The roadmap for new home buyers starts at their own place with a detailed budget assessment. Your ongoing and prospective expenses added to the credit score and your financial position are the first base to cover prior to consulting your house choices with a real state professional.
The process of buying a house turns out significantly less stressful once you have determined your prospects, and figured out how much you can comfortably pay. With that said, there are additional steps worth to keep in mind before settling for a home.
1. Credit Score, Select a Lender and Mortgage Options
Mortgages are relatively straightforward processes — although the paperwork could be a bit tedious.
First, you need to fix your credit score. Higher scores contribute to reducing interest rates and get the loan pre-approved faster from different lenders. To improve your score you will need to contact credit bureaus and dispute negative marks.
There are other ways to increase your credit score such as paying debts or getting a new credit card. In any case, improving credit records combined with a substantial down payment (no less than 20%) allows to freely choose between different mortgage types.
The ideal lender can be anything from a bank, to credit unions. With a credit score above 620, you can more or less ask anywhere for interest rates and APRs, and get pre-approved. The overall documentation these agencies ask for is a balance of the household income, debt, expenses, driving license and W2 and I-9 forms filled.
2. Find a Trustworthy Agent
Word-of-mouth is by far the best way to find a real stage agent. Besides agents, broker and realtor are good choices. The fundamental difference among these professionals is the type of certifications they hold, however, they all share a code of ethics.
Driving around the neighborhood facilitates the search for an agent. If you want to know whether there are more agents working in that area, just type the area or the name of the real state agent you found while driving in search engines (Google or Bing). A number of ads are most likely to appear with names of other agents working in similar areas.
3. The Home Search
Depending on your fundings and requirements the real state agent will provide with some housing options, so there is no need for a lot of help on this step. Just keep tabs on budget and your list of must-have amenities. Try to be as pragmatic as possible with your priorities.
4. Offer and Negotiation
After making an offer, and if everything is in order with the house, agents will often get an answer in a couple of days. If the price is too low or the neighborhood is steadily gaining value, the offer may get rejected a couple of times before settling for a price.
5. Due Diligence, Contract, and Appraisal
Once agreed on a price, the next step is to order an appraisal – without this, the lender won’t provide with the loan. This is mandatory because the bank or credit union want to protect their investment in case they need to sell the house at auction.
The contract specifies the term to perform a house inspection. The house inspection and appraisal can be done simultaneously.
If there are any faults in the house (repairs, problems with appliances, painting, landscaping, gas and pipelines issues), you can ask for the price to be lowered. This is a renegotiation process and it may take a couple of days extra.
For the closing process, home buyers must have the paperwork reviewed, that is, mortgage terms, extra costs, and obligations.
If the due diligence, appraisal, and home insurance are already in order, the only step remaining to happily close the deal is conducting the last inspection. It may take several weeks before actually be able to move to your new home.