In case you missed them, here are the 2 blogs to read before this one:
Now that you’re all caught up . . . you’re going to do it! You’ve checked your credit report. Your job is secure. You’ve been saving every spare penny for months. You’ve been staking out IKEA living room sets on your weekends off. You’re ready. You’re going to buy a house.
Unfortunately, buying a house isn’t as easy as going to Target and picking one off the shelf. So where do you start? Once again I have turned to my good friend Erik the Mortgage Officer, and he helped me come up with these steps for buying a house. Each person’s experience might be a little different and you might not follow this timeline exactly but this should give you an idea of how the purchase process should go:
- Determine Your Must-Haves – Although these things might change as you go through the home-buying process, I recommend having an idea of what you want before you do anything else. Make a list of 4 or 5 things that are important to you such as location, number of bedrooms, or style of house. You might need to refine your “must-haves” when you get approved for a certain dollar amount or when you start to visit homes for sale in your area, but these guidelines will give you some place to start. It’s important to be flexible, but you also don’t want to walk into this process blind; having a visual of the end-goal will help you make important decisions along the way. This step is especially important if you have a partner-in-crime for this purchase – what if your significant other wants a 70’s era one-level ranch when you dream of a three-story Victorian mansion?! It will be better to find this out at the beginning of your home-buying journey when there’s time to negotiate rather than once you’re ready to make an offer on your dream-house and your better-half isn’t on board. Save yourself time – have guidelines in place.
- Get Pre-approved – The next step is for you to visit your financial institution and get pre-approved for a mortgage loan. Hopefully, you’re going into that office with your best financial foot forward. Check out my previous blogs for tips on how to get your finances ready to buy a house.When you get approved for a mortgage loan, your financial institution will tell you that you are approved for up to a certain amount. For example, you might be approved for up to $150,000. IMPORTANT: this doesn’t mean you have to use that full amount! It just means that is the maximum limit to your spending. If you find a place for less, then that’s great. A pre-approval is generally good for between 60-90 days. Don’t worry if you haven’t found the right place by the end of this period – there’s no penalty for not buying a house during that time! It won’t negatively affect your credit, it just means you will have to reapply. A good tip: don’t do anything that would change your credit during that 90 day period, like apply for a new credit card or buy a car. You don’t want to think you are approved for a certain amount, find the perfect home, and then find out your credit has changed and you can no longer get a mortgage approved for that amount.
- Get a Realtor – Oh, to get a realtor or not to get a realtor? That is the question? There’s a lot of debating out there about whether or not you truly need a realtor to buy a house. But unless you are in the housing business yourself, chances are you could benefit from the help of a professional. Navigating the home-buying process is tough, especially if you are a first-time home-buyer! Why go it alone when you can have someone who has been through the process hundreds of times be your real estate spirit guide? The key is to comparison shop. Look at a lot of different realtors in your area. How long have they been in the business? Do they have any references? Does your mortgage officer have anyone they recommend? You want someone with experience who is familiar with the neighborhood you are looking to buy in and who understands your vision for your first home. You can still look at home-listings in your area and request to see certain properties, but your realtor will be able to make recommendations, as well. This is the stage at which you will actually begin shopping around for your new place. Hopefully with you realtor’s help you will find a house that feels like home and you will be well on your way to Step #4 . . .
- Get a Home Inspection – Mortgage-Officer-to-the-Stars Erik, told me that this is one step people commonly skip in an effort to save money. But it’s one of the most important ones. Once you find a place you like and think you are ready to make an offer, GET A HOME INSPECTION! If you don’t, you might end up costing yourself more money in the long run. A home inspection before buying could alert you to major problems in your potential new home that are costly to repair. Would you rather spend $1,000 to get a home inspected before you buy it or move in and find out about a $10,000 mold problem? If the home needs small repairs, you might be able to negotiate with the seller to have them fix it before you buy or get the price decreased. If the house needs a lot of work, you might be better to cross it off your list. Doing an inspection can give you peace of mind that the investment you’re making in a new home is a sound one.
- Closing Time – “One last call for alcohol, so finish your whiskey, your beer . . .” If you don’t remember that song, you are too young to buy a house. But in all seriousness, closing is the last and final step of this process. Once you find a place you like, your realtor will work with you to make an official offer on the house. This is where the haggling ensues and is when you realize how glad you are that you have a real estate agent helping you out. More than likely, the seller of your would-be home will make a counter-offer aka they will ask for a little more money than what you want to pay. Since we don’t barter or negotiate price very much in our everyday lives, this process is a tricky one to navigate alone. Your realtor can help you decide whether you make your own counter-offer, accept the seller’s price, or walk away from the sale. If you and the seller can agree upon a final price then they accept your bid, you visit your financial institution to close on your new mortgage loan (hopefully there will be no hiccups there because you were a good boy/girl and didn’t do anything that would affect your credit recently), and then you move into your new place and stay up all night celebrating! Yay for you! You bought a house! If your offer isn’t accepted by the seller, you will have to continue your search. It’s ok to be sad and maybe even cry a little, but dry those tears – there’s plenty of houses out there and you will find the right one for you.
My last and final tip for the first-time home-buyer – Don’t be scared to ask for help! If you were going to take up golf, you’d probably take a lesson or two from a pro. Maybe read a few golfing magazine. Watch some YouTube videos about perfecting your swing. Basically, you’d do some research before you went out there and just started wacking your club at balls. Buying a house is no different. Take advantage of all of the resources out there. Ask friends, family, and co-workers for advice. Reach out to your financial institution. No one expects you to be an expert the first time around and your house-hunting experience will be a lot less stressful and more successful if you have people guiding you in the right direction.
Best of luck to all you first-time house-hunters out there! I’d love to hear about your experiences. Please feel free to leave a comment telling me about your journey to your first home.