1. Know your credit score.
Your credit score will determine whether you qualify for the mortgage you want, and the interest rate lenders will offer.
If you’re applying for a mortgage soon, avoid opening new credit accounts to keep your score from dipping. Any time you open a new credit account, the lender runs an inquiry, which can temporarily affect your credit score.
2. Get pre-approved for a loan.
Having a pre-approval letter shows home sellers and real estate agents you’re a serious buyer, and can give you a negotiating advantage.
3. Decide whether to buy, build or renovate.
Think about your long-term needs, whether you plan to start or expand your family, the amenities that are important to you, and whether the neighborhood meets your lifestyle needs. While renovating may seem like an easier and cheaper option, consider structural issues that may drive the cost up.
4. Think about your dream home
Make a list of must-haves, your nice-to-haves and your deal breakers. You’ve probably given some thought to what your new home should look like. Smart technology, home office, spa bath, chef’s kitchen. But first consider: how long you plan on living there, how many bedrooms and bathrooms, garage or driveway, outdoor living areas, school district, and length of commute.
5. Choose a real estate agent carefully
Consider a buyer’s broker, an agent who works solely for you. A good real estate agent will scour the market for homes that meet your needs and guide you through the negotiation and closing process. Interview at least a few agents, and request references.
6. Explore mortgage options
A variety of mortgages are available with varying down payment and eligibility requirements. The main categories are conventional, FHA and VA loans.
You also have options when it comes to the term of the mortgage. Most home buyers opt for a 30-year fixed-rate mortgage, which is paid off in 30 years and has an interest rate that stays the same. A 15-year loan typically has a lower interest rate than a 30-year mortgage, but the monthly payments are larger.
By shopping around, you’ll be able to compare and save. Be careful about applying to multiple lenders as this can negatively affect your credit score.
7. Get a home appraisal and inspection
If you’re getting a mortgage, you’ll be required to get an appraisal on the home. That’s because the lender cannot lend more than the appraised value of the home. It will also keep you from paying more on the home than what it’s worth.
A home inspection is a thorough assessment of the structure and mechanical systems. Professional inspectors look for potential problems, so you can make an informed decision about buying the property.
To get the most out of your inspection, walk through the home with the inspector so any issues can be explained.
If the inspector does list any red flags or repairs, you can ask the seller to fix prior to sale, or you can use the findings to negotiate a lower sale price. If the home fails the inspection, you may want to consider backing out of the deal.
8. Buy homeowners insurance
Before closing your loan, you’ll be required to get homeowners insurance.
Home insurance covers the cost to repair or replace your home and belongings if they’re damaged by an incident covered in the policy. It also provides liability insurance if you’re held responsible for an injury or accident. Buy enough home insurance to cover the cost of rebuilding the home if it’s destroyed.
Just like a mortgage, you’ll want to shop around for your homeowner’s insurance as different agencies offer different rates. Cheaper insurance generally means less coverage and higher deductibles.
9. Negotiate with the seller
A lot can be up for negotiation in the home buying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs? If you’re in a buyer’s market, the seller may bargain with you to get the house off the market.
Your real estate agent should know the market and advise you accordingly.
10. Read disclosures carefully
Real estate disclosures will reveal any issue with the home that can have a negative impact on its value, and also protect the seller from being held liable for issues the buyer encounters after purchasing the home.
There are several things a seller must legally include on the disclosures and some that are optional. What’s required and what’s optional will depend on the state. A few common issues include: lead paint, a leaky basement, work that was done without a permit, renovations and upgrades, asbestos, and radon.
These few red flags, if listed on the disclosure, may cause you to reconsider purchasing the house: foundation issues, flood damage, environmental hazards and liens on the property.