Buying your first home is an exciting life event, but boy it can get complicated. There are so many financial and logistical hurdles to overcome, and finding a home that is well within your budget always seems to be harder than you imagined.
Don’t despair just yet. Lots of people, including millennials, find out how to end up in a home they love without wanting to stick their heads through the wall. Below are the steps you need to follow in our guide to buying a home, along with various helpful tips to help you find your perfect home.
The first step is to find out how much home you can afford and how to pay for it. Since a home is the most expensive commodity most people will ever buy, this phase can understandably be a bit tricky.
To get started, consider using an online home affordability calculator to estimate your budget. Make sure you understand the full cost of owning a home, which includes the home itself, utilities, taxes, homeowner association fees, maintenance, repairs, and lawn maintenance.
Chances are that you will need a mortgage loan to be able to afford your new home.
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To qualify for a mortgage, you will need:
Money for a deposit
A typical down payment is 20 percent, but many lenders now only allow 3 percent for first-time buyers. However, keep in mind that a lower down payment can mean higher costs in the long run.
If you are looking for Ways To Make Extra Money For your down payment, check out this helpful article: 9 Ways To Get Cash For A Home Down Payment
You can potentially get approved with a score of 600, but at least 720 is ideal for getting the best prices.
Credit karma can help you get there. It provides you with a free credit report card – including your credit history. It breaks down your score and rates various aspects of your credit profile.
The lender wants peace of mind that your down payment will not consume all of your money. Click here to learn more about the different aspects of home down payments.
Proof of permanent employment
The lender will also require proof of work. If you are self-employed, you must submit your tax returns for the past two years.
A variety of documents
You’ll need to have plenty of documentation on hand, including housing history, employment history, bank statements, proof of home insurance, and more.
You can also save on closing costs, which are usually between two and five percent of your loan amount.
You’ll also likely want to spend some cash on furniture, appliances, and minor home repairs and upgrades. Learn more about the closing process here.
2. Get pre-approved
Millennials can take the guesswork out of renting and buying with LoanDepot.
LoanDepot was founded in 2010 and has quickly grown to become one of the biggest names in the mortgage market.
In 2020, the lender made more than $ 100 billion in home loans, helping more than 84,000 home buyers purchase and more than 209,000 homeowners refinancing.
LoanDepot offers Conventional, Jumbo, FHA, VA, Fixed Rate, Variable Rate; Interest and term and cash-out refinancing; Construction and renovation loans.
LoanDepot simplifies the buying process with a digital credit experience with the ability to get personal help in more than 200 locations across the US
Millennials can quickly get a personalized quote and pre-approval and see if buying a home makes sense.
Related: Are Millennials Buying Homes? Should I rent or buy?
2. Find an agent
After you get pre-approved, your next step is to find an agent.
This home buying guide can help you find your first home, but it’s only a start. Buying a home is a chore and shouldn’t be taken lightly, so you’ll need a lot of additional resources along the way. One of your most valuable resources will be your real estate agent.
Finding the right broker is an integral part of the property buying process. Look for someone who is competent, motivated and with whom you get on well. Do not call the listing agent. You work for the seller and your goal is to sell the home as best you can.
Making sure you understand your realtor’s role will help keep the relationship and home buying process going smoothly. Make sure the expectations of both parties are clear. Sign a Buyer’s Brokerage Agreement and a Buyer’s Agency Agreement, but make sure you understand all of the forms before signing them.
3. Select a home
Once you’ve figured out the finances and the agent situation, it’s time to take a look at the houses. This part can be more enjoyable than the previous two steps, but it can be just as tricky.
Before you start looking for a home, define what you want and need in a home by creating a home purchase checklist. By making this list, you can prioritize what you are looking for and separate the essential from the useful.
As you make these distinctions, pay attention to what you may and cannot change one day.
For example, you can buy new countertops or install a pool in a few years. You can even renovate a bumpy or unsightly garden to create the green space of your dreams. However, you can’t change how far your home is from your work or your children’s school.
Also, tempting as it may be, stay within your budget.
If you’ve found your dream home and can afford it, you’re almost done. The final step on the road to buying a home is complete. Your real estate agent will play a prominent role in this part of the process.
They help you make a strong offer, convince the seller when there are multiple potential buyers, and negotiate savings. At this stage, be careful to avoid a bidding war that is beyond your budget.
Some other steps that you need to take are getting home insurance and a home inspection. Take part in this inspection and feel free to ask questions about it.
Once you’ve reached an agreement with the seller, it’s time to close. Before the closing meeting, be sure to read the HUD-1 statement of financial statements, which summarizes the transactions that will take place upon closing.
When you close, you sign the mortgage letter and pay the down payment, closing fees and any other outstanding fees, such as a real estate commission. Be sure to pay due attention to all documents and don’t be afraid to ask questions about them.
You will also receive the title and keys to the house when you close it. After that you are done! Except for moving in and everything that comes with it. Once you’ve moved in, you can finally settle into your home and enjoy the feeling of being a happy first-time owner.
Do you have any questions about our guide to buying a house? Leave a comment below!