Buying a home, whether it’s your first time or your fifth time, is very exciting! However, even though it is an exciting process, it can also be a stressful process as well. A lot of emotions can get involved when you’re looking for your dream home and hoping that it fits into your budget.
Also, the actual home buying process can be very complicated and hard to navigate if you are unfamiliar with what is going on. It may even seem like everyone that you are working with is speaking another language with all of their real estate jargon. Plus, if you decide on buying a foreclosed home, the process may be a bit more complicated.
With so many steps involved when you purchase a house, it can be difficult to know where to begin. Check out the information in this article to learn all about the steps to buying a home.
Steps to Buying a Home
It’s important to have a good understanding of how to buy a home before you jump straight into it. Purchasing a home is a huge deal. It is likely the biggest financial decision you will ever make.
There are a few steps to homebuying that you should be aware of so that everything can go smoothly and so that you will know what to expect. These steps include:
- Setting a budget.
Before you can start looking at homes, you need to see how much house you can afford. The last thing you want to do is fall in love with a home only to realize that you cannot afford it.
The amount that you can afford depends on a few different factors, including your income, credit score, current monthly expenses and debt. Also, the down payment and interest rate for the home will change the cost as well.
Don’t think you can qualify with your credit score? Buying a home with bad credit can still be an option if you take certain measures. This includes getting an FHA loan, making a larger down payment and/or getting a co-signer on the loan.
You can use online mortgage calculators to get an idea of what you can afford, although the best way to know for sure is to get pre-approved through a lender.
- Exploring loan options.
There are many different types of loans available. A few of the most popular types are conventional and FHA loans. You also need to consider the loan term, the interest rate, whether there is mortgage insurance included, and more. Make sure you speak to a couple of different lenders to compare options and to decide what loan is best for you.
- Learning about homebuying programs.
The U.S. Department of Housing and Urban Development (HUD) offers a few different home buying programs that may benefit you. Make sure you check to see what HUD programs are offered in your state.
For example, FHA loan programs offer low down payments, making them a great option for first-time homebuyers. If you are buying a home with bad credit, an FHA loan may be your best bet because they are typically easier to qualify for.
Also, programs like Good Neighbor Next Door, the Indian Home Loan Guarantee Program and homeownership for public housing residents can greatly help those interested in purchasing a home, oftentimes with big discounts.
- Finding a home.
Now comes the fun part: shopping for a home! You can do this on your own or you can enlist the help of a real estate agent. (If you are buying a home, a real estate agent is free. They are paid through the seller.)
Browse home listings online and visit as many open houses as you can. Make sure that you have a basic wishlist of the features you want in a home so that you can compare options and find your dream home.
- Making an offer.
After you have found a home that you want, you can make a fair offer by contacting the real estate agent or owner of the home. Negotiations may be made, and if you come to an agreement on a price, the home will go into escrow while final arrangements are made.
- Having a home inspection done.
Within a few days of your offer being accepted, arrange for a home inspection to be completed. This inspection will ensure that the home is structurally sound with no significant damage.
- Closing on the home.
Finally, you will complete all of the necessary paperwork and attend a closing where you officially complete the purchase. Once everything is finalized with the seller, you will receive the keys and you can move into your new home.
Buying a Foreclosed Home
The steps for how to buy a foreclosed home are essentially the same as purchasing any non-foreclosed home, although the process usually takes a bit more effort. The biggest differences include that it can be more difficult to secure funding for a foreclosure, and it takes work to carry out the necessary renovations for the home to get up to code. Having the proper inspections done is also very important because oftentimes the home can be left in disarray after the previous owners are evicted.
Foreclosed homes are typically priced below market value, so you can get a good deal. However, you still need to consider the cost of renovating the property if it needs significant repairs. As long as everything is done right and you follow the correct steps, you can get a great deal when you buy a foreclosed home.