The Ultimate Guide to Buying A New Home
Making the decision to buy a new home is exciting and stressful. Before you start checking out your local listings, it’s a good idea to get a few things in order first. Let this checklist be your guide through the home buying process.
Pay down debt.
If you’re drowning in debt it will be hard to get a home loan. Unless you plan on paying in cash, you will need a loan. Depending on the amount of debt you have, it could be difficult to get a home loan.
Many lenders will look at your debt-to-income ratio. If the amount of debt you have is more than your income can cover, your lender could deny the loan or ask that you pay a considerable amount down before approval.
A few ideas for paying off debt are:
· Get a second job or pick up extra work at your current one.
· Have a yard sale.
· Set a spending budget and stick with it.
With your debt payment plan underway, it’s time to start thinking about ways to save money. You will need money for closing costs, moving, and any furnishings you plan to use.
Some home loans require you to put down 10-20 percent of the loan amount. If the amount of your home loan is $300k, you would need to put down anywhere from $30-$60k. That’s a large down payment!
Some easy ideas for saving money are:
· Shopping sale and clearance items.
· Cutting down on excess spending.
Determine the type of home loan you will need.
There are many different factors that go into the type of home loan you can get or will need for your new home. Some options are a fixed or adjustable rate mortgage. You can also get government-insured home loans or conventional home loans. Talk to a trusted lender to find the home loan that is right for you.
Talk to lender for pre-approval.
Some Realtors won’t allow you to look at homes without some form of a pre-approval letter. This isn’t because they don’t want to show you houses. They do this because they want to make sure they are showing you houses that you can actually afford.
Before looking for a home, you should talk to a lender about pre-approval. They will ask you some basic questions about your employment status, income, expenses, etc. They use this information to get a better understanding of your debt-to-income ratio.
With this total, they can give you a good estimate of the loan amount you would be approved for. They will print a letter with your pre-approval amount. This makes it easier for you and your Real Estate Agent to find houses that fit your budget.
Find a Real Estate Agent.
It is always beneficial to have the help of a trusted Real Estate Agent as you search for homes. They can answer questions while you’re viewing homes. An agent also has access to more information about the homes than what you would find online.
The best part of working with a Real Estate Agent is that it’s their job to help you through the home buying process. They will work on your behalf to make sure you get the best deal on the house of your dreams.
Put in an offer on the house.
Once you find the house of your dreams, you need to put in an offer. This means you tell the person selling the house that you want to buy it and how much you are willing to pay. This is the part where an agent really comes in handy. They will negotiate on your behalf and help you land the house.
If your offer is accepted, it’s time to move on to the next step.
Request a loan.
Now that you know exactly how much money you will need to purchase your new home, it’s time to go back to your lender. Before they can process the loan and give you the money, they will need a few things from you first.
· A copy of your tax returns. If you’re self-employed, they may ask for the last 3 years.
· Any pay-stubs or proof of income you have.
· Bank statements and other assets such as investments.
· Your credit history.
The more information you can give the lender about your financial history, the better.
The process of getting loan approval can take time. Don’t be surprised if the lender needs more information even after the process has started.
Close on the house, FINALLY!
After what seems like forever, it’s finally time to close on your home. This is when you meet with the sellers to sign paperwork and go over the details of the loan. You will also need to present your down payment to the lending agent. Once the paperwork is signed, the keys are yours!
The home buying process can be very stressful. Hopefully, this checklist can help you decrease the stress and close on the home of your dreams. Make sure you find a Real Estate Agent you can trust to guide you through the process. If you’re searching for a home in the D.C. area, give D.C. Real Estate Listings a call. We would love to help you find your dream home!