5 Steps to Buying a Home
Buying a home is one of the most important decisions you will make in your life, representing a significant financial commitment. We can help you understand how to buy a home before you start the process. Understanding the steps involved can help you determine whether you are ready for a home purchase and make the entire process more manageable and less intimidating.
A crucial early step to buying a home involves some practical research on your part. Make a list of your future home’s features and amenities and share these with your agent, so they can filter out homes that don’t meet your requirements. When identifying your needs and wants, also consider location and neighborhood. For example, you may need a home close to your work to shorten your commute or consider the schools in the area for your kids.
A home purchase involves ongoing costs as well as upfront costs. It helps to calculate what you can afford and determine a budget before you start looking at homes. This information narrows your search by identifying a price range that you can afford. Be sure to factor in the interest, property taxes, and the homeowner's insurance premium included in a monthly payment. If you make a down payment of less than 20%, you will need to pay mortgage insurance as well. Depending on the type of property you buy, you may also have to factor in condo fees or homeowner's association dues. Other ongoing costs not included in your monthly mortgage payment will be utility bills and maintenance and repair expenses. Additionally, there are certain expenses that you may need to pay upfront, including your down payment, and an extra 2% to 5% for closing costs. If you choose to have the home inspected before finalizing the sale, you should factor in another $200 to $600 upfront.
There are a variety of mortgage loans available. Consider the pros and cons before making a decision.
Every institution charges different closings costs for mortgage loans. It's important that you understand these costs. Keep in mind, the lowest interest rate might not be the best deal if there are higher closing costs involved. Compare loan estimates from several lenders to find the loan that is right for you.
Once you have identified your needs and wants, narrowed in on your price range, and received pre-approval for your mortgage, you now can start looking at houses. Sometimes, this process can be lengthy, or you may find what you are looking for fairly quickly. Either way, you should view at least a handful of homes to be sure you are making a good choice. Once you have made your choice, you should confirm it by finding out the home's condition. The seller's disclosure is a document that identifies all known problems from the current owners. While the law requires that sellers disclose all known problems, there may be some unknown issues. A third-party inspection is recommended to identify these issues.
When you know about problems in the home, you can negotiate with sellers, asking them to either reduce the purchase price or pay for the necessary repairs. Once they accept your purchase offer, the next step is getting your loan approved. Your lender will typically order an appraisal on the property to ensure fair market value. Once these items are complete, it is time to schedule your closing, during which you will sign the documents transferring ownership of the property to you. The last step is to receive the keys, switch utilities into your name, and take occupancy. Finally, you can move into your new home. Contact ProFed Credit Union today to help you finance your new home with our competitive mortgage rates and first-time homebuyer program.