Spontaneity can be fun and exciting, but when you want to reach a goal, having a plan is the safest and most effective way to move forward. So, if you want to become a homeowner, familiarizing yourself with the steps to buying a house makes sense. Knowing what to expect allows you to prepare yourself and your finances.
The Steps to Buying a House
Some aspiring homeowners think that open houses are the perfect place to start their quest for the perfect house. While shopping for a home is certainly part of the process, there are a few other steps to buying a house that clever homebuyers attend to first. While they may be less obvious, they can produce substantial savings.
1. Check Your Credit Score
Your credit score is a three-digit number assigned by the credit bureaus after a statistical analysis of various credit factors in your credit history. As Credit.com explains, it’s a numerical assessment of how likely you are to repay your debts, so it’s no wonder that lenders consider it carefully when considering applications for home loans. Before you visit a lender, it’s wise to request your credit report and check your credit score. If you notice errors or find that your score is lower than expected, you may want to request corrections or work to raise your credit score before moving on to the next step.
2. Get Preapproved*
Why would you get preapproved for a home loan before finding a home? Earnest offers a few good reasons:
- Getting preapproved first lets you find out how much you can spend. Once the lender confirms how much they’re prepared to lend you, you’ll have a clear idea of what your budget for a home purchase is.
- Getting preapproved convinces real estate agents and sellers that you are a serious buyer. That can help you clinch the deal, especially in a competitive atmosphere.
- Getting preapproved creates an opportunity to uncover any potential problems early, while there is more time to fix them.
3. Find Your Dream Home
With your budget established, it’s time to find the house that suits your needs. According to the National Association of Realtors, some 5.34 million existing homes and 682,000 new homes were sold in 2019. How did homebuyers find their new homes? The internet did the trick for 52 percent. Meanwhile, a real estate agent led the way for 29 percent.
4. Submit Your Mortgage Application
Once you find the home that you wish to purchase, it’s time to submit your mortgage application. As Investopedia explains, most U.S. lenders use the Uniform Residential Loan Application, which is also called the 1003 mortgage application form. This standardized form is used by the Federal National Mortgage Association, or Fannie Mae. It’s also required for any loan that either it or the Federal Home Loan Mortgage Corporation, or Freddie Mac, might consider for purchase. Rather than deal with multiple forms, most lenders just stick with the standard form.
A mortgage application digs deep. Be ready to provide extensive information on each borrower, including their employment history and financial situation. You’ll also need to hand over information about the property being considered for purchase and your intentions regarding it. Getting preapproved offers a major advantage here because much of the information will transfer over, simplifying the process.
5. Go to Closing
As Money Under 30 explains, closing is the final step when you’re buying a home. During closing, the final documents are signed, the closing costs and other funds are transferred, and the deal is finalized. At the end of this meeting, you’re officially a homeowner. To make sure that closing goes smoothly, be responsive in the days leading up to it. If your lender reaches out to you with a request for additional documentation, be sure to respond promptly. In addition, make sure that you have the closing costs that you’re responsible for on hand. When the day comes, be alert, patient, and ready to celebrate your new status as a homeowner.
*All loans subject to credit approval and identification of acceptable property. Conditions and restrictions may apply.