Top 10 To-Do List for First-Time Homebuyers

27 Oct 2020

Buying 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:

Your monthly income

The amount you take home.

Your monthly payments & debt-to-income ratio

Rule of thumb: Your monthly mortgage should not exceed 30% of your income before taxes.

Your credit score

The numeric representation of your ability to pay back debts in the past.

Closing cost

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.

Save up for a down payment

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.

Pay down other debts

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.

Manage your credit score

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:

Proof of income
Proof of assets
Good credit
Employment verification
IT returns or Form 16 for the last 2 years

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.

Make a list of priorities you want in your home
Check all the amenities on offer
Research about neighbourhoods and municipalities

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:

Submit your offer as soon as you can
Don’t forgo inspections
Submit a strong offer you are proud of and confident about.

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:

Foundation
Structure
Interior
Exterior
Plumbing/HVAC
Electrical

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:

Comparable sales
Square Footage
Appearance
Amenities
Condition

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: