Purchasing a home is one of the biggest decisions most people will make in their life. It involves a long-term commitment financially and emotionally, but it can also be a very exciting and rewarding experience.
When buying a new home, there are a few key things to consider from the start:
- What monthly payment can I afford?
- What features and amenities am I looking for in a home?
- Should I work with a licensed REALTOR®?
- Once I find a home to purchase, what do I need to do next?
- How much cash do I need at closing?
- How do I obtain a mortgage loan?
Before You Begin Your Search
Get Pre-Qualified
Unless you are able to pay cash for your home, most buyers will need to apply for a mortgage. By contacting a mortgage loan specialist before you begin your search, you are able to determine the loan amount you qualify for. Typically, a borrower is pre-qualified for a loan that amounts to 28% or less of their gross monthly income. In addition, if you know the monthly payment you are comfortable with, a mortgage specialist can calculate the price range for your home search.
Getting pre-qualified for a loan also increases the chances of your offer being accepted. A seller is much more likely to accept an offer from a buyer who already has funding in place versus one who still needs to secure a loan.
By going through the pre-qualification process, your mortgage specialist can provide you with an estimate of how much cash you will need for the transaction, including the down payment, earnest money deposit, and closing costs.
Make an Amenities List
Decide what features are most important to you in a home. By establishing your criteria, you will save time by filtering out homes that do not meet your needs. Also, consider the specific locations you are interested in. Determine which criteria you absolutely cannot live without, and which ones you are willing to negotiate on.
Some typical criteria to include:
- Price range
- Neighborhood, subdivision, or water body
- School districts and proximity to work
- Proximity to shopping, restaurants, and hospitals
- Number of bedrooms and bathrooms
- Garages, storage spaces, and lot sizes
- Waterfront specifics (dock, water depth, sandy beach)
Choose An Agent
Once you have decided on the price range and features, your next step will be to decide whether you will search on your own or use the services of a real estate agent. If you choose to use an agent, make sure you enter into a **Buyer's Agency Agreement**. This ensures that the agent will represent you, the buyer, in the transaction rather than representing the interests of the sellers.
Ask friends and family for referrals of agents they have worked with. Select a REALTOR® that you trust and with whom you feel comfortable. Remember, there are usually no out-of-pocket fees that you pay to the buyer's agent. These commissions are typically incurred by the seller. Your agent will research property listings, coordinate showings, and guide you through contract negotiations and closing.
Beginning Your Search
Once you have selected an agent and determined your criteria, it is time to start touring homes. Based on your preferences, your REALTOR® will search the database for matching homes. Compare each home carefully — every property is unique!
Bring an amenities checklist to all properties you visit. Make notes of what you like and dislike to help you compare them later. Additional things to consider during home tours include: cost of upkeep and utilities, required maintenance, cost of updating or decorating, homeowner's association (HOA) dues, and neighborhood traffic patterns.
Making an Offer
Once you have found your dream home, it is time to prepare an offer to purchase. Your buyer's agent will help you determine a reasonable price based on recent sales of similar homes in the area. In addition to the price, terms to negotiate include: earnest money deposit, buyer concessions (carpet/paint allowances, help with closing costs), home inspection contingencies, financing terms, what appliances are included, and the closing date.
Closing the Deal
Once your offer has been accepted, you will work on the final steps of purchasing your home:
- Home Inspection: Arrange to have a professional inspect the home to check for structural, electrical, and plumbing issues. This is highly recommended to prevent future surprises.
- Apply For A Loan: Contact your mortgage specialist to officially apply for your loan with necessary tax returns, pay stubs, bank statements, and debt details.
- The Final Walkthrough: Conduct a walkthrough as close to the closing date as possible to verify that the home is in the agreed-upon condition, requested repairs are done, and the house is vacant.
- Closing: Meet with the closing attorney to sign all contracts and finalize the purchase. Remember to bring a certified check for closing costs, a picture ID, and your checkbook.
Congratulations! You are now a new homeowner!