Learn 10 steps to take when you are planning to buy a home. Gain insight from the experience of local Adirondack area realtors at ADKPP that have helped hundreds of people over the years.
Make Sure You Are Ready to Buy a House
You might think of this step as just a financial step, but it is also good to make sure you are ready mentally. The homebuying process can have a lot of ups and downs so preparing mentally is one of the best steps you can take. Financially, make sure that your loans or cash payment assets are in order and that you have a plan for your down payment. The mortgage process will be easier for you if your finances are prepared. Make sure you check your credit score. A high score with a low debt to income ratio will often allow you to qualify for a larger mortgage, potentially giving you more options on the market.
Create A Homebuying Wishlist (and a Deal Breaker list)
For us, the best part of real estate process is creating a few lists about what you are looking for in a home. We always suggest setting up three lists – “Need To Have”, “Could Live Without” and “Hard No”.
- The Need To Have list generally will cover the number of bedrooms and baths, the school district or other needs to have near your home.
- The Could Live Without list includes specific comforts or things that you could add later. Everyone wants a new home that is perfect to their specific tastes but if the home has the right bed/bath combo and the neighborhood you can settle for the carpeted floor or non-ideal counter tops that could later be changed to fit your style.
- The Hard No list will generally be the opposite of the Need To Have list but this could include certain neighborhoods or home that qualify as fixer uppers. Some decisions will come down to what you can afford when you get your mortgage.
Find The Right Mortgage
There are multiple options when it comes to get a mortgage. Some of these options can affect what you will qualify for, the required down payment and how you will pay it back. Choosing the right loan can increase your chances of approval and depending on where you are financially it could save you thousands of dollars. Remember to always ask your financial advisor prior to making decisions about your mortgage.
Conventional Loans – Mortgages that are not federally guaranteed. They can offer low minimum down payments but have more stringent qualifications.
FHA Loans – Mortgages backed by the Federal Housing Administration. They are easier to qualify for but have stricter requirements for mortgage insurance.
VA Loans – Mortgages from the Department Of Veterans Affairs for active or former service members and eligible spouses. These loans allow you to make no down payment.
Jumbo Loans – Mortgages for houses that are more expensive than standard lending limits. This loan requires large down payments and higher credit scores.
Renovation Loans – This loan lets you wrap the costs of home improvements into the total amount of the home loan. These are great when mortgage rates are low and you want to borrow more money for repairs while paying less interest that a normal home improvement loan.
Get Pre-Approved for a Mortgage
After you choose the mortgage that works best for your current situation now is the time to get the pre-approval that will make the home buying process easier. Check with multiple banks before you choose one of your pre-approval. Each bank will have its own positives and negatives. One bank might be able to pre-approve you for more than another or have different deals going on like covering closing cost.
Find A Real Estate Agent
With your mortgage approval is in hand, now is the time to find the right real estate agent. This is another step to research diligently. Every agency and agent can offer you something different. Larger agencies generally have more homes coming on the market as well as selling them quicker because they understand the market and what sellers are looking for due to the faster turnover. Also, personalities sometimes don’t click so talking to few potential representatives and looking up some reviews is a good way to see how they have treated past clients. We always suggest working with just one agent as working with multiple realtors can lead to headaches for everyone involved.
Go Shopping And Make An Offer on a New Home
Your Pre-approval is ready and have the perfect agent now is the other fun part of the process; looking at homes! In the Adirondack region most of the agencies are part of the Multiple Listing Service (MLS), with listings for almost every available home on the market. With the MLS, agents can show any listings for any available properties that fit your criteria.
When you find the right home now is time to put your offer in. This is where you could have some ups and downs depending on what mortgage you chose as well as what contingencies you may have (such as home inspections). If it is a popular property the seller may have multiple offers, so an offer that is cash with no contingencies will generally be chosen over an offer that has a mortgage and multiple contingencies, because it normally takes longer to sell. A strong real estate agent will be able to help guide you to submit the strongest offer and hopefully help you purchase the home.
Finalize You Mortgage And Homeowner Insurance
Your offer was accepted by the homeowner, time for a quick celebration! After the offer is accepted it is now time to finalize your mortgage what might include a deeper dive into your financial to make sure nothing has changed since your pre-approval. Generally you will send bank statements, pay checks and any other financials that the loan company may need to see. You will also need to purchase Homeowner Insurance before the mortgage is finalized.
Schedule Contingency Inspections
Depending on what contingencies you decided to include in your offer, you will need to schedule the inspections. Common contingencies include Mortgage, Title, Home Inspection, Appraisal, Sale Of A Prior Home and Homeowner Insurance. The mortgage and homeowner insurance should be in the works per the last step. The appraisal contingency may be a requirement from the mortgage lender in order to complete the mortgage contingency. This is a safeguard for the buyer as well as the bank because they normally don’t like to loan money to borrowers for a house that cost more than it’s worth.
In New York, your real estate attorney will be working on the Title contingency for you. The two main contingencies that you will have to schedule are the Home Inspection and Appraisal. We always suggest that home buyers schedule a professional home inspection, so they can be made aware of any defects of the home. Knowing these defects will protect the buyer from purchasing a home that is severely damaged. Some of these damages can be negotiated after the inspection to have them repaired or a have credit before the closing of the property.
Negotiate Any Repairs
After you have your home inspection, if there are any repairs that need to be done or credits to have them done in the future now is the time to negotiate. If everything is set after the inspection, then you are able to skip this step.
Close On The Property
You have survived the home buying process! The highs and lows are over. You will receive a closing disclosure approximately three days ahead of the final closing meeting. Compare the closing disclosure to the loan estimate to see if anything changed. This document will also specify how much cash you will need in order to close on the property.
The day of or day before your closing you will do a final walk-through with your real estate agent. This walk-through gives you the opportunity to make sure everything is there that was agreed on like appliances or anything else that conveyed with the purchase. After this final inspection you will be buzzing with excitement then heading to sign the endless paperwork with the keys for your new home as the prize. Congratulations you are now a homeowner!