Now that you know who's riding with you on your homebuying journey, it's time to map out the details of your trip. Buying a home is likely the largest purchase you'll ever make – that's why you should take the time to carefully plan out your path to homeownership. There are a lot of variables to consider and everyone's journey is different, but here are general "pit stops" you will make along the way.
Stop 1: Understanding What You Can Afford
Before you hit the road, map out your budget. Take inventory of your finances, including income, debts, savings, and monthly expenditures to assess how much you can afford.
Stop 2: Getting Pre-Approved
A pre–approval letter from your lender will tell you the maximum amount you are qualified to borrow. Having a pre–approval letter in hand while shopping for homes can help you move faster and with greater confidence. Be sure to ask your lender how long your pre-approval will remain valid. And remember that the pre-approval letter details the maximum amount you can borrow. Make sure you only borrow what is comfortable for you and your budget.
Stop 3: Finding the Right Home
Finding the right home for your needs will have long–term impacts on both your wallet and your quality of life. Prioritize your needs and wants and determine your deal breakers before you get started on your search. Be sure to consider a variety of factors like home type, location, size, taxes, and if this will be your forever home.
Stop 4: Making the Offer
Once you've found they home you want to buy, your real estate agent will submit an offer letter. The seller may counter your initial offer but once both you and the seller agree on all terms you will sign a purchase agreement. Once you have a signed purchase agreement you will work with your lender to finalize the loan application process to obtain final mortgage approval.
In this step to secure your financing there are two main types of mortgages — fixed–rate and adjustable–rate — that have their own set of features and benefits that you should carefully consider. Selecting the right mortgage for you may make a big difference in your monthly payments and the overall cost of your loan.
Stop 5: Examining the Home
Before the keys are transferred to you, your lender will help schedule a home appraisal to determine the home's value based on its condition and comparable homes in the neighborhood. You should also have the home inspected to determine the condition and report any significant repairs. It is recommended that you make the home purchase contingent on both the home appraisal and inspection to help avoid costly surprises.
Stop 6: Closing Day
Once you loan is approved your lender will schedule the closing. This is your final stop towards homeownership where all the documents are signed and the property is legally transferred to you.
Like we mentioned, these are just the general stops you'll make along the way. We will go more in-depth about each stop as we continue our spring homebuying blog series, so be sure to follow along!