Buyers Info
Home Buying Process
While the homebuying process can seem intimidating, once you know what to expect it is actually pretty simple. Knowing what to expect before you begin the process can lessen some of the anxiety associated with it for you, and can also educate you should any issues come up during the process.
Because we want to help you be successful in your home search, we’ve written this step-by-step guide to the home-buying process. Follow these steps to enter your home search prepared and ready to make an offer on your dream home.
Step 1: Check your Credit
Before even contacting a lender or an agent, it is smart to check your credit report to see what your options are. You can get one free credit report a year, and this will determine what the interest rate on your mortgage will be, along with what kind of loans you can apply for. A good rule of thumb is that a good credit score is 720 or above, while the minimum to secure a loan through FHA is 580 or over.
Step 2: Decide on a Budget
It is important to find out how much you are willing to pay. Make sure to include mortgage payments into your budgeting, because even if you qualify for an expensive house you will probably not want that high a payment for the long term. Doing things like using a mortgage affordability calculator and researching the housing market so that you can think of a concrete number that will be affordable for you.
Step 3: Find an Agent
It is very important that you trust your agent, because they will be your lifeline through the home buying process. Check reviews online or ask your friends and family for a referral, and make sure to ask a lot of questions and meet with a few candidates so you can find out your best fit.
Step 4: Get Pre-Approved
Getting pre-approved for a loan could make you more likely to get your offer accepted down the line. In pre-approval, a lender will pull your credit information and then give you a letter stating how much they would be willing to lend you. This gives the sellers some confidence in you because they know for sure that you will be able to afford their home. Take a look at standard home loan options here.
Step 5: Start Looking at Homes
By now, since you’ve done all of your financial prep and talked to an agent, you probably have a pretty good idea of what kind of house you would like and in what area. Your agent can also help you greatly here, as they will have a good knowledge of properties coming on the market and homes like the ones you are looking for.
Step 6: Make an Offer
Once you’ve found a home that you are excited about, your agent will help you decide on an offer based on the listing price of the property. Your agent will understand how to craft your offer, based on the current market, whether there will need to be contingencies, or whether you need an inspection.
Step 7: Home Inspection
This is an important day for negotiating, if your offer requires it. If the inspector finds any unseen defects, you can take them to the seller for bargaining power. Also, this is a good time to measure things in the house, because it is the last time you will be able to be inside before closing.
Step 8: Get Insurance and Utilities
If you have owned a home already, you will only have to call your insurance agent and let them know you’re buying a new home. But, if this is your first home, you will need to get homeowner’s insurance. Lenders require insurance, and it is a critical part of protecting your investment. You will also want to make sure you have utilities set up for your move-in date, because you will not want to arrive, ready to move in, only to find that you have no electricity.
Step 9: Close on Your Home
This is arguably the most important day in the process, and you will need your agent with you to help. At closing, you will read and sign all of the papers and policies that go along with officially owning your home, and you will want your agent there to make sure everything goes smoothly and that everything us how it should be for you.
Step 10: Move In!
You have officially reached the finish line by step 10! Your contract will specify the exact date that you can move in, and after that you can officially make your new house into a home. Now that you’re settled in, let’s look at the benefits of owning a home.
Benefits to Owning a Home
Buying a home can seem like a daunting task, particularly because it requires so much money upfront and you know that you will be paying for it for years to come. It is one of the biggest financial decisions you will make in your life, so it requires careful consideration, but there are also a lot of upsides to owning your own home. Some of these advantages include:
- Privacy and autonomy over your home
- A mortgage is more predictable and stable than rent if it is fixed rate
- Many payments that you make towards your home are tax deductible
- Pride of homeownership and sense of belonging in your community
- Equity that goes to you as you make payments
- More options, especially if you have a budget window.
There are definitely many different factors to consider if you are weighing buying versus renting. Homeownership requires you to have a stable or growing income, as you will be making payments for a very long time. While there are significant financial benefits, they are long term so having a budget or savings plan in place before you purchase your home is critical.
Also, your credit will affect your ability to buy a home more than it will your ability to rent, so knowing what your credit score is and how to improve it is another thing to consider. Overall, there are many benefits to owning a home, especially if you think you will be in one place for awhile and you feel financially stable. Here is a breakdown of the benefits of owning a home vs. renting a home.
Home Loan Options
Conventional Loans
If you are looking for a mortgage with a wide selection of terms and competitive rates, conventional loans may be your answer. These loans are what most people think of when it comes to a traditional home loan. Conventional Home Loans are not part of a government-sponsored program, and are instead fully funded and insured by private lenders and insurers.
Basic Conventional Loan Requirements
Ultimately, lenders individually decide who is and is not approved for a conventional loan. Borrowers should be prepared to supply at least two years of W-2’s, tax statements, bank statements and proof of cash reserves and submit to a credit report.
Clients should have good or better credit – at least a 620 or higher, and a low debt to income ratio. For most conventional loans, a 20% down payment is required.
FHA Loans
FHA loans are an awesome option when it comes to home financing. They have great benefits, such as a minimum of only 3.5% down payment. These non-conventional loans are secured by the Federal Housing Administration and are funded by private lenders.
Basic FHA Loan Requirements
FHA loans are a much more accessible financing option with lessened requirements and added benefits such as:
- 550+ Credit Score
- 3.5% Down Payment(Compared to 20% conventional)
- Fixed interest rates
- The ability to have some or all closing costs covered by the seller or the lender.
- If you would like to make repairs to your existing home, FHA also offers 203(k) mortgages for home repair.
Connect Today for Your Home Buying Needs
Experience top-tier real estate services in Greater Alamance County with Dale and Regina Simpson. With over 40 years of combined experience, we provide a full suite of offerings, including buying, selling, property management, and beyond. Reach out today to start your personalized journey with seasoned professionals dedicated to your success.
