If you’ve been thinking about joining the homeownership club but you have no clue where to start, this crash course in Home Buying 101 is for you.
1. Figure out what you can afford
Sit down with a mortgage calculator to get a baseline idea of how much house you can afford. Keep in mind: Even if a calculator or your lender indicates you can afford a $300,000 mortgage, that doesn’t mean you can afford the monthly payment in addition to other routine expenses.
2. Hire the right people
Ask friends, neighbors and family for recommendations of real estate agents and lenders they’ve used, then research those people online. Meet with them, feel them out and decide if you can entrust them with the largest financial transaction you’ll ever make in your life.
3. Get pre-approved for a mortgage
Flex your financial muscles to sellers by having a mortgage pre-approval letter in hand. Work with your lender to submit necessary financial paperwork — pay stubs, bank statements, W-2s, financial account documents — so you can make strong offers quickly and efficiently. You’ll also up your chances of getting the best mortgage possible.
4. Narrow your options
Decide what you want (and don’t want) in terms of home features and amenities, and which items are must-haves. Keep in mind that you can always remodel down the road, but you can’t change things like an undesirable school district.
5. Make an offer(s)
When you find “the one,” your real estate agent will submit an offer on your behalf. Include an earnest money deposit — usually about 1% of the asking price — and a preapproval letter with your offer. You might need to negotiate terms, so make sure your agent keeps you in the loop. Be sure to get a home inspection to ensure there are no major defects that need to be addressed before closing.
6. Seal the deal at closing
Once you’ve cleared underwriting, it’s closing time (yay!). After signing all the paperwork and getting those coveted keys, you’re officially a homeowner. Congrats!