If you are interested in buying a home, it is essential that you take the time to learn more about the home buying process. This includes being prepared by ensuring you have all of your necessary documents. As well, you must determine the type of home that you are looking to buy.
While the steps to buying a home may vary for some, the home buying process will usually follow the same general guidelines. This guideline includes reviewing your finances and credit score, finding the right real estate agent, obtaining a pre-approval for a mortgage, finding your ideal home and proceeding through closing and move-in dates.
By learning how to buy a home, you will be one step closer to purchasing and moving into your new home. Additionally, you may be able to identify ways that you can save money on your purchase, reduce your interest rate or improve your approval odds for a mortgage.
1. Review Your Credit Score, Report, Income and Debt-to-Income Ratio
Unless you can buy a home outright, you will likely need to obtain a mortgage from a lender. Therefore, it is essential to review the same factors that a lender will consider when determining whether or not to approve you for a loan and what interest rate to offer you. These factors include your:
- Credit score.
- Credit report history.
- Annual income and employment history.
- Debt-to-income ratio.
While buying a home with bad credit is possible, you may have to accept a higher interest rate or take advantage of a government mortgage program, such as an FHA loan. These programs are designed to assist low-income households and individuals with poor credit scores obtain a mortgage by reducing mortgage eligibility requirements.
2. Find a Real Estate Agent Within the Community You Wish to Purchase
One of the essential steps to buying a home is to select a real estate agent that will assist you through the home buying process. Depending on where you wish to live, you may have several choices for an agent. Therefore, it is essential that you check online reviews about any agent that you are interested in. As well, take the time to meet more than one agent. In doing so, you will ensure that you find an agent that you are comfortable with.
3. Get Pre-Approved for a Mortgage
Before buying a home, you will likely need to be approved for a mortgage with a licensed lender. To obtain a pre-approval, you will need to meet with a prospective lender and go over your credit score and financial information. You will also need to provide the lender with certain financial documents, such as your tax returns to verify your income.
Buying a home with bad credit can be accomplished through multiple lenders. However, should you wish to apply for a government loan program, you will need to find a lender that is approved for that program.
4. Determine the Type of Home You Want and Start Looking
Buying a foreclosed home can potentially save you money on the purchase price of a home as financial institutions are generally eager to sell properties to recoup money lost in a foreclosure. However, it is crucial that you always have an inspection performed before making an offer on a foreclosure, as these homes are sold as-is. If interested in learning how to buy a foreclosed home, it is worth knowing that you may be able to save even more by purchasing a HUD home.
When searching for a home, it is essential to review a list of your wants and needs for the home, regardless of the type of home that you intend to purchase. Would you prefer a house with a garage or a basement? Is the home in a location that is suitable for your job? By asking yourself these types of questions before you begin searching, your real estate agent can assist you in narrowing down your search.
5. Make an Offer
Buying a home is a substantial investment, and therefore, it is essential that you find the right house before making an offer. Once you have found the right home, your real estate agent will work with you to make an attractive offer. If your offer is not accepted, you may need to negotiate the purchase price or any contingencies that you have.
6. Determine Your Closing Day and Move-in Dates
Once your offer to buy a home is accepted, you will need to complete paperwork to finalize the sale of the house. Your paperwork must be completed on your closing day. Generally, move-in dates are within a few business days of close, but you will learn the exact date that you may move in when completing paperwork.