Buying a home, whether it's your first time or not, can bring mixed emotions -- fear, excitement, uncertainty, intimidation, and more.
Nonetheless, knowing what to expect can be a game-changer. It might not remove any negative feelings but it can help you understand what to do in case any situation arises.
So before buying a home, let alone checking any properties online, don't skip this.
There are many steps on how you should prepare yourself when buying a home, and some of these include:
To put it plainly, purchasing a home is costly. Several factors, like the house's age, size, location, and general condition will affect the final price you pay for it.
There are benefits to exploring these states and the region; as of 2023, Michigan and Indiana were included among several other midwestern states in Forbes' list of the 15 states with the lowest average house costs.
Nonetheless, purchasing a home is a huge financial decision therefore you should save heavily. If you're currently renting, that could be extra challenging, but there are ways and advice available to help you save money.
Saving money isn't glamorous or enjoyable. Still, you are investing in a place you can call home (and can actually be a source of profit in the future), so even though your friends think you're frugal and the like, it will be worthwhile.
Getting approved for a mortgage can be acquired by having a good or even better, an excellent credit score. After all, lenders use your credit score to know how trustworthy and responsible you are as a borrower.
Enrolling in autopayment services or maintaining a paying calendar can help. On-time bill payment is good for credit establishment and helps with auto loans, credit cards, student loans, and even ordinary utility bills.
Your low, medium, and high credit scores will be checked when you speak with your lender about being accepted for a mortgage. Ironically, having your credit checked usually results in a slight drop in your score. Since lenders are aware of this, it's unlikely that the decline will prevent them from accepting your application if your credit is strong enough.
Lastly, take some time to familiarize yourself with the overall geography of your target market before beginning the formal procedure. Consider your requirements as a buyer and the type of home you wish to live in.
You may check real estate websites for a while to know which homes in your target area meet your requirements.
Understanding the market will enable you to budget for your ideal buy and set aside funds for a down payment. There are many loan arrangements based on your level of interest in purchasing, but for a traditional loan, you may put down between 10% and 20% of the house's total cost.
After you've completed all of your preparations, you need to ask a lender for mortgage approval.
You may accomplish this online but it still helps if you can personally visit a loan officer for questions or clarifications.
But first, shop around. Don't go by the first lender you see on the Internet; rather, check different loan providers, read feedback, or even ask for referrals.
Usually, the advice is to bring printouts of any loans you have, your most recent pay stub, and a bank statement to the approval. You may also ask the bank or lender in advance about the things you need to bring for loan approval.
Normally, a loan officer might ask questions, such as where you want to live, how much you can afford (before they run their own credit check), how much you already have for a downpayment, and more.
Hiring a real estate agent is crucial since they are the ones who usually establish the tone throughout the entire process of buying the property.
That said, it's ideal to hire someone with experience and knowledge in handling first-time homebuyers.
As a first-time homebuyer, don't be afraid to ask as many questions as you can, no matter how silly you think it is. The right realtor is always ready to assist with your inquiries.
To find the right realtor, what you can do is speak with someone you know and trust who has just purchased a property; it could be a friend or a family who can give you a referral.
Ask about the real estate agent they've worked with and their experience. You may then do your own research about the agent by reading reviews from their other clients.
Knowing as much as you can about an agent before hiring them is crucial. After all, they will assist you with everything, including scheduling property tours, responding to your inquiries, serving as a liaison with the sellers, assisting with paperwork, and much more.
It's important to remember that you do not pay your agent directly. After the procedure, they receive payment from a portion of the transaction. Additionally, a new Indiana law mandates that buyers and their agents sign a contract.
Normally, your chosen agent will provide a portal you can use for communication. This portal will also help you look for homes and filter properties that don't meet your requirements, such as the price.
When doing this, go through each home and mark the features you like and dislike. Sort your options into three categories: "favorite" for homes you want to see; "possible" for homes you're considering but aren't sure about; and "reject" for homes you know you won't be interested in.
Once you find "the one", it's time to make an offer.
Congratulations! It's time to make an offer on the home you think is "the one." And by now, I do mean this.
This might sound rushed but normally, well-priced homes sell quickly while expensive ones stay in the market for a long time until the seller "blinks" and drops the asking price.
