Buying a house is an essential step in building wealth and financial stability. But it’s more than just picking out the home and signing a piece of paper—there’s a whole process to be followed with crucial steps along the way. This handy buying a new house checklist will help you to chart the entire course — from eligibility checks to receiving the keys to your new home.
- Check your credit score and pay off debt to improve it.
- Analyze your budget and calculate your debt-to-income ratio to determine what you can afford.
- Save as much money as possible for your down payment, and prepare all necessary documents ahead of time.
- Find a good real estate agent who can help you navigate the process and objectively handle negotiations.
- Consider the location and potential resale value of the property, and hire a real estate attorney to oversee the sale.
Checklist: Preparing to buy a house
When purchasing a new home, you should have some key factors on a checklist to help make the home-buying process much easier. Here we take a closer look at what you should consider when buying a home.
Consult a professional
When you are looking to purchase a new home, a good place to start is with a mortgage professional. Working with a knowledgeable loan officer will help you determine how much home you can afford and get prequalified for your new home loan even before you find your ideal home.
To learn more about how to choose a loan officer, check out our blog here.
Your credit score is a vital metric in determining eligibility for home loans. Lenders look at this number to decide whether you are a good financial risk. A minimum score of 620 is required for a conventional loan, though some lenders may require a higher number, especially post-Covid.
A low credit score can prevent you from buying a home or refinancing your existing property. However, there are ways that you can improve a poor score. First, be sure to pay all of your bills on time. Late bills can show up on credit reports for seven years, but their impact on your score will decline over time. Next, pay down your debt. Last, do not open any extra lines of credit unless absolutely necessary.
Finances and budget
Create a budget to get a picture of what you can truly afford to spend on a house. Analyze your DTI (debt-to-income ratio). This number will help determine your ability to get a home loan, as high DTI’s are a red flag for lenders. Typically lenders want to see a DTI of less than 50%.
DTI= income/debt payments x 100. Calculate what you spend on debt per month, for example, on rent, credit card payments, car loans, student loans, etc. Then calculate your gross income. This includes gross income from a W2, bonuses or overtime, and any other income sources. Divide your gross income by your monthly debt payments, then multiply by 100. This is your debt-to-income ratio.
Remember to carefully consider ALL expenses when calculating your budget. Taxes, insurances, any travel or commuting expenses, and a fund for emergency repairs are often overlooked.
Be prepared! When you see your dream house, you want to be ready to spring, so have all the necessary documents gathered and at hand. Some of these documents include:
- Tax returns
- Proof of income
- Bank statements
- Letter of recommendation from the landlord if you’re a previous renter
- Proof of funds for the down payment
To determine how much down payment you need, you need to know the required percentage for your lender. For instance, an FHA loan requires a 3.5% down payment. To calculate, multiply this number by the price of the home. (For example, if the house costs $150,000: 150,000 X .035=5,250. Your down payment is, therefore, $5,250.) If possible, save more than the minimum amount.
Having a sizable down payment for a new house is beneficial in two important ways. First, it gives you an advantage over competing homebuyers. It also whittles down monthly mortgage payments, lightening the burden on monthly expenses.
Most realtors will request a preapproval letter before starting a house hunt with you. This preapproval tells your realtor (and the seller!) that you can afford the home you are trying to buy.
Do your research! There are different types of mortgages, and it’s important to find out which is best for you.
To become pre-approved for a home loan, do the following:
- Get your credit score in line (remember, 620 is the minimum acceptable number for conventional loans)
- Have financial documents gathered to show mortgage broker (i.e proof of assets, proof of income)
- Disclose any financial issues
- Have several forms of I.D. available
Checklist: Purchasing the house
The next checklist you will need to create is the purchasing checklist. Here you will want to include everything necessary to purchase your dream home. This involves everything from finding the perfect home to making an offer and the home inspection.
Look for your dream house
When shopping for your dream home, consider your timetable for moving. Even an immediate closing can take upward of a month to complete, so be aware of dates and have a plan in place. Be sure to visit open houses and drive through surrounding neighborhoods to get a snapshot of the area. Research local schools and surrounding sites and attractions.
