Buying a home for the first time or even if it’s the tenth time still has a lot of stress that comes along with it. You are so excited that you are looking into investing into your future that you may overlook a lot of little details that can blow your mind when they do come up in the home buying process. I know when my husband and I bought our first home I really wished I would of had a step by step guide that listed all the things that I would need to know and consider before buying. It would of made the whole process a little less stressful. That is why I am here to write about what you will need to know now before you go out and make that BIG purchase! However, before I start I would like to inform you that I am not a real estate agent of any kind. This is just my own personal recommendations when it comes to buying a home. I do have personal experience in buying a house, but it does not make me and expert, so please do take that in mind before you continue and please research this more if you feel like you need. It is always a good thing to get a second opinion. Now with all that being said lets jump right into the step by step home buying guide.
Make an Income Worksheet:
Grab yourself a pen, paper and calculator. Write down on the top of the sheet all your monthly income. Under that, line by line, write down all your monthly expenses. Next on the back of the sheet write down all the money you may have in savings accounts. Then write down any expenses you may be able to cut down on if you just cut back on like going out to eat, seeing a movie, or shopping for new clothes. I am not saying that you are going to have to cut this out of your lives completely, however if you could cut down half you will be able to see that more money can come in to your monthly income and it may help the loan officer see that you will qualify for more if you are serious about cutting back on “NON-ESSENTIAL” items.
Gather All The Information:
Get a cheap folder and put in it all your important papers.
1. Recent pay stubs
2. Recent invoice from your savings account
3. Your income worksheet (explained in Step 1)
4. 3 numbers of family members
5. A copy of your recent credit report
Let’s Go To The Bank:
Contact a local bank, or the bank you already use for all your banking needs and speak to a home loan officer. At this you will not be applying for a loan but just inquiring how much money you will qualify for! Make sure you make that point to the loan officer as well. Just simply tell them that you are just wondering how much money you could possibly qualify for. The loan officer will lean have you fill out a number of papers which include all the information you gathered in Step 2. After the loan officer has all your information they will go over it and contact their boss to agree to it. Then he or she will present you will a letter of qualification. Ask them to make a copy of this letter for your personal records and to remind you throughout the home buying process that this is what you can afford. From the time you leave the bank this letter will be good for 30 days, unless your income either falls dramatically for some reason or sky rockets too. Now you know your time frame, and if you are satisfied with the number the loan officer gave you then this is the time to go out and start looking.
One more minor thing, well it’s really major, before you continue to step 4. Ask the loan officer to break down an estimate on what a monthly payment would be on a loan for the amount she gave you. For example at the time my husband and I did this process we qualified for a $125,000 loan, and the payments were going to be at least $1000 or more a month. We looked at each other and realized we would never be able to make that, so we asked her to give us some more figures like what would we pay on a $115,000 and a $100,000 loan. The monthly payments on them dropped a great deal and even though we qualified for more, we knew we could only afford a loan around $110,000. KNOW WHAT YOU CAN AFFORD BEFORE YOU LOOK!
Property For Sale:
Now that you know what you are going to be able to afford, it’s time to start looking. You already know a couple houses in mind, however those were out of price ranges and you don’t know what houses are out there that are in your price level. It is time to contact a real estate agent. You do not have to stick with this agent, just gather a little information from her or him and be on your way! Though if you like this person then do not hesitate to go back to them once you have found the house of your dreams. Just simply call a local real estate office and ask if they could please print you out a list off all the available houses in your area in your price range. They will be more then happy to do so, especially now with probably having slow work. You can either go by the office to pick it up or they can mail it to you if you don’t have the time during the day to get there. I know my real estate agent mailed me a copy of the homes with no questions asked.
Marking It Off The List:
Now that you have a list of all the house, with address and price amount they want for the home grab your pen and go for a Sunday drive. If your list is super long, and I am sure during this time of a bad economy, this process could possibly take you a couple days, maybe a week or so. Start with the first house and go down the list. Mark off completely the ones you didn’t like off the bat. Put a big smiley face on the ones you really love, and a question mark on the ones you were not to sure of. You are going to narrow down the properties during this process and while you are narrowing them down you will need to make sure you look inside the homes. You may need to contact that real estate agent in Step 4 again or just call the ones up on the signs and make appointments to do an open house run through with them.
You already have in mind what you want in a home, what you need in a home and what you will settle for so here is the time you need to make sure you get what you want. Did you find it? Is that little 2 story log home with a white picket fence the one you want? Great move onto Step 6!
