Do you also have a dream to buy a home? Well, most of us do. But the long process often tires us out, which is why a lot of people just draw out from this dream of buying a house. It is not just a normal investment; instead, it’s a lifetime investment, because of which you need to study and research a lot before you buy one. Well, then, why don’t you try using a new home-buying process checklist? This checklist will help you with everything you need to know before you make the right decision. If you are also a first-time buyer, then the following first-time home buyer guide will help you with all the details you need to know while buying a new house. Not to mention, you might also avoid taking the wrong step and getting stuck.
Assess Your emotional and financial Readiness
The first step before starting to hunt your desired house type is to set a budget. Or more like checking how much you can afford and what is your financial status before getting the house. Getting preapproval early on the house hunt will also help you with setting a realistic budget planning goal. Here are a few ways in which you can decide what your budget will look like:
- Calculate your debt-to-income ratio, which is based on your monthly expenses versus the cash inflow you get monthly. This will also include all the bills that you need to pay, which are divided by the total monthly income.
- When you consider the debts part, you also need to include any recurring bills such as loans, car payments, or any child support amount that you handle on a monthly basis.
- To get a mortgage from most lenders, you need to show your DTI, which should be no higher than 43%.
- Also ensure that you set your budget such that you consider your funds for daily activities, eating out, or traveling. Also, keep aside funds for routine maintenance or any unexpected shopping items.
By keeping such breathing room within your budget, you will be able to enjoy your new home with less stress and easy payments.
Financial Preparation
While your mortgage is just one part of your entire home-buying process, you also need to ensure that you have the down payment available. This could help you save a lot of money over the life of your loan. Here’s how it works:
- A down payment of about 20 per cent or more will exempt you from PMI, which is also called private mortgage insurance. This is essential for all loans with a down payment of less than 20 per cent. The cost of PMI is also based on various risk factors such as credit score and DTI. It is an expense that most people don’t want to be a part of.
- A large down payment amount will also help you get a lower interest rate which is based on the lower loan-to-value ratio which decreases the lender’s risk.
- A bigger down payment will also result in smaller monthly closures because you will owe less for the house.
- Smaller monthly payments could, however, influence your future borrowing power, which means that you can qualify for another car or gold loan.
- The larger the initial payment against the principal, the lesser the interest you will need to pay over the loan, which will also help you save a higher amount.
- Increasing your credit score is also a better way to get good mortgage plans.
Mortgage Preapproval
Before you start your house-hunting process, you might want to look around for mortgage lenders. You can also consider letting a mortgage broker check one for you. In the real market, the seller wants to have confidence that you will be able to buy the house if you give an offer. This can be done through mortgage preapproval.
One of the easiest ways to get a mortgage preapproval is by choosing a money lender and then showing your credit report. Then fix on a loan type and then the term of the loan. Once you get your mortgage preapproval you can also be sure about the position you hold regarding buying a house. However, to get a preapproval you will have to be prequalified. Prequalification is nothing but checking your financial status before offering you the mortgage.
Finding the Right Home
Finding the right home that matches the way you want it to be, can be a bit hard to get. However, if you are wondering how to choose the right home then here are a few real estate buying tips that you need to add to your home buying process checklist.
Find the right location
Finding the right location is very essential when looking for a house. You might want to check whether you want to live in a suburban place or a metropolitan place. Furthermore, you might also want to check what amenities do you get while choosing the location. For example, if you have kids, you might want a place closer to a school. Such considerations need to be made to choose a place that fulfills your needs.
Figure out the size of your house
Finding the right home is one thing and finding out how much place you need is another thing you need to look out for. For example, if you are a family who needs more open garden space then you might want to go for a house with more lawn space however if you are a family who prefers to stay indoors, then a cozy indoor-based house would be much more suitable. Also while viewing your house, you might want to see how much sunlight you get and what is the lighting condition of your house.
Take into account the condition of the house and the maintenance needed
While most houses you might visit might be new and devoid of any maintenance issues, however, there might be some old houses that might need a lot of changes to be done. Considering the costs of the same is also important while finding the right home. You can also carry some home inspection essentials along with you to get your home inspected.
Evaluate and compare homes
While you might like the first house you come across, do not finalize it right away, instead go around and take a look at other houses. This will keep your options open and check for all the necessary conditions you need to meet. Compare the houses and check which ones you prefer more; make a shortlist and then finalize one.
Making an Offer
Making a smart offer is where you will need the intervention of your real estate agent. You might also want to refer to their real estate buying tips to get the best offer made available. Consulting them will also give you a clear idea of how the houses are priced. Your agent will also provide you with more insights on:
- How trending the current housing market is both nationally and locally
- How long the house has been on the list
- Whether there are any other offers on the house
In a slow market, buyers can maybe ask for a discount on the house, however, if there is a competitive market then there are high chances the prices might not reduce.
Important Home Inspection
It is impossible to check each and every aspect of the house before you make an offer. This is where you need home inspection to come into play. Although you might have to pay for the home inspection, you can still avoid any extra costs that come across your way. For example, if the roof tile is left then you know how much work needs to be done or whether the foundation is firm or not.
The home inspector might also help reveal a lot of minor issues with the house. This is common and you need not panic over them. Instead, you can utilize these issues and try to bargain for a lower price. You can also ask for a few home inspection essentials while this process is being conducted.
Closing the Deal
Well, now that most of the part of your home buying process checklist is completed it is time to close the deal. Here you might want to go over the real estate transaction checklist one last time. In this phase, you might also want to check for your financial readiness and also avoid any purchases that may affect your credit score.
Apart from this, you might also want to check homeowners insurance. During this, you might want to do a final walkthrough of the home buying process checklist to see whether everything is in place.
Conclusion
House hunting can surely be stressful if you are not aware of the steps that are included in the home buying process or if you do not know whether you can afford it or not. However, it doesn’t need to be that hard to buy a new house. Especially with the home buying process checklist we have provided buying a new home will now feel like a breeze.
FAQs
What are the formalities for buying a house?
There are multiple formalities that need to be followed such as the ones given below:
- Selecting and finalizing the property
- Legal due diligence
- Applying for a mortgage
- Receiving the allotment letter
- Signing the final sale agreement
- Possession followed by registration
How to plan for buying a house?
For planning to buy a new house you might need the following steps:
- Start with proper budgeting
- Choosing the right location
- Checking the market rates
- Checking for your credit score and applying for a loan if possible
- Save for EMIs and down payment
- Finding the right home
- Finalizing the home.
What are the documents we need to check before buying a plot?
There might be a list of documents that you need to keep prepared such as follows:
- Mother deed
- Sale deed
- Power of Attorney
- Encumbrance Certificate
- NOC
- Property Tax, Electricity bill, and water tax bills
- Letter of allotment
How many types of property documents are there?
The following types of property documents are available:
- Sale deed
- Mortgage deed
- Partition deed
- Release deed
- Gift deed
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