange showings, and help you write an offer. Don’t rely on the seller’s agent to provide advice and guidance. It’s their job to advise their client, not you.
Once you’ve met with your real estate agent to discuss what you’re looking for, it’s time to begin house hunting. The more houses you look at, the more they start to blend together, so you may want to take notes and pictures to help you remember the features of each one. Things you might want to consider during your search include:
Once you find the house you want to purchase, your real estate agent will prepare an offer. Your offer letter typically includes:
From there, the seller can either accept the offer, reject the offer, or give you a counter offer. Negotiations may go on for a while after you submit your offer, but your real estate agent will help you with this. Remember, it’s ok to walk away if you can’t reach an agreement.
A home inspection is not required but highly recommended as it identifies issues you might face down the road and points out any necessary repairs. Purchase offers are typically contingent on a home inspection, which protects you if the inspection reveals significant damage. If you still love the home but don’t want to pay to replace the roof, you can negotiate with the seller by asking them to fix the issue or lower the sale price.
A home appraisal is an essential part of the home-buying process. The appraiser is hired by your lender as a third party that will independently assess your home and determine its value. The purpose of an appraisal is to determine whether the home’s contract price is appropriate given the home’s condition, location, and features. This assures the lender that they are lending the borrower the right amount of financing.
Once the seller has moved out, consider doing a final walk-through of the property to make sure the seller left everything they agreed to leave and that the property is in the same condition it was before. Check the areas that needed repairs if you requested them and keep an eye out for pests.
Three days before you close, you will receive the closing disclosure, which lists your actual closing costs. Your mortgage closing will likely be held at the office of the title company, an attorney, or the lender. You will need to bring your ID, a copy of your closing disclosure, proof of insurance for the home, and a cashier’s check for the amount you are paying for closing costs and the down payment. Be prepared to sign a lot of paperwork, and make sure you understand everything before signing. Once you sign all of the documents, you will receive the keys to your new home.
Congratulations! You are now a homeowner!
When you’re ready to get started on your home search, LCU is here to help. Explore our mortgage options and get pre-approved today!