Steps to buying a home
(This post is still under construction )
Buying a home is one of the largest transactions most of us perform in our lifetimes. It is an extremely personal decision and can require a large percentage of accumulated resources to pull off. For first time home buyers, the process can be a bit daunting. Here is an overview of the process, with links to additional resources.
1) Select a real estate agent that is right for you. Real estate agents know the local market, negotiate on your behalf, and have connections with lenders, title companies, and contractors. Unexpected issues come up frequently in real estate and your agent is there to protect your interests. Click here to learn more about what a real estate agent does and how their commission works.
2) Select a lender and get pre-qualified. Your real estate agent can refer you to a loan officer or you might ask for referrals from friends. You can learn about the difference between pre-qualification and pre-approval and how to compare lending institutions here.
3) Decide on your budget. Chances are, you will be pre-qualified and possibly pre-approved for more than you can comfortably afford. Keep in mind that you are searching for a home… a refuge at the end of the day where you can relax and enjoy your family and friends. Last thing you want is to purchase a home that will stretch you financially and add stress and instability to your life. A general rule of thumb is no more than 30% of your monthly income should be budgeted for housing. Personally, I like to be way under 30%. I enjoy the peace of mind it affords me knowing that I can comfortably pay all my bills, put money in savings each month, and have a little set aside to deal with emergencies when they arise (and they will). Living modestly is a small price to pay for peace of mind and stability. It has allowed me the freedom to make big life changes, like getting out of a job I did not enjoy, and pursuing investing opportunities.
4) Get serious about what matters to you: make a list. Here are some ideas of what you might consider when buying a home.
5) Make an offer. This is one of the areas where your real estate agent is worth their weight in gold. They will read the numbers, listen to your goals, work with you on the offer, and negotiate with the seller’s agent on your behalf. Learn more about this process here.
6) Inspection. Keep in mind that neither the pre-qualification nor the pre-approval means that the bank guarantees you the loan. The bank will also want to take a close look at the home being purchased. It will order an appraisal to determine that you are buying it at a fair market value. They do not want to offer a loan for more than the home is worth. This protects their investment in case you default on the loan and they have to put the house back on the market.
7) What to expect at closing. In VA, closing is typically when everything is finalized and the buyer gets the keys. The loan application process usually takes 45 days and has many time sensitive steps. Here is another area where a good loan officer and a good real estate agent are essential. They will work together to ensure that everything is moving along and will help navigate difficulties that may arise.