So you've decided to buy a home! Congratulations, this is an exciting time in your life. It can also be full of stress, especially when you don't know what to expect. That's why Landmark Home Warranty has created this article that walks you through each step of buying a home. We know that a home is an important part of your life. That's why we provide home warranty protection plans for your house's systems and appliances!
How much can you afford to pay on a mortgage each month? Although you could go to the bank and get pre-approved for a home loan, it's usually better to determine a reasonable budget with your finances. The amount of money you're pre-approved to borrow shouldn't influence the price range of home you buy. Loans profit lenders, and the more the lender gets you to borrow, the more money they make. Instead, look at your current spending habits and determine how much you can afford on a home each month. You can find out how much can you afford on a home by using this worksheet that will walk you through determining your budget step-by-step.
Next, after determining how much money you should spend each month on a mortgage payment (and your house price-range) start saving! Many lenders require a 20% down payment. Granted, there are other lenders that require a 3% or less for a down payment, but remember that the more money you put down on a home, the less money you have to pay in interest over time. This blog explains why pre-paying on your mortgage can help with those costs.
- Shop for a Loan, Get Pre-Approved
One of the biggest mistakes a homebuyer can make is to take the first loan offered to them. Before you find a home, shop around for a mortgage to find the one with the best interest rate. You could also hire a mortgage broker to find the best rates for you. Then, get pre-approved (or approved) for a loan. Although a pre-approval doesn't guarantee you'll get that exact loan, getting approved for a loan does, and makes closing on a home much faster.
- Determine what you Need and Want in a Home
The perfect home is more than just four walls and a roof. Homebuyers have to take in a lot of considerations when coming up with what they need and want in a home and neighborhood. First, decide how big you want your home. Do you want three floors, a rambler, or a split-level? Some individuals have specific tastes about what they want from a home, so make sure you know what type you're searching for. Then, decide where you need to live for commute times, schools for children and the neighborhood. Some homes will reside in Homeowner Associations, which could provide extra amenities (and extra rules). Write down a list of wants and needs when it comes to your house. Things that you desperately need within a home (3 bedrooms for all of your kids) and things you want (a pool, fireplace or separate kitchen and dining areas). These should be listed by order of importance.
- Get the right Real Estate Agent
Next, find a real estate agent. Although a real estate agent will typically list homes on the market, that agent is dedicated to the seller and has the seller's best interests at heart. Finding a buyer's agent can help you find a great home and help you through the tricky parts of buying a house. Bring your list of needs and wants in a home to your agent so that they can help you find the perfect house.
- Start House Hunting
Next is finding the perfect home with all of the things you need and want. Once you've given your real estate agent your list of needs and wants, they can find some homes you'd be interested in within your price range. If you want to know what types of questions you should ask your real estate agent when house hunting, this article can help!
When you find a home you like, make sure to complete a walk-through and ask any questions you have to your real estate agent. Then, make sure the neighborhood is someplace you'd like to live. Visit at different times of day to check traffic, noise levels and safety. Then, check to see if the home is in a Homeowner's Association. If the home is, check what the rules and regulations are for your home and neighborhood.
- Make an Offer
Once you find the perfect house, it's time to make an offer. Many individuals will list their home for higher than it is worth because they know they'll most likely lower their price. Some realtors will say to offer 5% below the asking price, but your real estate agent can help you decide what a good offer should be on a home. You will have your agent contact the seller's agent with the offer, and the seller's agent will contact the sellers to let them know you made an offer on their home. The sellers will either accept your offer, or provide a counter-offer. This haggling can go on a bit until you decide on a price, or try and find another home you'd like to buy.
- Enter into Contract
Once the seller accepts your offer, it's time to enter into a contract. There are a number of things you as the buyer have to do now you've entered into contract:
Finalize your Loan
A lender has to do a few things before they can finalize a loan. They will complete an appraisal and property survey to make sure the home is worth the asking price. This fee will be included in your closing costs. After, the lender will estimate the closing costs by sending the buyers a statement. This statement legally cannot increase more than 10% of the estimate at closing.
After the lender has finalized the loan, the buyer has to have title insurance. A title insurance company makes sure there are no discrepancies with who owns the title, and provides insurance that covers the bank and buyer if the ownership of the title does come into question.
Next, the buyer should hire a home inspector. These home inspections are usually required for home insurance purposes, and for lenders to know the state of the home's systems and appliances. The buyer should attend the home inspection so they can learn more about their future home, and can also bring any major problems the home might have to the sellers attention, which can help lower the price of the home. If you need help finding a good inspector, these tips can help.
Next, purchase home insurance! Lenders require having home insurance at the purchase of a home because they will know their investment is being protected. Shop around for the best home insurance.
Finally, purchase a home warranty, or see if this home warranty is included in the closing price of a home. A home warranty will protect a home's systems and appliances and is especially helpful for new homeowners. The truth is that everything within a home will break at some point, and with the proper maintenance, a home warranty can reduce the cost of those breakdowns immensely. A home warranty costs between $300-$600 a year, with a small $60-$100 service call fee for repairs and replacements made on failed systems and appliances.
Finally, closing is here! This means your real estate agent and the seller's real estate agent will go over what you can expect for your final closing costs. You real estate agent will have given you a HUD-1 document before the closing so you can make sure you understand all of the costs. Some lenders let homeowners add their closing costs into their mortgage so they don't have to pay for all of the fees up front. After signing the documentation and agreeing to pay for the final closing costs, you will get the keys to your new home and can move in!
Do you want to protect your home's systems and appliances while moving into a new house? Go to www.landmarkhw.com to see what options you have.
Our quick version of this article was featured on Lifehack! Take a look at the simple guide of buying your home here: