10 Steps To Buying A Home

Buying a home is one of the biggest decisions you will make. It is important to educate yourself on the steps to buying a home. If you have never owned a home before, the process of buying can be intimidating and overwhelming. It is actually easier than you think.

To help you feel more confident about buying a home, consider these 10 steps:

Ensure Your Finances are in Order
Your credit reports are a reflection of how you manage your finances. It is a good idea to know what your credit reports say before you apply for a mortgage. Your credit reports play an important role in determining the interest rate and other loan terms that a lender offers you. Avoid lifestyle changes if possible that could affect your financial situration.

Some Do's and Don'ts when examining your financial situation:

Do order your credit report from www.anualcreditreport.com. By law, each person is allowed a free report of his or her credit, one time every twelve months.
Do pay off or pay down high credit card balances.
Do pay your bills on time.
Do save money for down payment and closing costs.
Do not make any major purchases if you are planning to buy soon.
Do not apply for new credit.
Do not switch jobs if at all possible.
These all can affect your credit scores both negatively and positively.

Get Pre-Approved for a Mortgage
Become Familiar with your financing options. It's always a good idea to have at least a bit of background about the loan process before you talk to a lender. Shop around and ask others, including your agent, for referrals. Understand your Debt to Income Ratio, is an adjustable arm or fixed mortgage better for you, will a bi-weekly mortgage payment plan work within your budget, and how to avoid Private Mortgage Insurance (PMI). Having been pre-approved for a mortgage, prior to making an offer, will make it stronger to a prospective seller. Do you know how much house you can afford?

Determine and Prioritize Your Needs and Wants
The home buying process will go a lot smoother if you get familiar with your real estate market and narrow down your wants and needs before you start looking at houses. Communicate these to your agent in order of importance. This will help your agent conduct ongoing searches for the right properties to view. The more "wants" you have may reduce the number of homes that are available at that time so consider what are your "must haves" and be willing to walk away from properties that do not possess them.

Schedule a consultation with your agent
Sit down with your agent and ask as many questions as you can think of. Chances are if you have completed the previous steps and have read through this information you will have answer most of you own questions. Your agent should ensure that you understand most of what is in this answer any questions not covered here.

Determine your Closing Costs Well in Advance
One of the largest out-of-pocket costs in the buying (and selling) process is closing costs. There is nothing worse that being surprised with the final dollar amount just days before the closing. Working with your lender and agent, determine the closest approximation of costs and then add 10% for safe measures. Good agents will have worksheets available that help you determine closing costs well before the actual closing. Work with your lender to learn and understand all costs so that you may prepare well in advance.

Get the Experts ready!
Prior to making an offer, it is good to have selected some experts that will help you complete the buying process. In the state of Illinois, you will need a real estate attorney for closing. Anticipate spending anywhere between $200-$700. You will also want to find a reputable and thorough home inspector. Home inspectors will charge anywhere between $350-$600 based upon the type of home, square footage, number of levels, etc.

The Search, The CMA, The Offer
At this point you know how much you can afford and what you are looking for in a home. Your agent should be knowledgeable about the inventory and will be able to take you to the better homes that fit your criteria.

You have found the perfect home. What's next? You have found the perfect home. Now it is time to make an offer. Your agent should do a Comparative Market Analysis (CMA). A CMA will determine the fair market value of the home. Your offer should be based off the value found in the CMA. Your agent will draw up the contract and submit the offer to the seller's agent. Once a contract is accepted earnest money is required to make the contract legally binding.

Attorney's Review Period
You agent will forward the executed contract to your attorney for reveiw. A good attorney will review the contract for soundness and may alter or cancel the the contract on your behalf and in your favor.

Home Inspections
It is always a good idea to have your potential future home inspected. An inspection uncovers any defects that the eye cannot see and is for the protection of your investment. Typically, you will have between 5-10 business days to conduct an inspection on the home after the offer is accepted. Your real estate attorney will help determine any necessary course of action should critical issues be discovered.

Home Appraisals
Home Appraisals determine the value of the property based on what similar homes have sold for. It is similar to a CMA except it is more precise and is conducted by a certified home appraiser. Banks require appraisals to assess the total risk of lending the buyer money. Lenders will not loan more than what a property is worth. Often times when a home is over priced the seller would usually reduce the home of the property to match it's appraised value. Appraisal are not required if the buyer is buying in cash.

You're on the Way to Closing
Most of your home buying problems are behind you now and you're on your way to closing, also called settlement, the event that transfers ownership of the property to you. Just a few more things to learn, a few more things to do, and you're there! Ensure you have title and homeowner's insurance before the closing. You will also want to do a final walk-through of your new home prior to closing to ensure there are no new surprises, such as damage or inspection/contractual items have been completed.