Hey there! Are you wondering if buying a home is going to be a painful process?
It doesn’t have to be! You’re ready to make your home buying dream come true. And Flyhomes has just the perfect guide to take you through each of the steps!
The first step:
It’s always important to figure out if you’re financially ready to be a homeowner. Why, you ask? Well, purchasing a home commitment implies a 15-30 year mortgage in most scenarios. Its also about taking care of home maintenance, homeowners insurance, property taxes and repairs.
That’s why it’s important to ask yourself a few questions.
- Do you have a stable income? Most lenders require at least two years of employment history.
- Can you afford the mortgage? Ensuring stable employment before buying a home is important.
- Is your debt under control? Lenders look at your debt-to-income ratio to decide whether to offer you a loan.
- How long do you intend to live in the house for? Some loans, such as first-time home buyer’s assistance programs, require you to live in the home as your primary residence for at least five years.
- Are you committed to staying in the same area? Staying in the same home helps build more equity.
- How is your credit score? A higher credit score gives you access to lower interest rates and improves your chances of securing a mortgage. If your credit score is low, consider taking steps to clean it up.
- Do you have a downpayment saved? Most mortgages require a downpayment. Do you have enough saved to put down a down payment? Ideally, down payments are 5%-20% of the home’s total cost.
The right time to buy a house
It’s always important to match the timing of buying a house with several factors to consider. Some of these include market trends, inflation, housing costs and interest rates.
Quick note: Market trends can impact different aspects of the economy, like both the rate of unemployment and inflation. For example, when the stock market is dropping, mortgage providers can be less willing to lend money. If there’s a downturn in the stock market, you can still experience high interest rates. Both of these factors can impact your budget (a higher interest rate means a higher monthly payment).
Finally, high housing costs can impact whether you can afford a home, how much you’ll pay each month, and whether there is more or less inventory available for purchase.
There is no right or wrong time to buy a home. Consider your personal situation, the overall economy, and the housing market when making your decision.
Step 2: Set a Budget
How much home can you afford? Use calculations to determine a general idea of how much you can afford to spend. Start by taking your annual household income and multiplying it by 2.5.
That is approximately the amount you can afford to spend on a home.
A thumb rule is to make sure that payments are no more than 30% of your monthly income.
Quick note: None of these calculations cover interest rates. That’s why, use a mortgage rate calculator. It will help you in knowing the expected monthly payment for the mortgage loan amount.
Remember, you don’t have to spend the amount your lender approves you for. Spending less will give you breathing room in your budget.
Also, if your mortgage is an adjustable rate mortgage (ARM), your monthly mortgage cost can change as interest rates go up or down.
Make sure your budget allows for a potentially higher payment if you get an ARM.
Step 3: Secure Your Financing
Now that you know how much you can afford to spend, it’s time to find a company to loan you the money for a mortgage.
Finding the right mortgage lender can impact your closing time, interest rate, and even your ability to get a mortgage, so make sure to shop around.
Consider Flyhomes Mortgage
Flyhomes Mortgage is much more than a home lender. Our real estate brokerage and closing wings work hand in hand with our mortgage team to make sure you get a great deal—and a seamless experience— at every point in the home buying journey. We’re here for you, and we’re committed to your success.
Step 4: Find a Real Estate Agent or Use a Company like Flyhomes
A real estate agent assists you through the process of buying a home.
While the exact tasks vary by state, real estate agents are generally responsible for helping you find listings, providing advice on homes you’re looking at, explaining the purchasing process, submitting offers, and helping to finalize the purchase of your new property.
Most home sales involve two real estate agents—one for the buyer and one for the seller. The two agents split a percentage of the house’s sale price, which usually ranges between 4-6%.
There’s a good chance you’ll spend quite a bit of time with your real estate agent, so choose someone who understands your needs and is happy to explain the process and answer questions.
If the real estate agent constantly misses meetings, forgets to return calls, or suggests homes that do not fit your needs, they may not be the right agent for you.
Step 5: Choose a Neighborhood
Now it’s time to decide which neighborhood you want to live in. After all, you can always add a new deck or paint faded siding, but you can’t move your home to a better location.
When comparing neighborhoods, think about what features matter to you, such as:
- Safety
- Commute
- Walkability
- School ratings
- Utility and cable companies
- Convenience to friends and family
- Availability of parks and greenspace
- Closest grocer, pharmacy, other stores
- How well other homes are maintained
- Public services, such as trash pick up and snow removal
Step 6: Consider Home Features
Before starting your home search, understand the features that matter to your family and you. For example, you might prefer a four bedroom home, but be interested in a three-bedroom with a den.
On the other hand, a two-car garage may be non-negotiable.
Only you, as the buyer, should decide if a house is the right fit.
If you plan to live in the home long-term, consider how your needs might change. For example, will you need a bedroom for additional children, a first-floor bedroom for older generations down the road, or a garage for that woodworking shop you’ve always wanted?
Remember that many features can be added. A lovely home below your price range might leave room in your budget to add a must-have feature like a backyard pool or a larger garage.
Step 7: Submit an Offer
Once you find the right home, it is time to submit an offer.
Your real estate agent will handle the paperwork and confirm all details with you before sending the offer to the seller’s real estate agent.
Offer letters generally include:
- Address and description of the property
- The proposed sale price
- Terms of the sale
- The earnest money amount (A deposit the buyer puts down to show they’re committed to the deal.)
- Proposed close date
- When the buyer takes possession
- Contingencies that allow the sale to be canceled, such as if the property fails inspection
An offer is often the first interaction sellers have with a buyer, so aim to make a good impression. Be clear and include details that make your offer stronger, such as a larger down payment or flexible close date.
