Buying a home is an exciting, stressful, and expensive experience! If you've never been through it before, it can also be really confusing. There are a lot of financial terms and listing details that can get thrown around and leave you feeling like people are talking a different language.
Today, we want to simplify the home buying process for you, with the tips and questions you should really focus on when you start the process of buying a house.
Because, at the end of the day, it is not your friends, family, or even realtor that will be living in that home and paying the mortgage - it's you! So, you want to be really confident that you are making the right decision and doing what is best for you and your family.
1. Figure Out The Financials:
Before you even start looking at homes, you want to figure out the financials. There's going to be a lot of money talk and terms being used once things get rolling, so you want to make sure that you have a firm grasp on your budget and what you are pre-approved for.
In fact, you want to get a pre-approval letter from a lender/bank that you can take to your realtor and use as a baseline for what you can afford. But, just because the bank will give it to you - it doesn't mean you should spend it. Look honestly at your expenses and your financial priorities and decide what budget will suit your lifestyle best.
2. Learn Financial Lingo:
There are some financial terms that you are going to hear and you want to make sure you know what they mean.
We recently shared this post on our Instagram with four of the most common financial terms you want to be aware of. Let's break them down:
Closing Costs: This is a fee you pay in cash or roll into the loan to cover the costs of the loan process. Average closing costs are around $10,000 - but they are different for each loan, because it's based off 2-3% of the purchase price.
Down Payment: This is typically 20% of the total purchase price that you pay once the purchase is finalized. If you don't have the money for the down payment, you have to pay PMI, which is private mortgage insurance.
Earnest Money: This is a deposit that you will not get back if you change your mind on a deal or the purchase doesn't go through. For example, you might give a seller $20,000 to take the property off the market while you work out the details of the deal and if the purchase does not go through, the seller keeps the money and the property is re-listed.
Insurance: You have to have insurance in order to buy a house or a bank won't give you a loan.
3. Compare Mortgage Rates & Fees:
Not all mortgages are created equal! Do your due diligence and spend the time to find the right one for you! Shop rates and consider online banks, too.
Usually, you'll find the best deal with someone that is not your current banker and nowadays, online banks like BankRate.com are offering very competitive rates.
Three things to consider when looking at your options:
Closing costs - the amount that is coming out of your pocket.
Interest rate - you want the lowest possible interest rate
Fixed rate - usually you want a fixed rate mortgage, because this will lock in your interest rate, whereas an adjustable rate changes with the market and makes your payment unstable.
4. Find a Great Realtor:
Finding a great realtor is more than just having someone show you houses. This person is going to represent your best interest in negotiations, as well as handle all the paperwork for offers and more.
You really need someone who you can trust, has a solid reputation, excellent negotiation skills and also has a deep understanding of the area you want to live in.
In fact, a great realtor might even suggest neighborhoods that you didn't even know about!
Read our post with a lot more information on what to look for in a realtor and if you're in California - give us a call at 916.524.9733.
5. Make a List:
Now that you have been pre-approved, made a budget and found a realtor - the fun begins! Time to sit down and make a list of what you are looking for in your future home.
Consider what you like and don't like about where you live now. What would you change and what would you keep the same?
Things to think about in your future home include:
Proximity to work/freeways for travel
Here are some homebuyer questions we recently posted on our Instagram that can help guide your list, too:
6. 3 Most Important Things:
Armed with your list, your realtor should start showing you listings that might be a good fit. Or, maybe you'll be up all night on Zillow and Realtor.com finding your home yourself.
After all, 51% of buyers found their new home online (realtor.com). So, if you're hunting for that perfect place, make sure that you're always thinking about the three most important things when buying a home:
That's right! Location is the most important thing - because it's the one thing that you can never change about your house!
So, really evaluate if the location of that house is going to work for you and don't be wooed by the "perfect" house in the wrong spot!
7. Tour Properties in Person:
If at all possible, make sure to walk any potential properties in person. If you have to buy from a distance, try to find someone you really trust who knows your taste to walk them in real time. Yes, a realtor can do a video tour, but it's not the same as being there in person and getting a feel for a home and area.
Fact is, every home and neighborhood has its own unique vibe and you won't get a feel for that over the phone. So, if you're really serious about a property - get there and see it for yourself.
8. Make a Strong Offer:
This is when your realtor gets to do their best work. It's time to negotiate an offer. You want to consider all the elements of your offer and how competitive it makes you as a potential buyer and then start negotiating.
Your realtor's unique understanding of the area and market should give them a good baseline of how much lower or over ask you should go. And, don't rule out negotiating with new builds, either. Oftentimes, they'll be happy to negotiate to make a sale - and you'll be thrilled to save some money or get $5,000 in wood blinds installed for free!
9. Order Inspections & Appraisals:
With existing architecture, it's really ideal to know what you're getting into. Inspections allow you to look deeper at the realities of the home before they sneak up on you. They're sort of like getting a mechanic to look over a used car before you drive it home.
In some cases, saying you'll pass on inspections can strengthen your offer if you have to buy on contingency or are going up against a lot of cash offers. Do this very carefully, though, because those inspections could tell you that the home needs considerable (and costly) repairs.
10. Prepare To Move:
Did your offer get selected? Congratulations! You just bought a house! Now it's time to prepare to move.
But, don't worry, we already wrote a packed post with TONS of moving tips and tricks that will make moving much more organized and less stressful.
Go here to read our moving tips post!
What do you think? Do these tips help you? We love helping out our buyers and sellers.
A lot of these tips were originally shared on our Instagram, where we regularly share buyer and seller tips - so make sure to follow us so you can see future content, too!
Good luck with the home buying process - try to ride the ups and downs that come with the process and trust that in the end, you'll end up in the perfect place for you.
Thanks for reading!