Everyone awaits the day they can stop renting, move out of their parents house, or otherwise own their own home. Nevertheless, many people jump in to the decision only to end up back in their previous situation while being tens of thousands of dollars poorer.
1) Crunch the numbers. Review your budget decide what you are comfortable paying per month. It is okay to go slightly outside your budget on overall price, but you done want to end up choosing between food and your mortgage payment because you chose a home too far from your budget.
2) Save a 20 percent down payment, in cash or cash equivalent accounts. You can put down a lesser amount, but the lower your down payment the higher your monthly payments will be.
3) Calculate the cost of continuing to rent, especially if you are unsure about your current funding. It is better to ‘waste’ a bit more money renting then to strain your finances, and possibly lose your new home in a couple months.
4) Be informed. Pretty pictures are nice, but what about the structure of the home? Does it need a new roof? Does the neighbor have a dog that barks all day? These are all things to consider before buying a home. Small things like the barking dog are not a huge deal, until you try to take a nap.
5) Get your credit reports. This is usually part of step one but if you did not do it, credit reports will give you an idea of how much money you can borrow from your chosen lender. This affects how much your home can cost over all.
6) Get mortgage pre-approval. Make sure you get closing costs included in your cost as well as interest rates. Compare as many locations as you can find. The mortgage process is known for being more painful that a root canal, however a good broker can ease this process at lease slightly. You will need to provide documents on everything that has ever happened to you financially, it will feel like since birth, but it is usually the last 15-20 years.
7) Once you find a home you like get an appraisal, this will let you know the market value of your dream home. This is a wise step because not all home prices are realistic. Market Value takes into account the home, while houses around it will affect price a bit it is not based solely on the neighbors, as real estate prices often are.
8) Once you appraisal pans out, get a home inspection. There are almost always problems in an inspection. You need to decide the severity of the situation. A new roof or furnace for example is much more severe than a stair case not having a railing.
9) Make a fair offer. It is tempting to offer a much lower amount, especially if the seller has an unrealistic price set. Nevertheless, you need to offer the best you can based on other local sales in the last six months. The offer will specify your offer, financing terms and what will happen should any problems arise during inspection. Your real state agent will help with this process.
10) Once your offer is accepted you need to get homeowners insurance, this is a revelation for renters who have never paid this before. Keep in mind the contents and the structure are two very different things and may have very different levels of insurances. If you have a mansion but not much in it then the structure is worth more. However if you have a modest home with a large collection of antiques, your contents may be valued at a much higher rate than the structure.