Posted On: August 20th, 2021 4:43PM
Americans hop onto real estate websites and apps to scroll through numerous houses for
sale with no intention to buy a house. Scrolling has become such a trend that Saturday
Night Live recently ran a skit poking fun at this.
The prospect of buying a house seems daunting.
That does not have to be the case. If you are looking to become a first-time homebuyer,
keep this in mind: homeownership is within your grasp. Why is that? Let me explain.
There are five questions you should ask yourself to determine if you are ready to
buy a home.
1. How is your debt to income ratio (DTI) and your credit? This is something any lender
will focus on when you submit your pre-approval application.
2. Do you have money saved up for fees and costs that will incur during the home
buying process? For this one, think about inspections, appraisals, application fees
and possible closing costs you may have.
3. Are you able to afford the actual monthly mortgage payment? A mortgage payment
is not simply paying the loan amount. A mortgage payment encompasses the loan,
insurance, fees such as HOA dues and taxes.
4. Are you settling down in one location long enough to make homeownership worth it?
If not, will you rent your house out when you move?
5. Will you be able to afford possible repairs and maintenance?
If you have answered “yes” to these questions, you may be ready to buy a house. Now
Create your team. That’d be your real estate agent and your lender. Those two individuals
will be the most important individuals during the entire process. It’s important to find an
agent and a lender that is able to help effectively guide you through the home buying
process. When looking for the right agent and lender, keep a couple of critical thoughts in
mind. First, both the agent and the lender need to be able to educate and provide insight on
certain aspects of the process. Second, both the agent and the lender need to be
communicative and transparent about every aspect of the process. If your agent and lender
can do both of those critical acts, you are good to go!
The steps to buying a home are as follows:
1. Speak with a lender to get pre-approval for a mortgage.
2. House hunt and submit your offer.
3. Get to the closing table.
4. Sign the papers on your new home!
Let’s get step-by-step in brief over each step.
Step 1: pre-approval
There is no one basic loan for everyone. Each homebuyer is different with unique situations.
That is why speaking with a lender first is vital. Your lender will be able to tell you what may
be best for you based on the financial information given. There is a Federal Housing
Administration (FHA) loan. This option is attractive for lower credit scores, and a down
payment can be as low as 3.5 percent of the purchase price. In addition, there may be state
and county programs that can assist homebuyers with down payment assistance so you
have zero percent down. There is a conventional loan. Again, based on your credit score,
your down payment can be as low as three percent. And then, there’s even a USDA loan for
more rural areas that are 100 percent financed with no down payment needed.
The type of loan you get with certain terms depends on your financial situation. It is very
important to speak to a lender about all of your possibilities.
Step 2: house hunt and your offer
This is the “fun” part of the process. Using the criteria you’ve discussed with your real
estate agent, you both will start house hunting. Be sure to know what your lender has pre-
approved you for and stay within that financial limit. Your agent should be able to help you
find just the house for you.
The size of a house, number of bedrooms and bathrooms, house features and location are
all important to think about as you’re house hunting. Utilizing the tools available will be key
to finding the right house for you.
Once you’ve found a house you like, it’s time to submit your offer. Your offer should be
attractive enough for the seller and you to come to an agreement. Consult with both your
agent and lender if needed to create a solid offer. And, should the offer go well, you’ll be
under contract in no time! This can be the easy part of the whole process because once
you’ve found the house, the work begins.
Step 3: getting to the closing table
From here on out, you have anywhere between 30 to 60 days to get everything done in
order to get to the closing table. You’ll have inspections to have done. You may need a
survey of the house to be done. You will need to submit your financial history to the lender
so that the lender can finalize your approval. You’ll need to get homeowner’s insurance.
You’ll need an appraisal done as well.
All of that can sound daunting. This is usually what stresses the first-time homebuyer out.
But, have no fear! This is what your real estate agent and lender are for. They will be
guiding and handling much of the work. All you need to do is get documents in on time and
make sure you respond to calls and emails. Any delay could delay closing. For the next few
weeks, stay on top of the process so that the process can go smoothly.
Step 4: signing the papers
You’ve made it. All of those emails, appointments, scheduling, phone calls and talks have
led you to the day you go sign the papers to close the process out. This is closing day. You
may have money to bring to the table. You may not. Closing costs are determined by your
loan and lender. That’s why picking the right lender is important.
A typical closing session takes about an hour. There is a stack of papers for you to sign after
all! And, once you’re done with that, congratulations. You are a homeowner.
I hope this has helped your understanding a bit of how the home buying process works. I
hope you’ve found tips here and some good information to use as you buy your first house.
Remember this: you are not alone. You will have a team working with you to get you
through the process. Homeownership is a lifetime achievement. You can achieve it.