Buying a home can be overwhelming, and if you’ve never done it before, you might not know where to begin. Before you start attending open houses and touring properties, read on to learn how to buy a house in seven easy steps.
1. When You Buy a House, Know Your Budget
Ideally, your monthly housing expense should be no more than one-third of your total income. This is a general guideline, though some lenders will allow you up to 50% of your total income for loan purposes. However, it is better to budget conservatively in case you run into financial trouble or unexpected expenses. Budget for home repairs and improvements, homeowners insurance, and other costs that aren’t typically part of a credit calculation.
2. Make a List of Needs and Wants
Once you have decided on a dollar amount you can afford, start thinking about what features you would like in a house. Most people have a number of bedrooms and bathrooms in mind, but you may also want to think about other “wants” like a fenced-in yard, access to public transportation, and good schools. Know which items you are willing to be flexible on and which ones are must-haves.
3. Talk to a Lender About How to Buy a House
The sooner you start the mortgage process, the better. For first time homebuyers, you can expect the loan process to take from 30-90 days – sometimes longer if you have blemishes on your credit or if it takes a while to gather needed financial documents. Work with a lender before you start making offers so you can get pre-approved for the amount you hope to borrow.
4. Choose an Agent
Your buyer’s agent is the person who will represent you during negotiations. They are a valuable resource and know the ins and outs of the market and what to expect from sellers. Ask for recommendations from friends and interview real estate agents to learn about how they work and how they will communicate with you during the process.
5. Start Shopping
It’s now time to tour properties, become familiar with what is available in your preferred neighborhoods, and start making offers on homes that interest you. Your agent will help you draft an offer based on the value of the house and your budget, so you can begin negotiating with a seller.
6. Be Patient
Be prepared that your first offers may not be accepted and you may receive a counter-offer from the seller. In competitive neighborhoods, there could be multiple offers on a single house, and the seller will take the highest bid. Whatever happens, keep in mind that new houses go on the market every day and there will be another property that catches your interest.
7. Get an Inspection When You Buy a House
Once an offer is accepted, you are under contract. Now your agent will walk you through inspections and appraisals as you work towards closing. An inspection will report on the true condition of the home which will help you negotiate for repairs or discounts from the seller. Don’t skip the home inspection. You’ll learn valuable information about the property you are buying.