12 Steps to Buying a House
There are lots of steps to buying a home, and we’re here to make it easy, fun, and rewarding for you. Follow these 12 simple tips to buying a house with ease, and make owning your dream home a dream come true. We’ve got you covered from picking the right real estate agent and lender to finding your ideal neighborhood.
12 Steps to Buying a Home Summary :
- Decide on a Budget
- Check Your Credit
- Determine How Much You Can Borrow
- Research Mortgage Lenders
- Look Into Getting Pre-Approved Loans
- Interview Real Estate Agents
- Identify Potential Neighborhoods
- List Your Needed Features Must Haves
- Go House Hunting
- Make an Offer
- Get An Inspection or Build a Home
- Close and Celebrate
1) Decide on a Budget
One of the first steps to buying a house is to consider your overall budget and lifestyle.
Although we'd all love to have everything on our wishlist, sometimes we have to make compromises to stay within our budget.
No one wants to fall in love with a home just to find out its way out of their price range.
To begin with, list out your monthly income and expenses. Include any payments for cars, credit cards, student loans, and child support or alimony. Once you’ve done that, you’ll have a better idea of how much of a mortgage payment you’d be able to afford.
Along with affordability, it’s important to consider your ideal lifestyle.
- If you’re still working, how much of a commute are you willing to have?
- If you work in a big city like Dallas, San Antonio, Indianapolis, or Atlanta how close to the city do you want to be?
- Would you be willing to have more of a commute if you could buy a nicer home?
- Are you willing to spend less on eating out and entertainment to purchase your dream home?
As you can see, it doesn’t just come down to numbers, lifestyle is a big deal, and it’s important to consider that before you start shopping.
2) Check Your Credit
It’s fast and easy to check your credit for free online. This will give you an idea of what your scores are and if there’s anything you need to work on.
There are three main credit reporting agencies:
Two places you can see your scores for free are Credit Karma and Free Credit Score. It’s quick to sign up, and you don’t need a credit card. Viewing your credit through these companies does not affect your score. In addition to updating your score each month, they will let you know if there are any changes to your credit.
CreditKarma.com: You get two credit scores, one from TransUnion data and one from Equifax.
FreeCreditScore.com: Gives you one score from Experian.
3) Determine How Much You Can Borrow
You can get a good idea of how much you can borrow and what your payments will be with a mortgage calculator. One thing to know is that each loan program has different rules based on your credit and down payment amount. If you have limited funds for a down payment, an FHA loan may be the way to go. For those buyers who are veterans, be sure to ask your lender about VA loans.
When it comes to getting a loan, underwriters look at your debt-to-income (DTI) ratio. They want your payments to be less than 43% of your income. An example of that is: if your monthly overhead including debts and housing is $4,000 and your monthly income is $10,000, your DTI is 40%.
4) Research Mortgage Lenders
One of the best ways to find the right mortgage lender for you is by asking your friends if they can recommend someone. The second go-to place is online reviews with Google, Yelp, Zillow, and Trulia.
Make sure that you’re looking for a lender who provides the type of loan you need. For example, if you’re a first-time home buyer and want to take advantage of local government grants, not all mortgage banks or brokers provide those programs. Or if you have your heart set on a brand new home, the builder will probably have excellent financing options available that you can’t get anywhere else.
One of the advantages of going with a mortgage broker is they offer loan products from several different banks. This means they can shop around for you to find the best deal. Brokers provide a more extensive selection of loans as compared to a bank who only offers their own products. Depending upon your situation, you may be able to get your best deal with a broker. Google “mortgage broker” to see what comes up for your area, read reviews and go from there.
And, if you need a brush up on any financial terms, consider reading our helpful post, 10 Mortgage Terms You Should Know.
5) Get Pre-Approved For A Loan
Once you’ve selected your lender, it’s time to get your pre-approval. What a pre-approval letter does is tells your real estate agent that you are a qualified buyer. This way they will be willing to put in the time to show you homes. Whether you’re buying a house for the first time or the fifth time, having a lender you can trust is essential, so do your homework and select the best lender for you.
Your loan officer will go over the loan process with you and explain each step. They will also give you a list of closing costs involved and what costs the buyer pays. Make sure you ask any questions along the way. It’s a smart idea to be aware of some of the common terminology used throughout the home buying process.
Once you have your pre-approval letter in hand, if you don’t already have a real estate agent in mind, it’s time to start interviewing.
6) Interview Real Estate Agents
Since buying a house can be stressful, it’s critical that you find an agent that you feel confident in and an agent that knows what they’re doing.
Selecting a casual acquaintance might not be the best idea if they’re not experienced. A few things to check out when interviewing agents are:
- How familiar is the agent with the areas you’re interested in?
- How available are they? Are they full-time or do they have another job?
- Take notice if they answer phone calls and emails right away.
- How are their negotiating and people skills? Are they easy to work with?
- How aggressive are they with offers considering the current market?
- Make sure you check out Google, Yelp, Zillow, and Trulia for reviews.
If you’re considering a newly built home, let your real estate agent know that too so they can be with you when you preview any models. The builder will have their own real estate agent (usually on-site) who will help you through the process, but you can still be represented by your own agent as well.
