The 4 Basic Steps of Buying a Home
Owning a home is a dream for many people, but it’s an intensive process that can make many prospective home buyers nervous. With so much to manage, just where are buyers even expected to start? The home buying process can be broken down into a few easy steps to make it more manageable. Here is how all home buyers can start their journey to purchasing their first home.
Set a Budget and Save
Before a home buyer can start looking for homes, they first need to set their parameters. This first means deciding on a budget for the home. The buyer needs to have a good understanding of what they can afford so they don’t try to apply for a mortgage they won’t be able to pay back. Once the buyer has decided on an appropriate budget for their new home, they need to collect their down payment. Traditionally, a down payment is 20% of the home’s total cost, so if the buyer wants to buy a $100,000 home, then they’ll want to have $20,000 available in cash for the down payment. However, depending on the mortgage the buyer uses, they could be allowed to have a down payment as low as 3%.
Choose a Mortgage and Get Preapproved
Once the buyer knows what their budget is going to be, they can start researching different mortgage types. All mortgages are different, and some are better for certain situations. For example, here are some commonly used mortgages:
- FHA loans: Popular among first-time home buyers because of their low 3% down payment
- USDA loans: Specifically for people who want to move to a rural or suburban area
- Jumbo loans: Loans that are for more than $453,100
- Conventional loans: Loans that are backed by a private lender as opposed to the government
Once the buyer has chosen the loan they want, they need to get preapproved. When they are successfully preapproved, they are given written proof that they can show to sellers when making offers on homes. Sellers like to see buyers who are preapproved because it means they can close on the home faster.
Hire an Agent and Search for a Home
The first thing a buyer should do before looking for homes is hire a real estate agent. Agents are extremely helpful when purchasing a home because they do everything from setting up showing appointments to negotiating the price. Furthermore, it doesn’t cost the buyer anything to hire a real estate agent when purchasing a home because their commission comes from the seller’s profit. The agent also has many resources for locating homes, so the buyer only needs to describe what they want, and the agent will show them homes that meet those criteria. Then, all the buyer has to do is attend home showings until they find the home they want to buy.
Submit an Offer
Once the buyer has found the home they want, it’s time for them to submit an offer. The buyer will tell their agent what they want to offer, including money and extras like contingencies, and their agent will submit it for them. If the buyer is unsure about what they should offer, they can consult their agent for help. Once the offer is submitted, the buyer will typically hear back within a few days if their offer has been accepted, rejected, or sent back with changes. If the offer has been accepted, it’s time for closing.
Buying a home is an exciting time for anyone, but it can also be confusing—especially for those who have never done it before. Breaking it down into these basic steps can be a good way to stay on track during the process.