So you’re almost ready to buy a home? This is an exciting step toward creating a better future for yourself. To help you prepare for this major milestone, we’ve put together a list of some of the key steps you need to take before purchasing your dream home.
1. Review your current finances.
First things first, you should figure out where you stand financially. To get the most accurate picture of your financial health, you’ll need to look at current and upcoming expenses (these are important for forecasting) and your income. Once you have all this information, you’ll need to add everything up to see how much discretionary income you have.
Figuring out your finances will play a critical role in determining whether you can afford to buy a home right now and how much you can afford. Keep in mind that if you’re low income, you may be able to qualify for a free home.
2. Save up for your down payment.
Now that you have an idea of how much money you have, you can figure out how to start saving for a down payment. Your down payment is usually based on several factors, including the cost of the home and the required down payment percentage to qualify for your home loan. Traditionally, prospective homebuyers try to put down approximately 20% of the home’s value. However, that’s not realistic for many of today’s hopefully homeowners and fortunately there are mortgage programs that accept more lenient down payment terms.
To start saving for your down payment, you’ll likely need to create a budget. The first thing you’ll want to do is cut out any unnecessary expenses like subscriptions you don’t use, frequently dining out, and other luxury costs.
3. Get qualified for a mortgage.
Unless you’re paying your home off in cash, you’ll need a home loan, also known as a mortgage. You should shop around with different lenders before signing your mortgage agreement. You’d be surprised at the different rates you might be offered.
If you end up with a mortgage that is less than ideal, whether due to your financial circumstances or lack of knowledge, it’s not the end of the world. In a few years you can always refinance with a hard money loan to reduce your payment.
4. Make your must-have list.
You likely have a picture of your dream house in your head already but now’s the time to get back to reality. While you can probably find something close to what you’re looking for, you might also have to make some compromises.
To make this process easier, it’s highly recommended that you make a list of must-haves, as well as a list of features you can live without. Not only will this make it easier for a real estate agent to narrow down the house they choose to show you but it can alleviate some of the frustration when it comes down to making the difficult final decision. If you’re buying your home with a partner, make sure you both have a say in this list so that when it comes down to it, you’re both happy with the result.
5. Find a real estate agent.
If you haven’t used a real estate agent, you might think finding one is pretty simple. However, you want to find someone you can trust to help you make this big decision. And, since you’re going to be spending a good amount of time with them, you want to make sure they’re friendly and easy to deal with. One way to go about finding a real estate agent is getting referrals from friends or colleagues. You can also go online to find a realtor, just make sure you read up on their reviews.
6. Plan a home inspection.
One of the final steps before closing on your home is conducting a home inspection. A home inspection will bring any serious issues to your attention before you purchase your home. This is an important step because it gives you the opportunity to get a third party’s perspective on the quality of the home and an opportunity to withdraw or renegotiate your offer based on the findings, which you’ll likely want to do if you’re going to have to put a lot of money into home improvements and repairs.
When choosing a home inspector, you should check to see if they’re affiliated with the American Society of Home Inspectors (ASHI), which upholds those working in the industry to the highest standards.
While it’s inevitable to get swept up in the excitement, it’s also important to follow these 6 important steps before you buy, you’ll be happy you did down the road.