7) Identify Potential Neighborhoods
Unless you’re new to an area, you are probably aware of what neighborhoods you’re interested in, but it’s always good to take a fresh look at things. Sometimes there are new communities that would be a good to check out.
If you’re moving into a new area and you have children, you can see how different districts stack up all over the country by visiting GlobalReportcard.org. Another sure way to find the perfect home in a new area is to search: “Best neighborhoods in (town name).” Once you’ve made your preliminary list, it’s time to move onto what you want for the home itself.
By the way, if you are moving North Carolina or California, we have already pulled together our top lists for places to live in the state. You can also read more about what makes cities like Houston, Dallas, Indianapolis and San Antonio great places for a new home.
8) List Your Home Must Haves
This is the fun part! Sit down with your family and make a list of things you absolutely have to have. Put them in order of importance. For example:
Bedrooms - what are the minimum number of bedrooms and how big do they need to be? Could an office be used as a guest room?
Bathrooms - how many bathrooms do you need and are there specific things you want for a master bath? Do you want tubs or showers?
Floorplan - do you want an open floor plan or would more traditional, smaller rooms work for your family?
Kitchen - do you want a large gourmet kitchen or an open kitchen that’s perfect for large families and entertaining? What is your kitchen style?
Pantry - for gourmet cooks and busy moms an oversized pantry is a dream come true and can make cooking even more enjoyable.
Laundry room - this often-overlooked room should be considered. New homes even offer Super Laundries that make it easy to tackle all of a family’s dirty laundry.
Technology- a lot of homes, particularly new homes, come equipped to handle the new technology that is available on the market. If you have always dreamed of having a Smart Home, consider putting a CAT-6 enabled home on your list. That way, you have the technological “structure” to add all sorts of Smart Home tech. Not sure you want a Smart Home? Read about our top benefits of Smart Homes to see if it fits your needs.
9) Go House Hunting
Now that you have your needs list, it’s time to go shopping! Remember, this is an adventure (similar to a scavenger hunt!), and you may not find your perfect house on your first day out. Your real estate agent will most likely plan out your days with several homes to see within your parameters. As you visit each property for sale, make notes on each of them of what you liked and what you didn’t. That will make it easier to compare properties and revisit the ones you’re interested in.
When you’re comparing homes, don’t just compare the house - take other important things into consideration like:
- Yard space
That way you’re comparing apples to apples.
10) Make An Offer
When the time comes to submit an offer, take some advice from your real estate agent. They’ll know the best way to present your proposal and whether you should go over or under the asking prices. The amount of your offer depends on:
Market conditions - it’s a waste of time to put in a low-ball offer in a hot market for a house that’s in good repair. Find out from your realtor how long homes are staying on the market. That will give you a good idea of how aggressive you need to be in your offers.
New construction - if you’re looking at homes that are just being built, the base price will be set with optional upgrades. Sometimes the builder will make concessions on upgrades, so that can be a negotiating point.
Property condition - is the house you’re looking at in good repair or does it need work? Depending on how much work it needs and how extensive, you’ll need to price accordingly. For example, if it needs a new roof or HVAC allow for that in your offer.
Don’t get disappointed if your first offer isn’t accepted. Depending if it’s a buyer’s or seller’s market will make a difference. In a seller’s market, there’s more competition with multiple offers over the asking price. In a buyer's market, you have the bargaining chips.
11) Get An Inspection or Build the Home
Once you’ve selected your home and your offer has been accepted by the seller, it’s time for inspections. The buyer has the right to inspect the residence for a certain time period. An appraisal will be ordered by your lender for which the borrower usually pays. Often times your lender will request what’s called a Four Point Inspection.
This inspection focuses only on four main areas of the home:
Roof - what’s the condition, are there any current or old leaks, and how much life is left in it?
Plumbing - is the plumbing per code and are the connections and fixtures in good repair?
Electrical - are the electrical wires and panels per code and in good condition?
HVAC - does the heating, ventilation, and air conditioning work and is it in good repair?
Depending on the property, other inspections may be required.
If you have opted to buy a new construction home, there is little need for an inspection, since most builders will offer a warranty that covers repairs for a period of time. Instead, your next step will be going through the process of building the home. While each builder might take different steps, it is important that YOU feel comfortable with the build- after all, this is your new home! Consider working with a company that offers you a step-by-step walk through the build process so you can feel confident that your home is built to your specifications.
12) Close and Celebrate
Once all of the inspections are completed, and you’ve received your final approval from the underwriter, it’s time to close.
The closing is arranged by a neutral party called the title company. They work with both the buyer’s and seller’s real estate agent as well as the lender. The title company (some states use attorneys) makes sure that all of the mortgage documents are in order and the funds are dispersed correctly and that everyone is paid.
On the day of the closing, you will arrive to sign papers and get the keys to your new home.
Now it’s time to have friends and family over and pop the champagne.
Buying a new house is an adventure and can be much less stressful when you’re prepared. We hope you’ve enjoyed these 12 tips on buying a home. At Pulte Homes, we enhance family’s lives by designing homes that fit the way they live. For more information about what makes Pulte Homes special visit read more about the Pulte Difference.
Contributed to Your Home blog by Carol Youmans
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