Your agent and you will draft the offer, though your agent should do most of the heavy lifting and will likely have a template so they can work fast. Then your agent will send the offer off to the seller’s real estate agent. That’s when the waiting starts.
In competitive markets, you may only have to wait a few hours for an answer. It’s rare to wait more than 48 hours, though.Your agent can tell you how quickly to expect a response.
If your offer is accepted, you’ll receive a signed offer from the seller and move on to the home inspection.
The seller may also decline your offer (which often means they’ve accepted another offer) or counter with different terms or a higher asking price.
Your real estate agent will help you negotiate changes to the offer.
Your home offer is the beginning of your negotiation with the seller and, if accepted, becomes the purchase agreement.
Flyhomes Mortgage is much more than a home lender. Our real estate brokerage and closing wings work hand in hand with our mortgage team to make sure you get a great deal—and a seamless experience— at every point in the home buying journey. We’re here for you, and we’re committed to your success.
Step 8: Home Inspection
The home inspection is a crucial step in the home buying process.
During the inspection, a licensed professional tours your potential new home looking for any issues with the structure of the home, plumbing, or wiring. They may also check for gas leaks, water or bug damage, and assess the age and condition of the roof and the foundation.
A home inspection aims to ensure the house is in good shape. The inspector can also be a source of information about the home’s history and repairs you can expect in the coming years.
Even if you don’t intend to back out of the agreement, no matter the inspection findings, get one done so you can plan for repairs and get a sense of what you’re buying.
Make sure to hire an experienced professional you trust.
Your real estate agent may be able to recommend an inspector, but don’t be surprised if they can’t. Some real estate agents want to avoid even the appearance of a conflict of interests.
In most cases, you can attend the home inspection. The inspector will perform their inspection and walk you through their findings. In a few days, you’ll receive an inspection report including details, recommendations, and images of the property.
After reviewing the inspection report, you’ll decide whether to move forward with your offer, ask the seller for repairs, or reduce the asking price to account for taking care of repairs yourself.
If the inspection uncovers major issues, you may have grounds to withdraw your offer and get your earnest money back, if that contingency was included in your offer.
Step 9: The Appraisal
Your mortgage lender won’t underwrite your loan until they receive an independent appraisal. An appraisal is an estimate of the property’s current market value, typically performed by a third-party appraiser.
An appraiser will determine the value of your home by considering its condition in conjunction with the value of similar homes in the neighborhood (comparable sales or comps). The appraiser looks at the square footage, lot size, number of bedrooms, location, etc.and compares your home to recent sales to determine the current market value of your proposed new home.
The goal of the appraisal is to protect your lender by ensuring they won’t lend you more money than the home is worth and you will be assured of the home’s current market value.
Generally, the mortgage lender orders the appraisal from a third party, and you will not be present for the appraisal, though you may have to pay for the cost of the appraisal.
So what happens after the appraisal?
If the appraisal comes back significantly lower than your offer, you’ll only be allowed to borrow a percentage of that amount. So if you offered higher than the appraised value of the home, you may be forced to pay the difference in cash. Talk to your realtor about what this means in your situation— if you’re allowed to pull out of the deal without losing your earnest money.
If the property appraises close to your offer price or even higher than your offer price, nothing changes and you move to the next step.
Step 10: Final Walkthrough
By now, you’ve seen the property several times. You toured it with your real estate agent and saw it during the inspection.
After those visits, you may have asked the seller to make changes or repairs, such as fixing a leaky sink or installing a safety handrail on stairs.
During the final walkthrough, you’ll verify everything is in the same condition as the last time you saw the property and ensure any repairs are completed to your satisfaction and the property has been maintained during this time.
Bring the inspection report to the final walkthrough and compare the report to the current state of the property. Do the images match? Have your concerns been addressed?
Review your signed purchase contract and ensure any appliances and other items that were to remain in the property mentioned are still present.
Check for obvious signs of recent water damage, leaks, or mold. Ensure the yard and any additional buildings are also in good order.
In most cases, the final walkthrough goes smoothly but if issues arise, your real estate agent will walk you through your options.
Step 11: Closing
Closing on a home is when the final paperwork is signed, the seller is paid, and you officially take possession of the property.
The close date generally occurs four to six weeks after you submit your offer to the seller, though the timing varies by location, type of property, and individual contracts.
The exact closing process varies by state, but generally includes:
- Meeting at a title agency or real estate agent’s office
- Signing the final documents
- Paying closing costs
Your real estate agent or lender will tell you what documents you’ll need at closing, but expect to bring a cashier’s check or wiring details for closing costs, a photo ID, and proof of homeowners insurance. You and your spouse (if you have one) should plan to be at the closing in person, even if only one of you is on the mortgage – if one or both of you can’t for some reason (one of you will be out of the country, perhaps), you should tell your real estate agent and mortgage loan officer as soon as possible!
Once the mortgage closing papers are signed, it’s time to celebrate—you are officially a homeowner!
Step 12: Move In!
After closing, it is time to move into your new home. Welcome to homeownership!
If you hire movers, schedule your move-in day a few days later in case closing gets pushed back.
The wait might feel excruciating, but that extra time will be a lifesaver if the closing doesn’t proceed as expected. Consider hiring a cleaning company to do a deep clean, so your new home is sparkling clean to move in!
What to do once you move in to your new home:
- Call to get your utilities turned on ahead of time
- Make note of any upgrades you want to do as you move in
- Make a home repair list
- Make a regular home maintenance list
Moving in is your last step! Before you start, make sure you transfer utilities and prepare a regular maintenance list
Ready to buy your first home? Get in touch with our Flyhomes agents who are ready to usher you from homebuyer to home owner.
