A Five Step Guide to Buying a Home

May 19th, 2014

If you’re looking for help in understanding the process to purchase a home, look no further. With our five-step guide, you’ll be ready to buy a new home.

Step 1:  Determine Your Credit Score and How Much Home You Can Afford

First, you should check your credit report and make sure there aren’t any errors.  You are entitled to receive one free copy of your credit report per year according to the law.  You may find that relatives are listed or that you still have a joint account with a family member from years ago.  Clear up any issues.  Scores range from 300 to 850 with a higher score being more desirable.  If you find your score is low you may want to take steps to improve your credit before starting the home buying process.

To get an approximate estimate of how much mortgage you can afford you can use an online mortgage calculator.  Keep in mind you will also need money for a down payment and closing costs.  If the home needs repairs or furnishings you will want to make sure you have some extra money available.  Consulting with a home loan expert may be worthwhile as they can explain all of your loan options.

Step 2: Locate The Right Lender

Get recommendations from friends and family to find options for good mortgage lenders.  Check the Better Business Bureaus as well.  You will want to choose a lender you are comfortable with because you will need them to help walk you through the home buying process and the overwhelming quantity of paperwork.  Request pre-approval so you know what amount of loan you qualify for.  This will help you narrow down your search for homes.

Step 3: Create a List of Wants and Needs and Start Searching

Determine which aspects of a home you need and which things would be nice to have but you could live without.  Consider how many bedrooms and bathrooms you would like.  Do you want land or a garage?  How much space do you desire?  Are you looking for a new home or a used one?  Keep in mind that a new home will require less maintenance and will be more energy efficient than a used home.

Are you looking to live within a certain school district?  Do you have an area you want to search within that provides a reasonable commute to work?  Do you want to be close to shopping and restaurants?  Determining all of these details and how important they are to you before you start looking at houses can limit the amount of time you spend searching.

Once you have found the home you desire, make an offer.  If you are buying a used home consider requesting an inspection first.  The inspector can let you know if the air conditioner is about to fail or if the roof will need replacing shortly.  They can tell if the home is structurally sound.  However, an inspector can not guarantee that you won’t have upcoming expensive maintenance projects on your home.

Step 4: Select the Right Mortgage Options for You

Once you have found the home you want and your offer has been accepted it is time to determine the mortgage specifics.  The two main kind of mortgages are adjustable rate mortgages (ARMs) or fixed rate mortgages.

Fixed rate mortgages are considered more traditional and are ideal for people planning to stay in the house for many years.  Fixed rate mortgages generally last 15-30 years and the interest rate stays the same throughout that time period no matter how much the market interest rate changes.  Fixed rates mortgages are helpful for budgeting as the payment is predictable.

ARMs have a fixed interest rate for a short period to time, 1-7 years typically, and then the interest rate adjusts as the market changes.  These mortgages tend to work best for people who will likely be moving again before the interest rate starts to fluctuate.

Your mortgage lender can provide you details about your loan options.  Be sure to understand what you are signing up for and if it is constant over the life of the loan or if it will change over time.

Step 5: Close on Your Home and Move In!

A closing date will be set and your lender will let you know what closing costs you are responsible for.  Once you have signed all of the paperwork you are able to move into your new home!  You can unpack and enjoy!

Contact Us if you are ready to start searching for a new single-family home in Southern California!

 

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