Ready to take the first step in homeownership? We can help you get started.

Understanding the key milestones throughout this exciting yet complex process can help you avoid surprises and navigate with confidence.

Buying a home is one of the biggest financial decisions you’ll make. Understanding the key milestones throughout this exciting yet complex process can help you navigate with confidence and avoid surprises. In this article, we’ll walk you through each step on your homebuying journey.

Check Your Credit Score

Your credit score is a very important number, especially when it comes to making a major purchase like a house. To qualify for a mortgage, you’ll need a minimum credit score between 580 and 620. FHA loans can be obtained with a score as low as 580 (with a 3.5% down payment), but conventional loans typically require a higher score (often 620+). The higher your credit score, the more likely it is that you’ll receive a lower interest rate, which will save you money.

Start by obtaining your credit report from one of the major credit bureaus: Experian, Equifax, or TransUnion. You can receive a free copy of your credit report from each of the three nationwide credit bureaus by visiting annualcreditreport.com. To protect yourself from scammers, avoid similar-sounding sites that might not be legitimate.

Review the report carefully to identify any errors or discrepancies. If you find any inaccuracies, take steps to dispute and correct them promptly by contacting the credit reporting agency. Finally, work on improving your credit score by paying bills on time, reducing debt, and avoiding new credit inquiries.

Get Preapproved for a Mortgage

To demonstrate to sellers and real estate agents that you are a serious buyer, you’ll want to get a preapproval letter. This is a statement from the lender that they have reviewed your financial situation and confirmed your ability to take on mortgage payments for a specific loan amount.

You’ll be asked to provide the necessary financial documentation, such as income statements, tax returns, and bank statements. Lenders will assess your financial situation and determine the maximum loan amount you qualify for.

Figure Out How Much House You Can Afford

To qualify for a mortgage, lenders prefer that you spend no more than 28% of your gross monthly income on your mortgage principal and interest, property taxes, homeowners insurance, and any homeowners association fees. Lenders also prefer that you spend no more than 36% on total debt – including housing costs, car loans, student loans, credit card debt, and anything else you owe. While these guidelines are useful, you’ll want to look at your entire financial picture when determining what you’re able to afford. Consider enlisting the assistance of a financial professional to assist with the process.

Make a list of must-have features for your new home, such as the number of bedrooms and bathrooms, location, and desired amenities. Differentiate between needs (essential requirements) and wants (desirable features). Consider factors such as commute times, school districts, and proximity to amenities when determining your preferences.

When considering how much house you can afford, you’ll also need to include additional ongoing costs – like utilities and repairs – as well as upfront costs. Use online calculators or consult with a financial advisor to ensure you’re accurately estimating your affordability.

Hire a Buyer’s Agent

Research and interview multiple real estate agents before selecting one to represent you as a buyer. Make sure the agent is licensed and affiliated with a reputable brokerage. Look for agents with local market expertise, strong negotiation skills, and a track record of success. Competitively priced homes don’t stay on the market long. That’s why you should choose an agent who communicates effectively and is responsive to your needs and concerns.

Your buyer’s agent will help you navigate the homebuying process, provide guidance, and advocate for your
best interests.

When You Find a Home, Submit an Offer

When looking at properties, explore local amenities and drive around prospective neighborhoods to get a feel for each area. Once you’ve selected a home, work with your buyer’s agent to draft a competitive offer based on market analysis and comparable sales. As a buyer, you should be confident the home will appraise for the amount being offered or reconsider the offer if you do not have the cash ready to make up the difference. You will risk losing your deposit and the cost of inspection/appraisal if you learn you cannot make up the difference.

Consider factors such as the condition of the home, current market conditions, and seller motivations when determining your offer price. Be sure to have your agent request a copy of the seller’s disclosure form. Speak to your agent about the amount you intend to offer. If you are in a competitive market and it is likely that you will compete against another buyer, your agent may advise you to include an escalation clause that will automatically increase your offer up to the maximum amount you specify. If you are looking at a home that’s been sitting on the market, you may want to consider requesting seller assistance (up to 3% of the total price of the home) to save on upfront expenses.

Your agent will present your offer to the seller or their listing agent and negotiate on your behalf to secure the best possible terms.

