For many individuals, homeownership is the end-all-be-all of adulthood. It’s the core component of the American Dream and signals success to others. Yet, getting to that point is a lot easier said than done. Owning a home requires you to take on a significant level of responsibilities – financial and otherwise. Therefore, it is imperative that interested home buyers take their time in preparing themselves for this huge undertaking. Below is just a simple breakdown of the steps you’ll need to take to become a homeowner.
Determine How Much You Can Afford
You don’t want to commit to a mortgage only to realize you can’t afford to keep up with it. This will certainly result in a foreclosure and reduce your chances of obtaining a house for the next 7 to 10 years. Before you make any steps towards homeownership it is recommended that you review your finances.
Remember, you won’t just have to afford the monthly mortgage payments. You’ll also be required to pay homeowners insurance, property taxes, utilities, and your other expenses and needs. It is highly advised that homeowners don’t take on a property that will consume more than 20 percent of their income.
Review Your Credit Score
When you start looking for mortgages to cover the cost of your new home you’ll need to have a good credit history and score. Lenders review this information to determine whether you can afford the loan you’re applying for and how much of a risk it would be to lend the money to you.
Now would be a good time to clean up your credit report, if necessary. Start making all payments on time, get your debt to income ratio down, reduce your credit utilization percentage to at least 30, and settle or dispute any collection or delinquent accounts.
Get Prequalified for a Mortgage
You’re now aware of how much of a mortgage you can afford and your credit is prepared for lenders to review. You’re now ready to begin looking to get a pre approval first time home buyer offer from a reputable lender. Take your time in reviewing lenders as there are lots of different programs and incentives that you can take advantage of to make homeownership a lot more affordable. Once you’ve found the appropriate mortgage lender you can complete the application in full and wait for a response on a pre-approval.
Hire a Real Estate Agents
Though you could essential shop for a home without the assistance of a professional, if this is your first time it may be ideal to work with a real estate agent. They not only have access to multiple properties within your price range (and inclusive of your needs) but they will see to it that you get through the home buying processes efficiently.
There are several ways to find the right real estate agent. You can start by asking those you know for recommendations. You can also do a quick online research and look at databases where you can find realtors in your area. Be sure to interview at least three potential candidates before making a final decision.
Shop for Potential Homes
Once you have your pre-approval notification and the right real estate agent on your side, you’re ready to start looking at properties that could potentially be your new home. Be sure to give your real estate agent a detailed list of what you’re looking for. While you might fall in love with the first house you see, it is always best to look at a few to make sure you’re making the most efficient decision.
Make an Offer
After touring several homes that include everything you want in a price range you can afford, you should be ready to make an offer. You’ll have to work with your real estate agent to complete an offer and sale agreement with the buyer. This will include information like the sale price, move-in date, special requests, etc. If the offer is accepted, you’ll want to complete a loan application and provide supporting financial documentation.
Home Inspection
The final step towards homeownership is a home inspection. A home inspection is likely required by your mortgage lender but it is essential to ensure you’re not purchasing a home that is unhealthy, unsafe, or a money pit. Hire a home inspector to take a look at the entire property and give you a detailed report of any findings.
As you can see, there are a lot of steps involved in becoming a homeowner. Yet, taking your time in each of these steps is imperative to ensure that you make a wise investment. The good news is, once you’ve gotten this far you’re ready to start packing and get ready for your move.