8 Steps to Buying a House

Heather Murphy Real Estate Group Buyer Consultation from Real Estate Videos on Vimeo.

3. Secure financing with a mortgage lender

While you may find the thought of home ownership thrilling, the thought of taking on a mortgage loan may be downright chilling. Many first-time buyers start out confused about the mortgage pre-approval process or nervous about making such a large financial commitment.

From start to finish, you will follow a six-step, easy-to-understand process for securing a home loan.

Six steps to Financing a Home

1. Choose a mortgage lender (or mortgage broker).
2. Complete a mortgage application and get pre-approved.
3. Determine what monthly mortgage payments work for you and select a loan option.
4. Mortgage lenders then need you to submit an accepted purchase offer contract.
5. Get the appraised value of the house and title commitment.
6. Obtain funding on the closing date.

Find the right mortgage for you

The steps above might seem simple at first glance. However, there is more you need to know about mortgage loans. The type of mortgage you use to buy a house affects what you’ll need to qualify for the loan (including the required down payment amount) and how you’ll pay it back. Choosing the right home loan can boost your chances of approval and may save you thousands in the long run.

Before you decide which type of mortgage to pursue, it’s important to compare interest rates and learn the advantages and drawbacks of each one. Here are some of the main types of mortgages:

• Conventional loans are mortgages that are not guaranteed by the federal government. The qualifications are more strict, but the down payment requirements are lower.
• FHA loans are mortgages that are backed by the Federal Housing Administration (FHA). While these mortgages may be easier to qualify for than conventional loans, they have stricter requirements for mortgage insurance.
• VA loans from the Department of Veterans Affairs are for members of the military (active or former service) and eligible spouses. VA loans allow you to purchase your primary residence with no down payment.
• Jumbo loans are mortgages for expensive properties that cost substantially more than standard lending limits. These usually require a large down payment and a high credit score.
• Renovation loans allow you to include the costs of home improvements in the total amount of the mortgage. Choosing this option when mortgage rates are low can be a great way to save money on interest while borrowing money for repairs.

Use our free mortgage calculator at the bottom of this article!

4. Find your home

You may think that shopping for homes starts with jumping in the car and driving all over town. And it’s true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long. If weeks go by without finding what you’re looking for, the fun can fade pretty fast. That’s why we say that searching for your home begins with carefully assessing your values, wants, and needs, both for the short and long term.

Questions to ask yourself during your home search

1. What do I want my home to be close to?
2. How much house do I need and why?
3. Which is more critical: location or size?
4. Would I buy a house that is a fixer-upper?
5. How important is home value appreciation?
6. Is neighborhood stability a priority?
7. Would I be interested in buying a condo?
8. Would I be interested in new home construction?
9. What features and amenities do I want? Which do I really need?

While home shopping

Taking photos with your phone can later help jog your memory when you’re trying to make a decision. After seeing a dozen houses or more, they can start to blend together. You just might not remember which of those houses had that master closet you’ve been dreaming about! Potential issues can affect the amount you offer or be things to bring up with a home inspector.

5. Make an offer

When house hunting for your dream home, you were just that, a dreamer. Now that you’re writing an offer and figuring out your down payment, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are purchase price, terms, and contingencies (or “conditions” in Canada).

The right price to offer must fairly reflect the true market value of the home you want to buy. Your real estate agent will do market research to help guide this decision.

Terms are the other financial and timing factors that will be included in the offer.

Terms fall under six basic categories in a real estate offer:

1. Schedule-a schedule of events that has to happen before closing.
2. Conveyances-the items that stay with the house when the seller leaves.
3. Commission-the real estate commission or fee, for both the agent who works with the seller and the agent who works with the buyer.
4. Closing costs-it’s standard for buyers to pay their closing costs, but if you want to roll the costs into the home loan, you need to write that into the contract.
5. Home warranty-this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
6. Earnest money-this protects the sellers from the possibility of your unexpectedly pulling of the deal and makes a statement about the seriousness of your offer.

6. Perform due diligence

Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why homeowners insurance and a home inspection are so important.

A homeowners insurance policy protects you in two ways:

1. Against loss or damage to the property itself
2. Liability in case someone sustains an injury while on your property

The property inspection should expose the secret issues a home might hide so you know exactly what you’re getting into before you sign your closing papers.

• Your major concern is structural damage.
• Don’t sweat the small stuff. Things that are easily fixed can be overlooked.
• If a big problem shows up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase.

More on homeowners insurance

Although it might seem strange to get insurance on a house you don’t own, most lenders will make sure you have homeowners insurance before you apply for a mortgage. The policy must provide enough coverage to replace the entire home, which might not match the purchase price or appraised value. Typically, the policy will become effective at the closing date.

More on the home inspection

A basic home inspection will help you identify any potential problems and make recommendations for repairs. The visual inspection covers every aspect of the house, including the foundation and roof. You may also want to have one of the more detailed home inspections if you have concerns like mold or radon.

The home inspection should be performed by a licensed professional. Your real estate agent will know the names of reputable inspectors You may be able to negotiate with the seller if the inspection uncovers issues that were not originally disclosed.

7. The Closing

The final stage of the home-buying process is the lender’s confirmation of the home’s worth, legal status, and your continued creditworthiness. This entails a survey, appraisal, title search, and a final check of your credit report and financial health. Your agent will keep you posted on how each is progressing, but your work is pretty much done at this point.

You just have a few pre-closing responsibilities:

1. Stay in control of your finances.
2. Return all phone calls and paperwork promptly.
3. Communicate with your real estate agent at least once a week.
4. Several days before closing, confirm with your real estate agent that all your documentation is in place and in order.
5. Obtain certified funds for the closing, including your down payment.
6. Conduct a final walk-through.

On closing day, you’ll sign documents that do the following:

1. Finalize your mortgage.
2. Pay the seller.
3. Pay your closing costs.
4. Transfer the title from the seller to you.
5. Make arrangements to legally record the transaction as a public record.

As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your house-hunting process and commencement of your home-owning experience.

8. Protect your investment

Throughout the course of your home-buying experience, you’ve probably spent a lot of time with your real estate agent and you’ve gotten to know each other fairly well. There’s no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.

Even after you close on your house, your agent can still help you:

1. Handle your first tax return as a homeowner.
2. Find contractors to help with home maintenance or remodeling.
3. Help your friends find homes for sale.
4. Keep track of your home’s current market value.

Attention to your home’s maintenance needs is essential to protecting the long-term value of your investment. After all, you need to keep your new home in good shape in case you wish to sell the house in the future.

Home maintenance falls into two categories:

1. Keeping it clean: Perform routine maintenance on your home’s systems, depending on their age and style.
2. Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.

Interested in the Savannah area? Click Here!