Buying a Home: A Step-by-Step Guide

October 15, 2018 by Matthew Anticoli

Buying the perfect home for you can be daunting, with many steps requiring a lot of time and effort. These 10 steps can help make the home buying process more manageable, allowing you to move forward with confidence.

Step 1: What Can You Afford?

Before deciding to buy a home, it is essential to get a sense of how much you can afford. Look at your current debts, income, and expenses. How much money do you have coming in vs. going out? Additionally, what kind of money do you have saved already? Don’t try to figure this out on your own. Talk to an independent mortgage advisor who can help you figure out exactly how much you can afford. Once you have a strong understanding of your personal financial situation, you have taken the first step to buy your next home.

Step 2: What is Your Credit Score?

Next, it’s time to check your credit score. Knowing your credit score will help you narrow down how much you will be able to borrow, and thus how much you can afford. If your score is above 680, you’re likely to receive financing pretty easily. If you find that your score is 580 and above, you can still qualify, primarily through special loan options such as FHA loans. With a score lower than 579, you’ll have more difficulty receiving financing, and at best will receive a loan with less favourable loan terms. This is why it is crucial to have an independent mortgage advisor check your credit score before moving forward with buying a home. Checking your credit score early in the home-buying process also gives you a chance to fix any errors that may be present on your credit report, which typically has the effect of boosting your score.

Step 3: Getting the Right Pre-Approval

As you move forward with your decision to buy a home, you’ll need to begin planning how to afford this purchase. Here’s where your lender comes into play. During pre-approval, your lender will take a comprehensive look at your financial and credit documents to assess your eligibility for a mortgage loan. At the end of pre-approval, you’ll receive a pre-approval letter or PAL. You may use your PAL to start making offers. Having a PAL signals to sellers and listing agents that you are a buyer that means business!

A pre-approval is crucial and the quality of your PAL can vary depending on who you go to, whether it be a lender, a bank, or a broker. Some lending institutions will take your word for your income and assets without verifying your capacity to buy. Here at Candor Mortgage, our pre-approval is much more robust. One of our experienced mortgage advisors will verify your capacity to buy a house by reviewing your income, credit, and financials. 

Step 4: Building a Team

Now that you’ve prepared yourself to buy a home, it’s time to take the next step and bring in some help from the outside. To make your home buying experience as simple as possible, we recommend seeking the help of both a real estate agent and a lending institution.

For financing, you may choose from a bank or credit union, lender or direct lender, or an independent mortgage broker. Interest rates, closing costs, and service fees will vary from institution to institution. Your realtor may recommend their preferred lender, but you have a right to choose the lending company that is right for you.

If you need help finding a real estate agent, we’re here for you!  At Candor Mortgage we work with a well-vetted team of high-quality real estate professionals. We can help match you with a real estate agent that is right for you and your needs. You are never under any obligation to use our recommendation.

A real estate agent is not only a great source of information but also a useful strategic tool. A good real estate agent can help you save money negotiating a home’s price down. Your agent will help you make firm offers and ultimately help you get into your ideal home. The best part is, you do not pay for your agent’s help, the seller does.

Step 5: What Do You Want in a Home?

A fundamental question to ask yourself is “What kind of home am I looking for?” Do you want to live in a large home or would you prefer something smaller? Would you like your home to be close to schools, libraries, hospitals, and other essential services? Do you want someplace in or close to a major city? Questions such as these are hugely important and should be something you think about throughout the home purchase process. Your real estate agent and broker should be able to help you figure out what it is you truly want out of buying a home.

Step 6: Finding a Home

After your mortgage application has been processed and approved, you should have a better idea of what you can and cannot afford. With this knowledge, you’ll be better equipped to start looking for specific homes. If you haven’t already, check out online listings for homes in a few desired areas of yours. When house hunting, it’s best to have a few options in mind already. It’s recommended that you make a shortlist of about 5 homes; this way you’ll have a few backup options if your first choice of a house doesn’t work out. Your real estate agent should be able to help you navigate the housing market and find a home that’s right for you.

Step 7: Making Your Offer

Once you’ve decided on your number 1 choice of home, it’s time to make an offer to the seller. Your real estate agent will help you during this stage. With your real estate agent, draft an offer letter including your offer price and a deadline for the seller to respond by. Your real estate agent will determine a fair offer price based on the values of other homes in the area and on the condition of the house itself. After your initial offer, the seller will likely want to negotiate the terms of the proposal. Your real estate agent will be especially useful during this time in negotiating terms that are favorable to you.

After negotiating and settling on the terms of your offer, you and the seller will sign a purchase agreement. This will finalize the terms of your home purchase and enter you into a binding contract with the homeowner. Afterward, you will send the purchase agreement to your lender for their final approval.

Step 8: Applying for a Mortgage

Once your offer is accepted, and your agent has negotiated terms, it’s time to seek financing. You may use the services of the same company who procured your pre-approval or you may apply for a mortgage with a new lender. Applying for a mortgage, like seeking pre-approval, requires you to disclose a large amount of information. A lender will want to learn about your employment history, asset portfolio, source(s) of income, and current debts. Different lenders will ask for different information, but luckily at this stage, you should already have much of your financial information on hand and ready to send over. Once you apply, your application will progress through a series of steps, known as processing, underwriting, and closing. As your request is passed along, you may be asked to send along other documents that may have been missing. It’s crucial to send items in quickly to not slow down your home buying process overall.

Most buyers do not shop for a mortgage when buying a house. This is your last chance to shop rates and costs.

Step 9: Inspection and Appraisal

Once you’ve selected a home and entered into an agreement with the seller, you will need to order two appointments: a home inspection and a home appraisal.

A home inspection will help you determine if there are any aspects of the home in need or great repairs or otherwise deserving of your concern. It’s probably a good idea to hire a home inspector, rather than just inspecting the home for yourself. The home inspection may be one of the last times you walk through the house until after the home is yours. Take this time to begin pre-planning for how you’d like to organize your new home.

The appraisal is equally as critical as the inspection, if not more so. Your mortgage company will order a home appraiser and schedule a time for them to come and appraise the home. This will help determine a more accurate value for the home.

Step 10: Closing, Welcome Home

After inspection and appraisal, you’ll be mostly waiting for the final approval from the lender. Once this comes, your lender will specify a day for closing. At closing, all parties – you, the seller, your real estate agent, and any attorneys involved – sign final documents and make arrangements to cover down payment costs. This step also consists of the official, legal transfer of keys (and property) from the seller to the buyer.

Congratulations! You’ve completed the home buying process. Here at Candor Mortgage, we’re committed to making the home purchase process as simple as possible. With this 10-step guide, you’ll be in a new home in no time!

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