Buying your first home will most likely be the biggest financial decision and process that you or your family will ever make. Because of this, it is essential that you make sure you have your paperwork in order and follow your mortgage lender or bank’s instructions to make sure you get the best rates and the lowest amount of fees as possible.
If you’re buying a home for the first time, follow these steps to make sure you don’t overpay.
Step One: How Much Can You Afford?
The first step to buying a home is determining how much of a house you can afford. To do this, you’ll need to start by figuring out the maximum monthly payment that you can afford.
Use an online calculator to determine this amount, then work backwards with a current average interest rate and an online calculator to figure out how much house you can actually afford to buy.
Step Two: Get a Pre-Approval Letter
After you get this estimate of how much house you can buy, start talking to banks and mortgage lenders about getting a pre-approval letter. These companies will usually give you an estimate of the interest rate you will qualify for and issue a letter that you can take to a realtor stating the price range you qualify for.
Keep in mind that this letter will just give you an estimate of what you qualify for. Of course, after you find a home that you like, a more accurate estimate, including an updated interest rate, taxes, and insurance costs will be given to you. Find out more about mortgage pre-approvals in this brand new article from KANETIX.
Step Three: Make An Offer
As soon as you find a home that fits your budget and your needs, you should make an offer. Any good realtor will be able to help you through this process. It is normal to go through a couple of rounds of negotiations at this point in the process.
These negotiations will determine the selling price, but they also will determine which home repairs will need to be done to the home. In many cases, you will also be required to pay “earnest money”. This is a deposit that will later be applied towards closing costs that serves to ensure that you are serious about purchasing the home.
Step Four: Go Under Contract and Close
After the negotiations are completed, the house is considered to be “under contract”. This term means no additional offers on the house will be accepted. In most cases, this term also means that both you and the seller have thirty days or less to meet the terms of the contract.
This means that over the next month you will need to get all of your paperwork in order and have your mortgage lender or bank issue the final approval on the mortgage. While you wait, make sure that you do not do anything that can jeopardize getting this final approval.
Online mortgage whiz extraordinate Thomas Whiling is a retired real estate agent. Obsessed with the industry, he can’t help but spread his knowledge across the web. He believes in educating the masses about the complicated world of mortgages and real estate to help consumer make informed decisions.