Make an Earnest Money Deposit

When submitting an offer, you’ll typically include an earnest money deposit to demonstrate your commitment
to the purchase.

The amount of the earnest money deposit varies but is typically around 1% to 3% of the purchase price, held in escrow until closing, and applied toward your down payment and closing costs.

Choose the Right Mortgage Option

Work closely with your lender to explore the range of mortgage options available. Consider programs specifically tailored for first-time homebuyers, such as Federal Housing Administration (FHA) loans, which often require lower down payments and have more flexible qualification requirements. Veterans and active-duty service members may qualify for Department of Veterans Affairs (VA) loans, which offer competitive interest rates and may not require a down payment or private mortgage insurance (PMI).

Determine whether a fixed-rate or adjustable-rate mortgage (ARM) is more suitable for your needs. With a fixed-rate mortgage, your interest rate remains constant throughout the life of the loan (generally 30 years), providing stability and predictability in monthly payments. An ARM typically starts with a lower initial interest rate, which adjusts periodically based on market conditions. While initial payments may be lower, they can increase over time, potentially impacting your budget.

Schedule a Home Inspection

Once your offer is accepted, schedule a home inspection with a licensed inspector to assess the condition of the property. The inspector will examine the home’s structure, systems, and components for defects or safety issues. Once the inspection is complete, they will provide you with a written report. Understand that the home inspection is for your benefit, as it is meant to uncover issues that you may want the seller to address. In a “seller’s market,” where buyers are competing for properties that may end up selling for more than the asking price, some buyers have decided to forgo home inspections to make their offer more attractive to the sellers.

Negotiate Repairs or Renegotiate Price

If the home inspection reveals significant issues or deficiencies, you may negotiate with the seller to address these concerns. Options include requesting repairs, requesting a seller concession toward closing costs, or renegotiating the purchase price.

Your buyer’s agent can advise you on the best approach and negotiate on your behalf to reach a satisfactory resolution.

Complete the Mortgage Application and Lock in Your Interest Rate

Formalize your mortgage application by providing all required documentation and financial information to your lender. This includes income verification, employment history, asset statements, and details about the property being purchased. Be prepared to respond promptly to any requests for additional information or documentation from your lender. During this time, remember not to make any large purchases that will raise red flags.

Your lender will also schedule an appraisal of the property to ensure it is worth the amount of money they are lending you. Typically, they will handle this and notify you of the results of the appraisal.

Once your mortgage application is approved, you have the option to lock in your interest rate to secure the terms of your loan. Interest rate locks typically have expiration dates, so act quickly to secure a favorable rate. Locking in your interest rate protects you from potential rate increases while your loan is being processed.

Obtain Homeowners Insurance

Shop around for homeowners insurance quotes from multiple insurers to find the best coverage and rates. Provide your lender with proof of insurance before closing, as it’s required to finalize your loan.

Homeowners insurance typically covers damages to your home and personal belongings caused by perils such as fire, theft, vandalism, and certain natural disasters. You might want to consider additional coverage options depending on your location (such as flood or earthquake insurance) or umbrella policies for added protection.

Transfer Utilities

Contact utility providers as soon as possible to transfer services such as electricity, gas, water, and internet to your name. Coordinate the timing of utility transfers to ensure uninterrupted service during the transition period. Update your billing and contact information with utility companies to avoid billing discrepancies.

Close on Your Home and Move In

The closing, also known as settlement or escrow, is the final step in the homebuying process. Typically, the buyer, seller, real estate agents representing both parties, and the closing agent or title company representative attend
the closing.

During closing, all necessary paperwork is signed, funds are transferred, and ownership of the property is officially transferred from the seller to the buyer. As the buyer, you’ll need to bring funds for closing costs in addition to the down payment. A certified check or cashier’s check (not a personal check) made out to the escrow company is required.

Congratulations, you’re officially a homeowner! Celebrate your new home and start making memories in your new space. Take time to unpack, settle in, and explore your new neighborhood and community.

Home Sweet Home

The homebuying process may seem overwhelming, but breaking it down into manageable steps can help alleviate stress and uncertainty. By following these essential steps and seeking guidance from professionals along the way, you can confidently navigate the journey toward homeownership and find the perfect place to call home.

If you have questions or concerns about getting your finances ready and buying a home, please contact our homebuying specialists.

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