The Complete and Only Home Buying Checklist You’ll Ever Need
Experts predict that in 2022, median home prices will increase by 5.7%. Further, new home sales are expected to rise too, to 920,000.
No matter if the housing market is hot or sluggish, one thing remains the same. For success when purchasing the best home, you must follow a certain home buying checklist.
In this article, we will guide you. We’ll offer step-by-step insight as to the process that will help you find what you are looking for and avoid common pitfalls that new home buyers can succumb to.
Ready to find what you are looking for at the best deal? Let’s dive into the details of the home buying checklist!
How Much Can You Afford?
To begin, you must establish your budget. There are tons of details involved when buying a home, and the last thing you want to do is waste time viewing homes that are not within your budget. If you find that the best home for you is unattainable, it will only leave you frustrated.
A smart homeowner will embark on their search for the best home in their price range. One way to determine your budget is to get preapproval on a mortgage from the start.
When trying to figure out your budget, here is a guideline that can help you.
The first step is just like it sounds. Your DTI is the expenses you have monthly compared to your monthly cash income.
While considering all debts, you also must include recurring bills. These can be car payments, student loans, child support, etc. Anything that you must pay monthly should be included.
Most lenders will probably secure you a qualified mortgage if your DTI is lower than 43%. Just because they max out at 43% does not mean you need to spend that much on a mortgage payment. Think practically about your budget.
Don’t Be “House Poor”
This refers to someone who spends so much on their home that they cannot afford fun things like traveling or eating out. You should budget for things you enjoy doing.
Also, there can be unexpected items that come up with a big ticket. What if you need a new roof or a hot water heater? Being a smart homeowner means having enough to cover both routine maintenance and unexpected maintenance, too.
Save for a Down Payment
A good way to save an extensive amount of money for the life of your mortgage is by making a significant down payment.
Many professionals suggest 20% because it will mean you do not have to pay PMI or private mortgage insurance. The amount that a bank will charge you is based on your risk factors, too. Your credit score and DTI will affect your PMI.
Further, when you make a sizeable down payment, it can mean a lower interest rate. That is because you are decreasing the risk for your lender with an LTV, or loan-to-value ratio.
When you can make a bigger down payment on a home, you are borrowing less, and this will save you thousands of interest. Plus, with a bigger down payment, the monthly payments are less.
Find an Excellent Real Estate Agent
You can browse for houses on the internet by yourself, but typically most home buyers prefer to work with an agent or REALTOR®. In fact, recent statistics reveal that 43% of home buyers today will find a real estate agent from a recommendation they receive.
A real estate agent is a scout for you, finding prospective homes. They also carry expertise that is highly beneficial. This means helping you with:
- Determining a good asking price
- Locating neighborhoods that are “up-and-coming”
- Locating certain types of homes
- Negotiating price and bidding wars
- Paperwork and closing
As we continue to discuss the home buying checklist, the real estate agent will become more and more critical of the process. Real estate agents are there to lessen the burden, take away stress, and look out for your best interest.
Choose a Lender and Obtain a Mortgage Preapproval
It will help you tremendously if you shop for a mortgage lender before you look at homes. With the housing market today, sellers want assurance that you can purchase their property at the time you make an offer.
This means getting a preapproval letter. Sellers also want to hasten, so they will choose a buyer that will move the process along expeditiously.
Remember that a preapproval is not a binding commitment. It is best that you shop around anyway so that you can find a lender that will offer you the best deal.
Finding the Best Home
Understandably, this is the best part of homeownership when you can choose your dream home. Although, it can also be overwhelming.
This is a good time to ask your real estate agent for more advice, especially on questions about good school districts. If you are looking at a house that has been on the market for a while, ask why that is.
It is important to find the homes you like online, and then visit them in person. Visiting a property in person is important because it will give you a better sense of what you find in terms of curb appeal and inside appeal as well.
An agent helps narrow your search too by leveraging the MLS, or multiple listing services. The MLS is timely and accurate. However, it does not contain homes that are for sale by the owner.
Here is a link where you can check out cheap properties for sale, too.
Gather as much information as you can. The more details you gather, the better off you will be when it is time to decide.
Making a Smart Purchase Offer
By now, you have likely found it, the one you have been waiting for. As exciting as this is, you are also still a savvy, smart homeowner, meaning you will extend a smart purchase offer too.
Your real estate agent should be a shining example for you in this arena. Consult with your agent first before making a conclusion on the dollar amount to offer.
There are a few factors that are important to consider when crafting a purchase offer, such as if the housing market in that neighborhood is hot, and how long it has been on the market. You will want to know if there are any other offers on that house, too, before extending your offer.
If the housing marketing is slow, you can likely achieve a small discount from their seller’s asking price. In a market that is competitive, making a lowball offer will get you rejected.
It is more than just the money, too. As a part of your offer, you will want to establish terms around the purchase, like when you would want to move in.
An earnest money deposit is usually required with the purchase offer. This is typically 1-3% of the home’s value and they will place it in escrow. It will remain there until the seller accepts your offer.
If the sale falls through because you reconsider, they may force you to forfeit the money. It is critical to add some safeguards around your earnest money, such as passing a home inspection.
Schedule the Home Inspection
Judging the fitness of a new home is nearly impossible before making an offer, which is why it is necessary to get a home inspection. You will have to pay the fee, but in the long run, it is well worth it. This protects you from potential liabilities for the road.
Almost every inspection will reveal minor issues, and that is okay. Don’t sweat the small stuff.
Instead, use it to your advantage while negotiating with the seller. You may lower the overall purchase price.
Prepare for Closing
If the inspection goes well, you should be in a position where you are ready to close. You will want to ensure that your finances are in order, and this includes the costs due at the time of closing.
A magnificent piece of advice is to avoid doing anything at this point that could affect your credit score.
Also, your mortgage lender will want to schedule a third party to appraise the property for them. Should the appraiser discover that the property is worth much less than the price that is agreed upon, the buyer can request that the seller lower their price. Another option is to have the seller take on some costs of closing.
Time for Closing
As the day arrives, it is exciting and nerve-wracking. Get ready for a mountain of paperwork! You will want to review them before closing day, however.
At the time of closing, you will need to bring some things with you. This includes proof of insurance, a cashier’s check for the closing costs, your identification, and, last but not least, a lot of patience.
You will receive the keys to your best home, and that is about it. Now is the time to enjoy what you have earned.
Home Buying Checklist
We know you are destined to be a smart homeowner, which is why we provide such valuable insight in this article. The home buying checklist we have included will help you achieve your dreams of homeownership.
For more advice that will help you achieve your goals, we have a lot more tips and tricks like this. So, stick around. Keep clicking and live your best life, now.