27 Oct 2020Buying a first home is an overwhelming feeling. It takes a lot of preparation and planning to settle for the most suitable and profitable buy. Following is a step-by-step overview to guide you through your home-buying journey.
Step 1: Evaluate How Much You Can Afford
Buying a home is a huge and long-term investment. Before taking the leap, set up a proper budget considering:
The amount you take home.
Rule of thumb: Your monthly mortgage should not exceed 30% of your income before taxes.
The numeric representation of your ability to pay back debts in the past.
The expenses to complete a real estate transaction
Step 2: Manage Your Finances
Once you are done evaluating how much you can afford, start managing your finances to make the biggest investment of your life.
More the savings, less the loan amount you have to bear. It’s a common notion that you need 20% down payment to buy a home. But now, there are loans available without making any down payment.
Try to pay off other loans before taking the home loan. This will increase your credit score and help you save money in the long run.
Improve your credit score in order to qualify for mortgage loans with a lower rate and flexible repayment options. Get a credit score report.
Step 3: Find A Real Estate Agent
Once you are done managing your finances, hire an experienced real estate agent who is well versed with the real estate market and can guide you through the whole process of home buying. Statistics show most people trust and hire an agent recommended by a friend.
Step 4: Get Pre-Approved
Getting pre-approved means your lender has conditionally agreed to loan you a set amount of money for a mortgage after reviewing your income, expenses and credit reports. For pre-approval, you will need:
Step 5: Start Home Hunting
It’s time for the most exciting part of the procedure – searching for a suitable home that will fulfil all your needs without exhausting your budget.
Checking online is a faster and more convenient way of searching for homes. Consult with your agent for more suggestion.
Step 6: Make An Offer
Once you make your mind about the home you are going to buy, let your agent guide you to make a reasonable offer by negotiating the price and other factors. You may also negotiate about furnishings, appliances, inspection fees etc. Here are 3 tips:
Step 7: Do A Home Inspection
Once your offer is accepted, a thorough home inspection is needed to ensure there are no hidden issues within the home. Check if any repair work needs to be addressed or presence of radon, asbestos, toxic mould or more. If any major problem is found, that can affect your financial negotiation.
Standard home inspection checklist:
Step 8: Get An Appraisal
An appraisal is used to determine whether the home’s contract price is appropriate given its condition, location, and features. Lenders require an appraisal to make sure that homeowners are not over-borrowing for a property because the home serves as collateral for the mortgage.
Critical components for an appraisal include:
Step 9: Close The Deal
Once your home loan is approved, your lender will schedule a closing date to sign all the documents and paperwork which will officially seal the deal. The ownership of the property will be transferred to you. You need to sign:
Step 10: Congratulations!
Cherish the pride of buying your first home. You are now a proud homeowner.
Best Home Buying Tips For First Time Homebuyers
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