The Home Buying Process.

Buying a house is a major commitment. Before you begin shopping for properties or comparing mortgage options, you need to make sure you’re ready to be a homeowner.

Wondering if you should buy a house? Let’s look at some of the factors that lenders and homeowners alike should consider.

Once you decide you’re ready to buy a home, it’s time to set a budget. A good place to begin is by calculating your DTI (debt to income) ratio. Look at your current debts and income and consider how much money you can reasonably afford to spend each month on a mortgage.

There are many ways to save for your home purchase, including through investments and savings accounts. If you have relatives who are willing to contribute money, you may be able to use gift money toward your down payment (in which case, be sure to provide your lender with a gift letter).

But how much do you need to save before buying a home?

Many home buyers believe that they need a 20% down payment to buy a home. This isn’t true. For example, you can get a conventional loan for as little as 3% down! 

In addition to the down payment, saving around 3-6% of the home value for closing costs is an absolutely great idea.

Conventional loans

VA loans

FHA loans

USDA loans

When you’re ready to start house hunting, it’s a good time to get preapproved for a mortgage. When you apply, your lender will give you a preapproval letter that states how much you’re approved for based on your credit, assets and income. You can show your preapproval letter to your real estate agent so they can help you find homes within your budget.

There are multiple parties involved when getting a mortgage and buying a house. Your real estate agent is your representative in the home purchase transaction. Your agent will look out for your best interests by finding homes that meet your criteria, get you showings, help you write offers and negotiate.

It’s possible to buy a house without a real estate agent. This isn’t recommended, especially for first-time buyers. The homebuying process can be complicated and emotional. Having an agent by your side can help you navigate the real estate market, submit a legally sound offer and avoid overpaying for your property.

Your real estate agent will help you hunt for houses within your budget. It’s a good idea to make a list of your top priorities, some of which might depend on whether you’re looking for a starter home or forever home and what type of house you are looking for.

When you decide to make an offer on a home, you must submit an offer letter in writing. Your offer letter includes details about yourself (like your name and current address), the price you’re willing to pay for the home and more. It will also include a deadline for the seller to respond to your offer.

Lenders usually don’t require a home inspection to get a loan, but you should still get an inspection before you buy a property. During a home inspection, an inspector will go through the home and specifically look for problems. They will test electrical systems, make sure the roofing is safe, make sure appliances are working and much more. After the inspection closes, the inspector will give you a list of problems they found in the home.

A home appraisal is a review that gives the current value of the property you want to buy. You must get an appraisal before you buy a home with a mortgage loan.

You should do a final walkthrough in your new home before you close, even if you’re 100% committed to the property. This time allows you to check and make sure that the seller has everything in order.

Your lender is required to give you your Closing Disclosure, which tells you what you need to pay at closing and summarizes your loan details, 3 business days before closing. Read through your Closing Disclosure and make sure the numbers don’t vary too much from your loan estimate, which you would have received no more than 3 business days after your initial application.