After making an offer, you may hire a home inspector to inspect the house. This is an important part because it lets you know if there are any repairs or remodeling the current homeowner can take care of or if it's going to be you who will handle it.
Having a home inspection will also give you an idea of the estimates of the remodeling or repairs, which you can use to negotiate. By the way, don't forget to ask help from your real estate agent with negotiation; more or less, they know how to do this professionally and effectively.
Now let's discuss the offering procedure. This is another situation where having a competent agent is essential. To put it briefly, the offer is written on a sizable document, which can be daunting for a first-time buyer. A skilled agent will guide you through it all and provide clear explanations.
You will be sent an electronic copy of the paper to sign at the end.
Normally, when you've reached this point, you have an idea about e-signing documents. This includes the rough estimate of your monthly payment, which covers the taxes, homeowners' insurance, title insurance, and loan payments.
PRO TIP: Create a system to organize and monitor the documents you have signed and their contents. As you grow overwhelmed, it will help you easily find what you need and answer questions you have in mind.
Your proposal has been approved! It's time to demonstrate your seriousness about your interest to the seller or sellers. Earnest money, a tiny deposit made toward purchasing a home, is used for this. The amount is based on several conditions, although it is often not greater than 3% of the total purchase price.
Earnest money is usually refundable if you act in good faith and in case you and the home seller have conflicts you can't resolve anymore.
The property may also be appraised by your lender. They are, after all, paying for 80%, if not more, of the bill.
For this phase, all you need to know is that the bank won't lend you more than what they think is the property's worth.
For instance, the bank believes that the property is worth $190,000, but you have made an offer of $200,000. If that is the case, the remaining $10,000 is your responsibility.
A great realtor can recommend you to their network of contacts for any kind of homeownership need; for instance, a home inspector examining a home in great detail with great care.
You are the one who pays the inspector you hire to inspect the house on your behalf. They will provide you with a report that lists any possible issues and irregularities in and around the house. You can utilize it as a list of fixes that you can make.
All issues will be covered during the inspection, so identify the most important ones and share them with your agent (who will also receive a copy of the report). This brings us to the following:
Once you have a list of the main problems, you can negotiate with the seller by asking them to fix the problems, coming up with a fair solution, or changing the asking price of the house to account for the effort or money you'll need to spend on repairs.
This is the point at which earnest money becomes relevant again. Usually, you can back out of the deal and get your earnest money returned if you are a reasonable negotiator but the sellers are doing otherwise. However, consult your Indiana real estate agent first.
So, you've finished your list of "must-be-fixed" problems. Everything is going well and in order. Here's what comes after:
Basically, your expenses already include your down payment and closing costs, such as the title search and title insurance. The exact amount you pay at closing will vary based on the loan type, local regulations, and the property's valuation; nevertheless, it usually ranges from 3% to 5% of the purchase price.
An estimate of your closing costs is one of the numerous documents you will e-sign. Since this estimate is typically high, a few pleasant shocks will occur.
Buying a house requires a substantial financial commitment. You might be shocked to learn how frequently people mix "thousand" and "dollars," particularly if you've been saving money for a long time.
In Indiana, money from your bank needs to be wired to the title firm if your closing fees exceed $10,000.
Instructions for wire transfers will be sent to you by your title insurance provider via a secure online interface. Please print these instructions and bring them to your bank as soon as you receive them.
These wire instructions essentially specify the money that will be transferred from your bank account to the escrow account of the title firm. Thus, it contains account numbers, routing numbers, and more data to execute the transfer.
The day before the fabled closing day is usually when you have your final tour of the house. This is your chance to go over everything that has transpired since the inspection with your agent to make sure everything meets your expectations.
Write down any problems you find and bring them with you on closing day.
Alright, you've arrived! You have been waiting for this day—closing day. Closing day is always exciting, and with good reason, but when you go and close, just remember that it consists of signing and dating a lot of papers.
You, the buyer, will sign the documents at an office as a loan officer goes over each one's content with you. The sellers then return to sign the paperwork.
Following the completion of both events, the title service will usually provide a chance to have a conversation about the house, and the neighbors, and just generally get to know one another a little better.
When the close is complete, it's time to move-- you now own the house!
Caroline Soriano