Find a good real estate agent
A good real estate agent is a valuable resource when purchasing a new home. They can pinpoint pricing on a home and determine whether it is too high or too low and whether the neighborhood is likely to hold its value. They will understand what you’re looking for and not waste your time with impractical choices. A real estate agent also knows what repairs to look for and can guide you toward a good home inspector. Lastly, they can objectively handle difficult negotiations with the seller and navigate the paperwork during the sale.
Make an offer
Once you’ve found the house that you want to call home, it’s time to make an offer. When making an offer on a home, it’s important to do your research and have a clear understanding of the property’s value. This involves looking at comparable properties in the area, considering any necessary repairs or upgrades, and factoring in market conditions. You may also include contingencies in your offer, such as a home inspection or appraisal contingency, to protect yourself.
Hire a real estate attorney
Hiring a real estate attorney when purchasing a home can provide valuable legal guidance and protection throughout the home-buying process. A real estate attorney can review and negotiate the terms of the purchase contract, ensure that all necessary legal documents are properly prepared and filed, and guide on any legal issues that may arise during the transaction.
Home inspection and appraisal
When purchasing a home, it is important to have a thorough home inspection and appraisal conducted. A home inspection is typically performed by a professional inspector who will evaluate the condition of the property, including the foundation, roof, plumbing, electrical systems, and other major components. The inspection can help identify any potential issues or necessary repairs before finalizing the purchase.
The lender often requires an appraisal to determine the market value of the property. This helps ensure that the purchase price is fair and that the lender is not providing a loan that exceeds the value of the property. Hiring qualified professionals to conduct the inspection and appraisal can help provide peace of mind and potentially save the buyer from costly repairs or overpaying for the property.
To learn more, read our blog, How Do I Prepare for a Home Appraisal?
Checklist: Closing your new home
Closing your new home is the final step in the home-buying process, where the ownership of the property is transferred from the seller to the buyer.
What to expect during closing
During the closing process, you can expect to sign a lot of paperwork and pay any closing costs associated with the purchase of your home, such as lender fees, title fees, and taxes. You’ll also receive a settlement statement that outlines the costs and credits associated with the purchase. The seller will transfer ownership of the property to you, and you’ll receive the keys to your new home. The closing process typically takes a few hours, so be sure to set aside enough time in your schedule.
What you need during closing
During the closing process, there are several items you will need to have available. These include a valid government-issued ID, a copy of the purchase agreement, proof of homeowners insurance, and any required closing costs and down payment funds, often in the form of a cashier’s check. It’s important to carefully review all documents and ask any questions you may have before signing. The closing process is typically handled by a closing agent or escrow officer who will guide you through the necessary steps and ensure that all paperwork is completed accurately and efficiently.
Preparing to move
After closing on a new home, there are several things you can do to prepare for your move. First, make sure you have all the necessary utilities set up and scheduled to be turned on before your move-in date. This includes water, electricity, gas, internet, and any other services you require. Don’t forget to submit a change of address to your local post office to ensure an easy transition. Next, consider hiring a moving company or renting a moving truck if you plan to do it yourself. Make sure to schedule your move-in date well in advance and confirm the details with your movers or rental company.
Planning ahead can help make buying your new home easier
Buying a new home can be an exciting yet stressful endeavor. Understanding the home buying process and creating checklists for each step can help make the process much easier to get through. Following these checklist tips can help guide you through the process and help you make a move to your new dream home.
Contact us today!
Though homeownership is an anticipated and welcome event, the home-buying process itself can seem daunting with its many responsibilities. However, with a bit of planning, foresight, and research, your dream home can become a reality.
A big first step is building your team of home-building experts. This includes a local representative who can guide you through the home buying checklist with ease and help you find the local professionals to best assist you on your home buying journey. Reach out and speak with a Hero Home Programs™ expert today. Request a consultation today!