So you want to buy a home. This can be quite a scary endeavor. A lot goes into buying a home for the very first time. And without prior experience it can be quite intimidating. I know. We are buying our very first home ourselves. After 11.5 years of marriage, we will finally be homeowners for the very first time. But I want to take a lot of the scariness out of it for you. It doesn’t need to be scary if you know what to expect. So we are sharing our full experience on how to buy a house. Hopefully it will help you in your endeavor to home ownership!
How to buy a house part 1
The very first step it so make sure buying a home is really what you want to do. We’ve been married 11 years. And this is the first time in our lives that we have been in a situation where buying a house is the right decision. If you will be moving frequently it probably isn’t a great idea to buy a home. If you aren’t in a steady income position; maybe it may not be the right choice. If the homes cost more than you can afford in your budget; maybe it isn’t such a good idea.
Also consider if you have enough cash to manage the cost of buying a home? (buyer pays out of pocket for home inspection, earnest money, and down payment on house– you need to have this saved up before you make the decision to buy a home).
If you find that buying a house is the right decision for you and your family here are the best 12 steps on how to buy a house with the least amount of difficulty.
1. Figure out your budget. – Don’t just track where your money goes. Have an established budget and live within your budget guidelines. Make sure you have room in our budget for a mortgage payment. Calculate how much you can afford each month in house payment. Figure out the most you can afford for a home before you even start looking at homes. Try new budget apps for your phone to keep on track. We personally love Goodbudget and Mint Personal Finance. Both are free apps and really help keep you on budget.
2. Pay off debt – if at all possible. But you definitely want low debt if any. It helps your credit score, it frees up your monthly finances to be used for the home and living. It gives you more freedom and more choices.
3. Check your credit score (Once a year. Not too often as it can hurt your credit score if it is checked too frequently) for a good loan and interest rate, ideally you want a 720 or higher. Best is 740 or higher. Know your credit score going into the process. This will help you better negotiate the best rates on a mortgage.
Is your credit score a little low? Try these 5 things to improve your credit score.
4. Decide what you want in a house. Features, size, how many bedrooms, bathrooms, etc. How big of a yard do you need/want? Make your list in order of importance. Deal breakers first. Then high valued wants. And finally the frivolous things that you want but can do without. Such as my coveted double oven. That is something I desperately want. But it is frivolous for house hunting; as it can be installed later in any house you purchase. But for us a home with a min of 4 bedrooms and 2 bathrooms was a deal breaker.
5 Browse the houses in the area you are looking to move to. See what is a realistic price range for the area. And again, make sure it fits your budget.
6. Shop around for a home loan pre-approval. Ask your bank, and various credit unions what rates they can offer you. Basically you are shopping for money. You want the best deal. Don’t just go with the first offer. Check different locations and see which bank or resource can give you the best interest rate.
7. Apply for a home loan pre-approval. If you go house hunting with a pre-approval, the process will go a lot smoother. You will know exactly how much you can afford. No temptation to look at that $350,000 house when you are only approved for $250,000. Also, closing goes a lot smoother if you are pre-approved. But do keep in mind that sometimes you will be ‘pre-approved’ for a lot higher than what will fit your budget. So again, don’t stray from your budget just because you are pre-approved for more.
In order to apply for a home loan pre-approval you will need
- last two years of taxes, w2s, 1099s, etc.
- two months of bank statements
- Photo ID
- 2 recent pay stubs
- If you are getting a new job, you will also need a letter of job acceptance
- If you are using a VA loan; you will also need the letter of eligibility for the VA loan and notation if you must pay the VA Loan fee or if it is waved.
Make sure you gather all those papers before you even begin the pre-approval process. It makes it go a lot faster and smoother. Turn those into your loan officer and they can easily have you a pre-approval or denial within a day or two. We were pre-approved in less than 24 hours and onto the next step.
