So you want to buy a home. Most people don’t know where to start, even though they have a vague or general idea of the process. Here’s a checklist that will guarantee that you don’t miss a thing.
Check Your Credit First
Before you do anything, you should check your credit first. Annualcreditreport.com allows you to pull a free credit report once per year. If you find anything that doesn’t seem right, you can either dispute it or ask your lender to do Rapid Rescore on your report. That should clear up any mistakes that other creditors have made and reported.
Make a List of Essentials and Dealbreakers
There are lots of great tips out there for homeowners, but little advice on how to actually figure out how to make a good decision on a home.
Here’s the secret: Make a list of essentials and dealbreakers for your new home. That’s it. This is a pure value play, meaning, you have to really introspect and think about what you value most in a home.
For example, what are the things you absolutely must have for your new house – a pool? A nice back yard? Close proximity to a school? What about dealbreakers? Living in the city or in the country – which do you prefer? What must you have, and what things will you not tolerate?
Make sure your list is detailed – the more, the better. This makes choosing a home much easier.
Work With a Real Estate Broker Who Understands Your Needs
Work with a real estate broker who understands your needs, and is experienced with the type of home you want in the neighborhood you’re looking in. For example, let’s say you really want a Cape Cod-style home. Does your broker know what these are (really)? Has he or she been to Cape Cod and seen how those beach homes are constructed?
How much does he know about them? What about the neighborhood? Is he knowledgeable about the people who live there now as well as the history of it and how it’s changed over time?
While there are no guarantees that it won’t change in the future, it’s nice to know what the history is so that you have a general idea about what you’re moving into.
Another example would be if you were looking for a more modern or contemporary home. Does the real estate agent know anything about Frank Lloyd Wright or any of his students? Does he understand modern architecture? Does he know where these types of homes are built and can he tell you about the advantages and disadvantages of these homes?
These are things you want to know before you commit to a broker or agent.
Get a Lawyer
Regardless of how knowledgeable an agent is, he’s no lawyer. Hire one to look over all of your legal contracts, including the real estate contract. She should be able to tell you about any discrepancies or provisions that favor the seller or may pose a problem for you during or after the transaction.
Save, Save, Save
Start saving money. If you can’t put at least 20 percent down, you’ll likely have to buy mortgage lenders insurance, which protects the lender (not you) in the event that you default on the loan. The insurance makes up the shortfall, but the premiums for this insurance can be substantial.
Get Your Loan Documents Around
Documents like proof of income or previous on-time rent payments are required before a lender will give you any money. This includes any income you receive from rental properties or investments. You may also need to provide child support documents if you receive child support and you want to count this as income. Ditto for alimony.
How To Choose The Right Mortgage
Choosing the right mortgage isn’t as easy as it sounds. While many people choose fixed rate loans, the history of variable rate loans shows that, historically, these loans have usually outperformed fixed rates. In other words, historically, it’s been cheaper during most decades, to service a variable rate mortgage. That doesn’t mean that’s how it will always be going forward, but it’s something to consider.
You should feel comfortable about the rate you’re paying and, at the end of the day, it’s really about the monthly payment and the total of all payments you’ll be making. The lower, the better – the less interest, the better.
Get prequalified before you start making offers on a home. Every real estate agent and home seller will expect this.
Make an Offer
Make an offer you think is reasonable through your real estate professional. Let them negotiate it from there.
Get a Survey Done
Have a home survey or inspection done to find any potential problems with the home, like repairs that need to be done. These can be used as leverage during negotiations.
Closing the deal is the last step, and one where a surprising number of people drop the ball. By this stage, you’ve hopefully not found any serious problems with the home, you’ve got the rate you wanted from the lender, and you’ve done a title search to verify that there are no other claims on the property. If you haven’t done these things, square them away.
Once that’s done, sign all of the paperwork, shake hands with the seller, and get the keys. You’re ready to move in.
Lucas Coleman works as a real estate agent. He likes to write about his experiences. You can find his articles mainly on real estate and financial websites.