The Homebuying Process
The homebuying process can be confusing and difficult to navigate, especially for first-time homebuyers. Following are the steps homebuyers will take as they purchase a new home.
Plan the Down Payment
As homebuyer begin to think about starting the process of looking for a home, they should also start gathering and saving money for a down payment. It is ideal to put down 20 percent of the cost of the home to avoid extra fees, such as private mortgage insurance (PMI). But if that is not possible, a down payment anywhere from 0 — 10 percent may be accepted, depending on the type of loan.
Check Credit Reports
Homebuyers should check their own credit reports before starting the process of looking for a home so they are aware of any issues that may come up during the lending process. Homebuyers need a decent credit score to get a loan. The better the credit score, the lower the mortgage interest rate will be.
Find a Lender for Pre-approval
Pre-approval can set homebuyers apart if they find themselves in a multiple-offer situation. Compare interest rates and fees of the different available lenders to find the best value. Homebuyers can provide a lender with detailed financial information, including W-2 statements, paycheck stubs and bank account statements to have their credit and finances checked for pre-approval. Pre-approval is an important step because it proves that homebuyers are in a financial position to purchase a home.
Research Property Types and Locations
It is important for homebuyers to spend time to consider the location and type of home they want to buy. It is common for people to choose a location based on factors such as proximity to work or family. Homebuyers should visit the potential location to determine if it fits their lifestyle. Homebuyers also should consider the different types of property available, including a single-family home, duplex, townhouse, condo or multi-family building, to determine which type they prefer. Some homebuyers seek a move-in ready home, while others are willing to buy a property that may require some updates.
Find a Real Estate Agent
Homebuyers can start looking for a real estate agent by asking for referrals from people they know. If there are no referrals available, homebuyers can check online reviews for agents who are active in the community they want to live in to find an agency or real estate agent with a good reputation. The real estate agent will be a key player to help homebuyers navigate the home buying process. For that reason, it is important that homebuyers trust and communicate well with their real estate agent. The real estate agent will lead homebuyers through the buying and purchase process by finding appropriate home listings, visiting prospective homes, making the offer, handling negotiations, completing the paperwork and providing advice.
Look at Homes
The real estate agent will send homebuyers online listings of available properties that fit within their budget in their desired location. Most online listings offer virtual tours, property specifications, listing price, tax costs, sale history and community amenities. After reviewing the listings and choosing the ones that best fit their criteria, homebuyers can visit those properties in person with their real estate agent. It is a good idea to look at several options before choosing one to better understand what is available within the budget.
Make an Offer
After narrowing down the options, homebuyers choose a home and make an offer. Earnest money is put down to show the seller the homebuyer is serious about the offer. This money is held in an escrow account until the closing and will be used toward the down payment and closing costs. In addition, closing terms and contingencies are specified.
Get a Home Inspection
After the offer has been accepted, it is important to have the home inspected by a professional ASHI home inspector. Home inspectors will check the entire home and its systems so the homebuyer knows the condition of the property. The inspector will write a report about their findings, which will go to the homebuyers and homeowners. Based on report, the homebuyer can withdraw the offer, renegotiate the offer or ask the seller to fix specific issues.
Have the Home Appraised
Home appraisals are conducted by the mortgage lender to ensure the homebuyers are paying a fair price for the property by reviewing comparable sales in the area and market trends.
Close on the Home
At the closing, all the closing paperwork and loan documents will be signed. In addition, homebuyers will pay the closing costs and down payment. The closing agent will facilitate the closing process. Sellers pay the real estate agents' commissions. After the closing process has been completed, the homebuyers get the keys to their new home.