8. Shop for a real estate agent. If this is your first time buying a home; there are a lot small details and paperwork that goes into buying a home. Having a quality real estate agent can help you navigate the foreign waters. I really lucked out because my Friend Nicole from Mom Always Finds Out; helped me find a fantastic agent! If you move to the Wasatch Front of Utah; I highly recommend Laura B. from Your Home in Utah. She took the time to get to know us and what we were really looking for on a personal level so she could help us navigate through the process of finding different homes. She has been a dream to work with and made this entire process almost completely painless (the fact that we are spending hundreds of thousands of dollars on a house is pretty painful..but that comes with the territory).
Here are 5 questions to ask before you hire a real estate agent that will help you pick the best agent for yourself!
9. Browse online listings. Make a list of all the houses you have an interest in that fit your previous criteria. Work with your agent to set up a time to visit each home in person. You definitely want to see the home in person before proceeding any further. We browsed hundreds of home online before we selected our 17 homes we wanted to see in person. Of that list; I had a top 3 favorites. We visited those homes first. After walking through them; 2 of those homes were immediately eliminated from our “possible home” list. They were quite different in person than they looked online. So definitely get a first hand experience.
10. Look at houses seriously. Don’t just look at the house. Check out the neighborhoods. Schools, and geographical location. When we went house hunting, there were multiple houses that we really liked. And we had a hard time deciding between them based on the house alone.
As you are looking at each home; make sure to take along this awesome House Hunting checklist printable from SAHMReviews. It will make the process of noting your likes and dislikes of each house a lot easier!
Our agent emphasized, you don’t want just the house. You need to look for the right neighborhood that you can be happy in! Pay attention to the yards in the neighborhood. Are they immaculate? Are there signs of kids via bikes, playgrounds, trampolines, and basketball hoops? Even what type of cars do they drive. You can learn a lot about a neighborhood this way. Make sure the home you love in also in a neighborhood and school district you can be happy in as well. If you are spending that much money on an investment; you want to ensure you will be happy with the whole package; not just the house.
We found one home we really enjoyed. It was close to the park. It had a lot of space. We drove through the neighborhood. Every yard was perfect. I am talking not a blade of grass out of place. Zero signs of kids. And a lot of signs of a retirement community. That was not the place for us!
Sure, we want a nice clean community, where people take care of their yards. But not to the extend that we become the eye sore if I can’t be out there gardening for 4 hours every day, or if we happen to be a few days late getting the lawn mowed one week.
And we want a neighborhood with kids! We have kids. We want our kids to have friends nearby. We want a family community. So these were signs we had to watch for.
11. Pick the top 3. Once you have looked at 4 houses pick your top 3. And eliminate a house from the options. And no longer worry about that house. Then every new house has to get ranked. Does it make it into the top three? If not; forget the house. If the new house does make it into the top 3; which of the previous top 3 homes does it beat out? You can only have 3 homes in the top 3 obviously. This helps you narrow down the options a lot faster and easier.
Plus as you are picking between homes; you only have to compare the current home you are looking at to the top 3 homes on your list. Not all the houses on the list.
When we went house hunting; we looked at 15 homes in one day. I would have lost my mind had I tried to compare all the homes to each other. But only having to compare each home against the top 3; made it really easy to eliminate most of the homes.
12. Rank the top 3. When you have looked at all the homes, compare the top 3 homes you are left with. Take a paper and divide it into 3 columns. At the top list each home. Then down the side list the major features of each home. Then rank the features between the houses. We gave a 1 for the kitchen we liked most, then 2 for the kitchen we liked 2nd best, and so on.
Continue the ranking for each feature of the home that is important to you. Don’t forget the neighborhood. At the end you will see which home had the most #1 rankings. That is your logical choice. But you may find out if you had become emotionally attached to any home if it happens to not be the most logical choice and you find yourself sad it wasn’t #1. This exercise really helps you discover which of the top 3 homes is really the home for you.
Lucky for us, our house #1 was also the home that I had become emotionally attached to! For a lot of reasons, but a big reason was the kitchen. You will understand why when I show you this kitchen! But that will have to wait until we actually move in. But don’t worry, I will definitely be showing it off!
Once you have the right house picked out; you proceed to the actual negotiations. But you will need to check out How to buy a house part 2 to get all that great info.
What are your top tips on how to buy a house?