8 Steps to Buying your Dream House
Buying a house is a dream for many people. There’s no definite guideline as to how you can buy a house. Things differ from one state to another. This list provides a general overview of the whole buying process. Make sure you research on what different steps are applicable in your area. This guideline just aims to make you aware of what possible steps are included in the process.
So now instead of getting perplexed by the lengthy process, you’ll be able to pinpoint your progress. The more confident you are about the process, the better decisions you can make. Since it’ll require a lot of time and effort don’t expect to glide smoothly towards your dream home. The process takes time and your patience will go a long way in helping you make the right decision.
1. Review your Credit Report
If you’ve been keeping your credit report in good condition, you’ll have an advantage. Why is this so important? Simply put, your loan and mortgage applications will be accepted on the basis of your credit report. Preparing yourself before applying for a mortgage will result in less headache and stress throughout the process. Knowledge is power. Loan terms are derived from many factors including your credit score, debt to income ratio, and loan to value ratio.
2. Research Mortgage Options
This may seem odd; searching for a mortgage before a house but this backward technique will eventually help you. Once your lender approves your credit report, you’ll be able to determine how much you can actually borrow. This way, you’ll have a clear idea of how much you can spend on your house, without breaking your bank account.
Decide on how much you’d like to pay in monthly payments. Only you can be the better judge of that so don’t let the lender coerce you into anything you’re not comfortable with. You can request a loan preapproval letter from the lender. Having a pre approval letter from a lender informs the seller that your credit and income information has been verified by a lender, and that lender has pre-approved you based on your credit, income, and debts at the time of application.
3. Hire a Real Estate Agent
With the rapid changes in the real estate market, you’d better hire an agent. Usually agents work with sellers but there are also buyer representatives out there. All you have to do is search or ask around. It’s better to hire an agent referred by someone you know. This way you’ll be assured of their level of competence and professionalism. The important thing to remember is that you don’t pay the agent, the seller does. Relish the feeling of saving money on agent’s commission.
4. Search For a House & Select Your Loan
Well, it is your dream house and you’d know better where to look. In case, you’re open to suggestions, looking at advertisements in your local paper is a good start. Or just Google for the best housing schemes in town. Opt for a more fun way and just drive around your favorite neighborhood to get an idea on what to buy.
To narrow down your search, look for foreclosed houses, fixer-uppers or over priced houses that have been on the market for long. You might have a better chance of finding a house once you decide where to look. Inform your agent once you’re sure about your choice. Contact your lender to decide loan terms and conditions.
5. Offer for Purchase and Counter Bids
Now that everything has been checked and you’re content with the condition of the house, it’s time to offer a bid. Compare all the properties you’ve seen and offer a reasonable price. It can be lower than what the seller is asking. Your best guide here will be the buyer representative. Be prepared for the seller to counter; you can’t really expect to win at first try.
Counter bids are perfectly normal and may be a positive sign that the seller is considering selling to you. If you need additional help with making an offer, you can find it here.
6. Deposit Earnest Money
Once you and the seller reach an agreement on the price, you’ll have to deposit a ‘binder’. Don’t confuse it with down payment. This sum of money is like a guarantee that assures the seller you’ll keep your word and buy the house. The earnest money can be anywhere from 1-3 % of the total sales price.
A word of warning; never give the money to the seller. Instead, write the check for a third party, a law firm, a title company or a real estate agency.
7. Manage the Paperwork
This includes your mortgage application and house deeds. Submit your mortgage application along with the applicable fees. The lender will then get the house appraised to assess its worth. This is a good time to do a final walk-through to ensure you’re getting the house in the condition you agreed to buy it in.
8. Close the Sale
With all the documents signed and checked by both the parties, you’ll need to deposit the down payment. It’ll take a few weeks before you receive the original deed but in all terms, you’d be the owner of the house. The first thing to do when you shift to your new house is to change the locks.
Congratulations! You’ve bought your dream house. Now instead of rent, you’ll be paying mortgage. That’s a step ahead in life as you will be investing in your home and over time, your equity will build up.