I Pick You:
By now, if you do not already have a real estate agent that you have been working with, it’s time you get one. You have already interfaced with enough of them to make the right decision on who is best. Please if you do not learn anything else from this article make sure you do learn this. GET AN AGENT! Do not try to go at this alone because, if you do not have experience in this field, you will get burned!
My Offer Is:
You have your loan qualification sheet from the bank, the agent you trust and the house you want to buy all ready to go. Now you need to make that offer. Never, and I mean never offer the listing price. Come down about 10,000 and then work from there. From my own experience this took a while because we had a lot to settle on. Just listen to what my husband and I did and then take this Step and make it your own!
Our house was listed at $115,000. We offered the seller $108, 000. He would only accept if there was a down payment. Of course we did not, so he declined that offer. We came back with an offer of $110,000 and asked him to pay $3000 on the closing cost. Again he declined, but came back with a counter offer of $110,000, no help with closing and 5% down. We declined because again we didn’t have the money for a down payment. So we upped the offer one more time. $115,000, $3000 help on the closing, pay for the home inspection, and any repairs if found in the first year free of charge. By now this went on for 3 weeks, and he gave in. The housing market wasn’t great at th
e time and he was just ready to get it sold. Yes, it was a little more then we could pay for, however no money came out of our pockets during the whole process, except the Earnest money, and we were really wanting it to go that way!
Once you have made an offer and the seller has agreed, you now have a binding contract. The only thing that makes it 100% sure is the Earnest money. This money is about 1%-5% of the purchase price, however if negotiated, it can be lower. This assures the seller, the bank and the real estate agent that you are serious about buying and that you are not just pulling their legs. Don’t worry, you will not lose this money, however it will go back into your home as escrow! It’s like a investment in your home before you start. I don’t agree with this, however I don’t make the laws. I thought signing your name is all you had to do to say you are REALLY interested, but I was wrong.
This money will be kept in the hands of your real estate agent until the closing date. Never give the money to the seller!
Inspector Gadget Please:
Now it is time to get a home inspector to come and take a look at the home you are ready to buy. Make sure he writes down everything that is wrong with the house, and the seller has to repair it before you sign your name to the final line. On top of hiring an inspector head back out to the house one last time and yourself go over it with a fine tooth comb. I know our home inspector found a couple things wrong with the house like a light switch that didn’t work, small things like that, but when we went back by ourselves, we found some cracks in the floors, carpet that had stains and a window that the screen was cut. We made sure the seller fixed all of our problems. He did with no hesitation!
Back To The Bank:
Here is where you will now set down and sign your life away. You thought those small amount of papers you filled out when you were just consulting with the loan officer was a lot, however the loan officer now has over 50 pages for you to sign to get the loan ready to go to the lawyers office to finalize your purchase. Make sure if you have any questions before heading to Step 11, you ask them here and now. Do not sign on the final line until you are 100% positive you fully understand what you are about to do!
Another thing may occur while you are back at the bank it talking about home insurance. If you are not sure where you may need to go with this one, I advise you to contact your car insurance or life insurance companies and get them to explain what type of insurance, how much insurance, and how to go about getting insurance you will need for your home. If you stick with a company you already have insurance through, they may offer you a percentage off your home owners insurance.
The Lawyers Office:
This is it, this is the day the keys will be presented in your hands! I was so nervous about this day that I could not sleep the night before. I kept running through my mind all the things that we have done and made sure that we didn’t miss anything.
You will meet at a lawyers office, one the seller prefers (more then likely) with the seller, and your real estate agent. If you are having to put a down payment on the house, or pay any on closing this is where your money will now leave your hands, and the Earnest money your real estate was holding on to leaves her hands. This is also where you will have the joys of signing more papers and making the deal done! The seller will get paid here and and the real estate agent will also will also get their cut. If you are lucky like we were then you will also get a check in your hands as well. I can’t remember exactly how much we got back in closing. I do know it was around $600 dollars. The reason why we got back to much is because our seller paid to much into closing cost for us. We got it because the closing cost was part of “our” home loan. However if you don’t get any back, do not worry, and don’t get upset because you just got the house of your dreams!
You are done and now ready to move into your new home. Usually you will have about 30 days or until the end of the month to switch over water and electric in your names and out of the sellers name. If you have a a good length of time before that happens, please take your time. Get all your stuff in your new home, and everything up and running the way you want it before you switch over names.
I hope that this step by step guide has helped you a little bit, but like I said at the beginning of this article I am no professional expert on this. I know from my own personal experience what my husband and I had to go through and that is what I wrote on. Nothing more, nothing less. Please always get a second opinion and research this topic more because this is one of the most biggest purchases you will ever have to go through in your entire life! Good Luck!