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Buying a home may seem like a dauntingly complex proposition,
perhaps because you've never done it before or never understood
all the details of financing and closing a sale.
However, once you know what steps are involved, understand
the purpose of each step, and learn how each is accomplished,
buying a home will be revealed for what it is--a series of
simple steps that lead toward a substantial emotional and
financial commitment.
Prepare to Buy
- Clarify your reasons to buy. Because it is such
a weighty commitment, buying a home shouldn't come with
regret or second thoughts. Before you buy or even begin
the process, make sure that your reasons and resolve to
buy a home are clear and firm.
- Get your financial house in order. It's hard to
have any idea about how much home you can afford if you
don't know how much of your money you want to devote toward
housing. If you haven't done so already, thinking about
buying a home is a perfect reason to get your finances in
order.
- Check your credit history. Even if you aren't going
to buy a house, this is a good idea. If your credit report
has mistakes or other blemishes, your credit rating will
suffer. As a result, you will hurt your chances of securing
financing and will probably pay higher interest rates or
possibly not be able to secure financing.
- Figure out how much home
you can afford. Getting an accurate estimate of
what priced home you can afford will make your search more
realistic and efficient. It may even give you cause to reconsider
buying altogether.
- Buy vs. rent. Depending
on your situation, renting a home instead of buying may
make more sense (financially or otherwise). It's a possibility
that's worth considering.
Buy a Home
- Get
prequalified. When preparing to buy a home, you
estimate how much home you can afford. Now it's the lender's
turn. Using financial information that you provide, prequalification
is a lender's analysis of your general position as a borrower,
or in other words, an estimate of what you can afford. Getting
prequalified gives you an even clearer understanding of
what home you will be able to afford, and a prequalification
letter from your lender helps strengthen your position with
sellers in the early stages of negotiation.
- Shop for loans. Finding a good loan is probably
the most confusing part of the process (and definitely the
dullest), but since it will dictate how much your monthly
payment will be, it deserves your full attention. To simplify,
your job is to decide what kind of loan you want, whom you
want to get it from, and how long you want the term to be
(most are either for 15 or 30 years).
- Get
preapproved. When you get preapproved, a lender
gives a firm commitment to loan you up to a set amount without
knowing the specific property. It's particularly useful
because when you make an offer on a home, waiting for financing
won't jeopardize your offer. Once you are preapproved, closing
the loan is quick, depending only on a satisfactory appraisal
and title report of the home. To get preapproved you apply
for a certain purchase price, loan amount, and loan program,
but these assumptions can change after you're preapproved.
- Find a home. Finding the
perfect home can be challenging, especially if you are moving
to a new area. Regardless of where you're moving, the Internet
offers powerful tools to research neighborhoods and find
available homes.
- Close the deal. Once you've found the home you
want, you still must get it inspected, have it appraised,
get a report on the title (to make sure the history of the
house is clean), negotiate the price, and close your financing.
- Move in. If you've made it this far, you're close
to the finish line, but the race isn't over. Moving presents
its own challenges, and there's a litany of things to be
mindful of, such as changing your address and more.
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The
Buying Process
