The Home Buyers Guide

by Brandon Cornett

In the last few years, the process of buying a home has been altered by the so-called mortgage crisis and the continued evolution of online real estate tools. In this article, we will take a fresh and modern look at the process of buying a house. More specifically, we will outline the general process in twelve clear steps.

Step 1: Check Your Credit

Credit scores have always been important for home buyers, but now, in the wake of the mortgage meltdown of 2007 – 2009, they are even more critical. According to industry experts, home buyers in the past needed much lower credit score to qualify for a loan than they do today. During the boom years, a sub 600 credit score would work, but now, generally a score of 620 or higher is needed. Because of the new mortgage environment, your first step should be to review your financial situation. Order your credit reports from Experian, Equifax and TransUnion, and check them for errors. Order your credit score (different from your reports) to see how you stack up against the national average. If necessary, focus on improving your score by paying down credit card balances, making all future payments on time, etc.

Check out our article on credit repair if your scores are low.

Step 2: Determine Your Budget

Don’t make the mistake of letting a mortgage lender tell you what you can and cannot afford, in terms of a monthly mortgage payment. In reality, the only thing a lender can tell you is the amount you qualify for — not the amount you can realistically afford. In other words, you should determine your home buying budget for yourself.

Step 3: Research and Choose a Type of Mortgage

Do you know the difference between a fixed-rate mortgage and an ARM? This is just one of the things you need to understand before applying for a mortgage loan. Because of increased competition in the lending industry, there are more types of home loans today than ten years ago. The key to success when choosing a mortgage is to consider your long-term plans and find a loan that matches those plans. To do this, you must learn the pros and cons of the primary loan types. For more information check out our article on ‘Mortgage Basics.’

Step 4: Get Pre-Approved for a Loan

Pre-approval is a process in which the mortgage lender reviews your financial and credit history to determine your “creditworthiness” … an industry term that means: “How much of a risk is this person, and how much are we comfortable lending?” When you get pre-approved for a certain loan amount, there’s a good chance that you’ll receive final approval for that amount as well, when the time comes.

Having a pre-approval letter in hand also shows sellers that you are serious about (and capable of) purchasing their home. This can make a big difference in negotiating price with the seller. Seller’s love serious buyers with the ability to quickly close a loan!

Step 5: Find a Real Estate Agent

If you are buying a home, it’s wise to hire a professional real estate agent. The seller generally pays the commission so the service is no cost to the buyer. A Real Estate professional will help you avoid the pitfalls of the transaction, and in the end you’ll get more for your money.

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Step 6. Narrow Your Search

The neighborhood you choose is nearly as important as the house itself, because both have a direct bearing on your quality of life — not to mention the future resale value of your new home. For these reasons and more, it’s always best to hire a Real Estate Agent to help you research the areas you like best. Schools, shopping, upcoming zoning changes, future developments in the area, all effect your quality of life and resale value.

For a listing of Homes for Sale use our free MLS search engine today!

Step 7: Begin House Hunting

This is where you and your agent visit properties in order to find one that matches your needs. Here are some helpful tips. Take a digital camera with you to get pictures of each home. This will help you recall the details later on. Bring a notepad as well, and for the same reason.

Use our free MLS search engine to narrow your options before visiting the properties in person. This way you won’t waste your valuable time in traffic. Also, try to limit the number of houses you visit in one day. If you view 20 houses in a day the houses will all tend to ‘run together’ leading to what we call ‘Buyer’s Fatigue.’

Step 8: Evaluate the Asking Price

It’s referred to as the “asking price” for a good reason. Just because a property is listed at $250,000 doesn’t necessarily mean it’s worth that amount. This is another area where it helps to have a real estate agent. Most agents are expert at validating sale prices against recent sales in the area, and that’s the best way to find out if the price is realistic or inflated.

Step 9. Make an Offer

Once you’ve determined that the price is fair and reasonable, you are ready to make an offer on the property. Always make the offer contingent upon the home inspection (see next item). That way, if the inspector uncovers an issue that you consider a deal breaker, you have a way out of the contract. Ask your agent about contingencies.

Step 10: Get a Home Inspection

Most inspections are relatively inexpensive. The money you spend on an inspection is a small price to pay for the peace of mind you get in return. A Home Inspector will review the structural and mechanical aspects of the house, including (but not limited to) the roof, foundation, electrical, and heating / cooling system etc. Ask your agent for a list of local Home Inspectors.

Step 11: Attend the Closing / Settlement Process

So, you’ve made it through all of the inspections and the process is still on track. Great! The next step will be the closing / settlement process. Actually, you can prepare for this process early on by putting extra money aside. This is when the title to the property is transferred from the seller to the buyer. You’ll also be signing a lot of paperwork and paying any other fees that are due.

Step 12: Tie Up Loose Ends

After your move, you’ll have a few more things on your task list. Transfer your utilities if you haven’t done so already. Complete a change-of-address form with the post office. Get a safe deposit box for your home insurance policy and other important documents. Set up a mortgage payment schedule or an online auto-pay system. And give yourself a pat on the back … you’re now a homeowner!

About the Author: Brandon Cornett is a consumer advocate and publisher of the Home Buying Institute. You may visit the author's website at www.HomeBuyingInstitute.com to learn more about this topic.