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The housing market is hotter than ever. More than seven million homes are sold every year in the US. And as competition heats up, houses are scooped in days, if not hours.
To buy a house in this market, you need to be ready. You need to move quickly. And in order to do that, you need to have all your ducks in a row.
If you’re a first-time home buyer, then you probably need the help of a home buying checklist to make sure you do everything in the correct order.
By taking the time upfront to prepare for a home purchase, you can ensure the purchasing process is fast and smooth. Keep reading below to learn how you can become a smart homeowner sooner rather than later.
High Credit Score
One of the most important things you need to qualify for a mortgage is a healthy credit score. Hopefully, you’ve participated in credit-building activities over the past few years.
This might mean paying off student loans, an auto loan, having credit cards, or leasing an apartment.
There are many factors that determine your overall credit score. But you’ll want a score of at least 650, though the higher the better to qualify for a decent loan.
Take some time to evaluate your score, check for errors, and improve your credit score by paying down other forms of debt, lowering your credit utilization ratio.
Employment History
To qualify for a conventional or FHA mortgage, which most new homebuyers apply for, you’ll need to have a steady employment history. Lenders will look at the last two years of your tax return to determine how much money you make on a monthly basis.
If you’re planning to buy a home in the near future, don’t change jobs. Sometimes a job change is acceptable if you are still doing the same type of work. But changing industries or career paths is a big red flag to lenders.
If you’re self-employed, things can be a bit more difficult. If you have multiple years of steady self-employment income then you should be okay.
But if you’re income level fluctuates from month to month, or you have multiple income streams, things can get a bit messy. You may need to work with a specialized mortgage lender to handle your situation.
Money for Downpayment
Another huge factor for qualifying for a home loan is the amount of money you have for a down payment. Home prices are rising nationwide.
For a conventional mortgage, you’ll need anywhere from five to 20 percent in cash for a down payment. And don’t forget additional funds for closing costs.
If you choose an FHA mortgage, you can pay as little as 3.5 percent down. However, this will result in an extra monthly payment known as private mortgage insurance (PMI).
Even with the extra payment, it’s one of the best ways for new homeowners to get into a house sooner rather than later.
Get Preapproved
Now it’s time to actually apply for a mortgage. It’s best to apply with multiple lenders, even though it can be time-consuming.
If they all preapproved you, you can compare the mortgage rates offered by each lender and choose whichever loan will be the cheapest for you in the long run.
If you have a straightforward financial situation, you can get preapproved in a few days. For others, it can take weeks of going back and forth with lenders before you can start looking for a house to buy.
Find a Realtor
Once you have a preapproval letter from your lender, you can start shopping for a home. You’ll want to work with a realtor to help you find a house and negotiate a good offer.
Ask friends and family members if they have any realtors they recommend. A good realtor is worth searching for, as they will have a direct hand in your success or failure in buying a home.
And as a buyer, you don’t have to worry about paying them, since their paycheck comes from the seller. Just make sure to choose an agent that focuses on the types of homes you are looking for.
For example, if you’re a new home buyer, you probably won’t work with an agent that focuses on luxury homes.
Alternatively, you can buy a house directly from a company that buys, fixes, and sells homes directly. Just search for “we buy homes near me” to find a local company that offers this service.
Make an Offer
Once you find the home you want, you need to move fast. You’ll want to submit an offer and be ready to close quickly.
It’s a seller’s market, so you’ll likely need to offer at least the asking price. Your agent will recommend if you should offer over-asking.
Generally, only houses that are terribly out of date or in bad neighborhoods will sit on the market for more than a day or two in this housing climate.
If the curb appeal of the house is high, it’s going to sell fast.
Hire a Home Inspector
Once your offer is accepted, you’ll need to get a home inspection (unless you waived the inspection clause to increase your chances of getting the house).
The best home inspector will let you know about every problem in the home house. Your agent probably has an inspector they recommend.
Get Insurance
If all things are going according to plan, you’ll need to get homeowners insurance before the sale of the home is complete. Your policy needs to be active before you actually get the key to ensure consistent protection as it transfers ownership.
Otherwise, you’ll head to your closing appointment, sign a bunch of papers, authorize payment, and receive the key to your new home.
Crossing Off Your Home Buying Checklist
It almost sounds easy, doesn’t it? By working through this home buying checklist, you can take steps towards your dream of owning a house, building equity, and never paying rent again.
It’s a straightforward process. But ask any new homeowners. In this market, it’s not easy.
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