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Home Buyer Checklist

There are a lot of steps that come with buying a home. Tasks such as finding a real estate agent or getting pre-approved for your mortgage are things that you should not skip or you will end up having problems later in the process.

It can be hard to keep track of everything you need to do to buy a home. Follow this checklist to make sure you are as prepared as possible to buy your new home.

Figure out what you can afford

The first step for anyone buying a home is to figure out just how much you can afford. A good place to start is determining your debt to income ratio. This is your monthly expenses - which includes anything you pay on a monthly basis such as student loans and car payments - versus your monthly cash intake. In most cases, you should have a debt to income ratio of no more than 43% to qualify for a mortgage.

In addition to mortgage expenses, make sure you are able to budget for other expenses like renovations you would want to make, furniture, and general maintenance of the home. All in all, your monthly mortgage payment, as well as other expenses such as property taxes and homeowners insurance, should not exceed 30% of your take-home pay.

Find a Real Estate Agent

Another important step to take early on in the process is finding a real estate agent. It is highly recommended to hire a real estate agent to help walk you through the entire home buying process. They bring with them a great level of expertise that can help you to find the best homes, negotiate a fair purchase price, and navigate complex contracts. In addition, buyers do not pay a fee to use a real estate agent so it will not be an additional expense on your part.

Determine your Down Payment

A down payment will be one of the biggest and most important decisions you will make. If you pay a down payment of 20% or more will exempt you from private mortgage insurance (PMI), which is a fee your lender requires to make sure that you do not default on the loan. In addition, a larger down payment gets you smaller monthly payments, a shorter mortgage term, and less interest. A 20% or more down payment is ideal if it is feasible for you. If not, it is a good idea to make an effort to put down as much money as possible.

Get Pre-Approved for Your Mortgage

Another good step to take before you start actually looking at homes is to get pre-approved for a mortgage. It is beneficial to you because it is another way to help determine how much you can afford to pay. As you start making offers on homes, getting pre-approved shows the seller that you are serious and ready to pay once you make an offer.

Start Looking for a Home

Once your finances are in order, it is time to start looking for a home. There are a lot of places to look: online, in person, and by asking around to your family and friends. Your real estate agent will give you advice on where to look and help you to narrow down your search. As you look at homes, consider not only the price and features of the home but its location as well. Make sure the home you ultimately decide on is in a good neighborhood with a good school system nearby and is within a convenient distance to where you work and other places you frequently visit.

Make an Offer

After you have chosen your home, it’s time to make an offer. This is another opportunity to consult with your real estate agent as they will provide guidance on what you should offer. Ultimately, it will depend on how hot the housing market currently is, how long the house has been on the market, and whether there are already offers on the home. You will work with your real estate agent to determine how much you will offer as well as the terms and contingencies that will be included in the offer. If it is accepted, you will put down earnest money; a small deposit that will be placed into an escrow account until closing.

Get an Inspection and Appraisal

Once you have made an offer, it is time to get an inspection. This step is very important as it protects buyers from unwanted costs and liabilities that come from major problems hidden within the home. An inspection will let you know of major and minor issues with the home like how old the roof is, whether the foundation is failing, or how good the electrical system is. After the inspection is done, you will go back to the seller and either ask them to fix the problems before closing or negotiate a lower price with them.

In addition to an inspection, an appraisal will also be done on the home before you officially close. The appraisal will be arranged by your mortgage lender and essentially serves to determine how much your home is worth.

Prepare for Closing

As you get ready to seal the deal on your home, there are a few steps you should take to make sure you are as prepared as possible. For one thing, make sure all of your finances are ready to go in time for closing. It is a good idea to avoid making any kind of large purchases or financial changes that can impact your credit score before closing.

In addition to gathering your down payment and mortgage, start preparing your closing costs as well. Both buyers and sellers pay closing costs but buyers typically pay a bit more at about 3-4% of the purchase price of the home. There are closing costs calculators online that you can use to give you an idea of what you will spend or you can work it out with your real estate agent, lender, or mortgage broker.

Close on Your New Home

Finally, it’s time to close on your new home. At this phase, you will meet with your lender to sign documents and pay closing costs. When it comes to closing costs, some of those expenses are paid up front before the home is sold and some are paid at the end of the closing process. Some examples of what you can expect to pay during closing include a fee for running your credit report and a fee for a title search to unearth any liens on the property that could interfere with your ownership of it.

Once you have signed all of the paperwork and gotten the keys in your hand, you can let out a sigh of relief now that the process is over. All that is left to do is to start moving into your new home.

Ready to Buy in Houston?

If you’ve read this entire article, then you are serious about buying. Contact Keith E. Ford at 832-788-7037 to learn more about buying in Houston!

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