Step-by-step guide to buying a home

By Citizens Staff

The process of buying a house can seem complicated, especially when it’s your first time. With so many factors to consider — credit scores, down payments, mortgage rates, and property taxes, just to name a few — it’s not surprising that many people find home buying and — more to the point — figuring out how to pay for it to be stressful and confusing.

But getting a mortgage doesn’t have to be a beast. Start your journey off on the right foot and familiarize yourself with the overall home-buying process with this step-by-step guide.

Take a hard look at your monthly budget and decide how much of a mortgage payment you can afford alongside your other expenses. A good rule of thumb is to keep your monthly mortgage payment — including taxes and insurance — and other monthly debt obligations below 43% of your monthly income (before taxes).

There are benefits to putting down 20% of a home’s purchase price up front. For example, you won’t have to pay private mortgage insurance (PMI). However, 20% is a lot of money and isn’t realistic for a lot of potential buyers. You have the option of putting down less, so talk to your lender about what will work best for you.

All those loud commercials have likely drilled it into your head that it’s important to know your credit score when you plan on making major purchases like houses and cars. That’s because your credit score is one of the first factors lenders review when determining your mortgage eligibility. So it’s important to make sure that all-important score — and your credit history — are in a good place before applying for a mortgage.

Most lenders will be looking for a score of 670 and above. If it’s not, you may want to take steps to improve your score before buying a home.

Going shopping for a home with a pre-approval letter in hand may put you ahead of the game: It shows the seller that you’re serious about buying a home, and it gives you an estimate of just how much house you can afford.

You should be aware that a pre-approval is a hard inquiry on your credit report — and you’ll need to provide documentation to verify your income, assets, and employment before you can get one. Beyond giving you an edge over other potential homebuyers, some real estate agents consider a pre-approval letter a must before you can put in an offer.

Your real estate agent will tour houses with you, answering questions and making recommendations along the way. However, you’re not limited to the homes your agent shows you — feel free to browse your favorite house hunting app or go to open houses in your area on your own.

• Pro tip: When touring homes, keep a notebook handy so you can write down any thoughts and questions you may have.

When you find the home you want, make an offer! Depending on the situation, you can match the asking price, bid lower, or even offer more (if there are several bids on the home). Your agent will help you with this process. If the seller expects multiple offers, then putting in yours as soon as possible is a must. If you wait, you might miss out. If you don’t want to compete and possibly have to raise your offer higher than the asking price, then stick to your guns. Even though that house may have captured your heart, you might not feel so loving if you have to sacrifice annual vacations or daily lattés because you've become “house poor.”

Now it’s time to hire a qualified professional home inspector to evaluate the house. It’s important to pay close attention to the report, especially if you’re buying an older home. Here’s what your inspector will be checking:

• Structure: the skeleton of the house, its foundation, and framing
• Exterior: walks, driveway, siding, drainage system, gutters, doors, and windows
• Roofing: roof coverings, drainage, flashings, skylights, and chimneys
• Plumbing: water supply drainage system, hot water heater, and fuel storage system
• Electrical: service entrance wires, breakers and fuses, and disconnects
• Heating: heating systems, vents, flues, chimneys, and heating energy source
• Air conditioning: home cooling system, including central and through-wall cooling equipment
• Interior: walls, ceilings, and floors that may have water stains or mold
• Ventilation: adequate insulation and mechanical ventilation systems
• Fireplaces: proper installation, chimney, and flue safety, as well as proper drafting

The lender will process your application and send you initial disclosures to review and acknowledge. Then they'll order an appraisal of the home to ensure that the purchase price doesn’t exceed the fair market value of the property. Finally, an underwriter will review your application before issuing their decision on your home loan.

Congratulations! Before the closing date, make sure you review all documents carefully. Once you sign, you’ll officially own the home. You’ll get together with the seller, your broker, and lawyer to walk through all of the paperwork.

If you’re preparing to buy a home, it’s important to educate yourself to avoid feeling intimidated throughout the process. Everyone has questions — even those who’ve had a mortgage for years. Ask an experienced mortgage loan officer about anything you don’t understand; they’re here to help get you ready for your next big move!