The process of finding and purchasing a house can be daunting. But it doesn’t have to be scary! With a real estate agent you trust, the process can even be fun! Our agents are patient and thorough, walking you through the whole process. Our Home Buyers’ Checklist lays out the entire process in 10 easy steps.
1. Do a Financial Checkup
We recommend sifting through your financials closely before the bank does, so you know exactly where you stand before they decide whether you qualify for a mortgage. The first thing you’ll need is proof of a steady income stream. The lender needs to be certain that you will be able to make your monthly mortgage payments. Next, request a full credit report from Experian, Equifax, or TransUnion. The bank will rely heavily on your credit score to determine what mortgage you qualify for. Scores under 500 are usually too low to qualify for a mortgage. Third, determine how much money you have for a down payment and closing costs. Some loans only require a 3-5% down payment while others require a 20% down payment. Closing costs can be 1-3% of the purchase price.
2. Set a Budget
This is a wise step to take early on to avoid disappointment and protect yourself from purchasing a house you can’t afford. First, make a list of all your monthly payments, including car payments, student loans, credit card payments, and all other recurring payments. Then, add potential expenses related to owning a home: monthly mortgage payment, property taxes, HOAs, homeowner’s insurance, home maintenance, and mortgage insurance. (You can use an online calculator to make estimations.) Now divide your monthly expenses by your gross monthly income. This gives you a percentage known as DTI (debt-to-income ratio.) The bank uses this number to determine if you can afford a house. If your DTI is more than 43% you won’t be approved for a loan. It doesn’t mean you cannot purchase a house at all, though. You’ll just need to find a home at a lower price, which lowers your mortgage payment, monthly expenses, and therefore your DTI. While 43% is the magic number for the bank, you’ll need to consider what makes the most sense for you. If you want to have room in your monthly budget for restaurants, vacations, or the kids’ extracurricular activities, it’s wise to have a DTI between 25%-30%.
3. Get a Mortgage Pre-Approval
Talking to lenders before you start shopping for a house is crucial for two reasons. One, they’ll help you understand the types of loans you qualify for. Find a mortgage broker or loan officer that you trust (we are happy to recommend reputable mortgage brokers), and ask all of your questions about possible terms, interest rates, your credit score, and your DTI. Use a mortgage calculator to help you estimate your options. Two, they can get you a mortgage pre-approval. Pre-approval isn’t a guarantee that you’ll receive a loan, but it signifies that you’re qualified to receive one. It’s helpful because it includes your maximum loan amount, so you know which houses you can look at and which ones you can’t. It also shows realtors and sellers that you’re serious about buying and able to afford a house. A pre-approval is not a contract, so you’re free to make changes or shop for a better mortgage after you select a house.
4. Find a Real Estate Agent
If you’re looking for a home in the Bryan/College Station area, the experienced agents at Inhabit Real Estate Group can help you find the house of your dreams. We live, work, and play in BCS and we use our expertise on the local housing market to help our neighbors find homes they love. Our knowledgeable agents will help you find homes in desirable neighborhoods and school districts, help first-time buyers know what to look for, use comparable sales to help determine if an asking price is fair, prepare offers and counteroffers, provide valuable information on market conditions, and even find information on homes that are not yet listed publicly. We’ll guide you through every step of the process and answer all your questions. Here’s some information on interviewing potential realtors to find a good fit.
5. Go House Hunting
Whew! You made it! Purchase agreements are finalized, inspections are done, contingencies are met, and financing is in place. Now it’s time to stretch your fingers, grab your lucky pen and sign a whole bunch of paperwork! Before your closing day, have a certified check or schedule money to be wired to cover the down payment and closing costs. You’ll need to bring proof of homeowner’s insurance and ID with you. Just when you get tired of signing your name, your realtor will hand you the keys to your new home, and the whole process will be worth it! If you’re ready to start the home-buying process, contact Inhabit Real Estate Group today!
6. Gather Financial Info for Your Lender
If you haven’t already, now is the time to get the following documents gathered for submission to your lender. While there may be a few more items your lender requires, these are the basics needed to process your loan.
- Tax returns from the previous two years
- Two months of pay stubs or proof of income
- Bank statements, including brokerage and investment account statements, from the past two years
- Proof of funds for a down payment and closing costs
- ID
7. Make an Offer
When you’ve decided on a house and can imagine your life inside it, it’s time to put in an offer! Don’t worry, your real estate agent will be there to guide you through this process, too. They can help you make a fair offer. In most cases, you can attach some conditions to your offers like the inclusion of appliances or furnishings in the sale, the desired closing date, or a clause stating the purchase is contingent on the sale of your previous home, although in a seller’s market or a multiple-offer scenario, these may not all be options. To show that you’re serious about the home, you’ll include a check or money order with your offer. This is called earnest money and is usually 1-3% of the purchase price. This money is held in an escrow account and applied to the purchase of your home at closing. If the deal falls through because of a problem on the seller’s end, then you’ll get that money back; if the problem is on your side, you won’t.
8. Arrange for Financing
When an offer is approved, it’s time to contact your lender and start the mortgage application. Expect phone calls and emails from your mortgage broker or loan officer as they make sure they have all of the documents they need. Don’t panic if final approval doesn’t happen until days before closing. It’s not a sign that something is wrong. Lenders are going through everything with a fine-tooth comb to ensure you’re a good risk for the loan.
9. Get a Home Inspection and an Appraisal
Before you complete the purchase, you want to be 100% sure there are no hidden structural or functional problems with the house. Our realtors will suggest trusted home inspectors that can determine if there are any issues. Sometimes, minor problems are discovered that can be easily repaired. If an inspector finds a major issue, you can decide if you want to back out of the sale or demand that the issues be fixed before closing. The lender will want you to schedule an appraisal to ensure that the home is worth what you’re paying for it. The lender will typically schedule the appraisal at your expense.
10. Close on Your New Home
Whew! You made it! Purchase agreements are finalized, inspections are done, contingencies are met, and financing is in place. Now it’s time to stretch your fingers, grab your lucky pen and sign a whole bunch of paperwork! Before your closing day, have a certified check or schedule money to be wired to cover the down payment and closing costs. You’ll need to bring proof of homeowner’s insurance and ID with you. Just when you get tired of signing your name, your realtor will hand you the keys to your new home, and the whole process will be worth it! If you’re ready to start the home-buying process, contact Inhabit Real Estate Group today!
