Are you in the market for your very first home? If so, congratulations! Buying a home can be a daunting process, but it’s also an exciting one. To help make the process as smooth as possible, here is a checklist of everything you’ll need to do before buying your first house.

One: Get Your Money in Order

For a conventional home loan, you’ll need to come up with an earnest money deposit, a down payment, and closing costs — all cash out of pocket.

An earnest money deposit is the amount of money the buyer will give to the seller at the time a home purchase agreement is signed. This deposit shows that you’re serious about buying this particular house and helps protect your interest in it. The amount of earnest money should be equal to 1-3% of the purchase price.

The down payment is another cash expenditure that most buyers must prepare for. Many lenders require 20% for a conventional loan, although they may lower their standards if you have decent credit history and high-income potential.

Closing costs are costs incurred by the buyer at closing. They are related to the closing of the transaction and can include fees for title insurance, appraisal, credit report, surveys and inspections, homeowners association transfer fee, hazard insurance premium, government recording costs, document preparation fees, and transfer taxes.

Two: Prepare Your Credit and Debt-to-Income Ratio

To qualify for a home mortgage loan, you’re going to need a strong credit score and a low debt-to-income ratio.

Start by checking your credit reports from all three of the major credit bureaus — Experian, TransUnion, and Equifax. Make sure that any errors are corrected. Your score should be 620 or higher, and your report should be free of derogatory marks such as accounts in collections.

Then take a look at what’s called your debt-to-income ratio. This is calculated by taking all of your monthly expenditures (including car payments, student loans, minimum credit card payments, etc.) and dividing them by your gross (before taxes) income. Your DTI, ideally, should be at 36%, although some people qualify with a DTI as high as 47%.

Three: Gather Documents

Your lender is going to require proof of income and expenses, including pay stubs, bank statements, credit card statements, loan documents, tax returns, and more. If you have all of this information organized and easily accessible, you’ll expedite the loan application process.

Four: Shop Lenders

Customize your home loan to meet your needs by shopping around for different lenders. Get quotes from several companies, but don’t settle on the first one you talk to. There are differences in rates, fees, and processing times that are worth considering before committing to a lender. The lender is responsible for a large portion of your closing costs, so compare those estimates from one lender to another.

Five: Get Pre-Approved for Your Loan

To make your purchase more efficient, get pre-approved for a loan before you start looking at houses. Being pre-approved means that you’ve worked out all of the details with a lender and entered them into your loan application.

Pre-approval accomplishes several things. First, it locks in your financing so that you’re empowered to purchase when you find the right house. Second, it clearly defines your budget. Third, it proves to the seller that you’re ready to move and could give you an upper hand over competing offers that haven’t been pre-approved. Finally, it saves time between the offer being accepted and the closing date since the application process is already finished.

Keep in mind that pre-qualification and pre-approval for your loan are not the same. Pre-qualification is a mere estimate of your annual income and how much home you can afford. Pre-approval involves verification of income, assets, credit scores, and down payment, as well as having the loan terms (interest rate and fees) locked in place before you make an offer or sign purchase documents.

Six: Hire an Agent

Having the right buyers’ real-estate agent on your side will make the home-buying process pleasurable. They’ll help you refine your wish list so that it matches your budget so that you’ll have realistic expectations of how much house your money can buy. They’ll show you houses in the location of your choice that match your budget and wish list. Then your agent will help you come up with an offer to submit when you find the house you want to buy. When the seller submits a counteroffer, your agent will negotiate for you and also will help you understand the legalities in the contracts that you’re signing. Finally, they’ll guide you through the tricky closing process and celebrate with you when you get your keys.

Seven: Shop for Houses

There are several things to consider when you’re touring houses for sale. Take a look at the driveway and look for any cracks that could be a sign of structural problems. If there are large trees on the property, look for root systems that are growing close to or under the home’s foundation. See if you notice any cracks in the walls, corners, or ceilings.

Check the faucets for drips and look under the cabinets for standing water, water stains, or foul odors. Also, run the faucets and flush the toilets to make sure there are no plumbing issues.

Don’t worry too much about cosmetic issues like paint or carpet. These things can be easily upgraded after you take ownership, and you may be able to negotiate a lower price to accommodate for repairs.

Eight: Submit an Offer

When you find a house that’s perfect for you, submit your best offer. It’s not uncommon to come back with two or three offers before the seller accepts one.

There are several components of an offer: the price, loan details, closing costs, and any special requests like repairs or appliances. If you’re pre-approved and have shopped around for rates, this will help lock in your rate and minimize the chances that it will change on closing day. You can also negotiate to add appliances if there aren’t any included in the sale (like refrigerator or washer and dryer). Ask your real-estate agent exactly what comes with the house, such as window coverings and light fixtures, so that you’re not surprised on move-in day.

Nine: Be Patient Through the Closing Process

The closing process is when all the legal paperwork is finalized and you get your keys. It typically takes 30-45 days before all the requirements are met, and you can move in, but there could be several factors that extend that time frame. For example, inspections, appraisals, and repairs can delay closing. Use this time to pack and prepare for your upcoming move. On closing day, you’ll sign the last of the documents, pay your down payment and closing costs, and then collect the keys to your new home.

Conclusion

Buying a house can be a confusing and complicated process. Use this checklist to ensure that you don’t forget anything. For more information and details about the process of buying your first house, reach out to your local professional real-estate agent today.

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