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Home Price Protection
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Home Price Protection

The Path to Purchasing a New Home

Prepare yourself so you can be successful

The Path to Purchasing a New Home

Article summary

Buying a home is a major financial commitment that can feel both exciting and daunting, especially if you are a first-time homebuyer. Be sure you understand the ins and outs of home buying before you begin your search, so you are prepared to make informed decisions. Doing so can prevent costly and time-consuming mistakes. Use this step-by-step guide to anticipate every step along the way.

Establish a budget

Before anything else, it’s vital to determine the amount you’re able to spend. This may depend on how much you can save for a down payment. It’s important to be realistic about what you can reasonably afford. For example, if interest rates increase, your loan payments may go up. A rule of thumb is to not over-extend yourself and ensure your monthly budget has breathing room.

Once you know what the purchase price range of your home will be, you can estimate how much to save for expenses including the down payment and closing costs.

Check your credit

Once you determine a budget, check your credit history. This typically involves pulling your credit reports from the three credit reporting bureaus (TransUnion, Experian, and Equifax) in order to better understand your credit score. If your score is high, you’ll receive a lower interest rate. Use a reputable website such as Credit Karma, Credit Sesame, Credit.com, or WalletHub.

Find a real estate agent

Buying a home can be an emotional, complicated, and intimidating process. It’s a good idea to have an experienced professional on your side looking out for your best interests and answering questions that arise.

A buyer’s agent will help you navigate the complex home-buying process. In many cases, they might even help you find a property before it hits the real estate market.

Identify a balance between finances and desires

Go into your home search with a clear idea of what matters in a new home. Create a list that includes two types of characteristics:

  • Non negotiables are features that you MUST have in your new home. This typically includes things that are difficult or impossible to modify such as location, lot size, and the number of bedrooms.
  • Nice-to-haves are features that you’d LIKE to have in your new home but aren’t dealbreakers, especially because they can often be changed. Think cosmetic aspects like flooring, counters, and outdoor spaces. Research potential neighborhoods and prices for homes with these characteristics. Doing the research up front will make your search for the perfect home more focused. In addition, you’ll be better prepared to strike a balance between the features you want and what you can reasonably afford.

Shop for a mortgage and get it finalized

Loan preapproval is powerful when it comes to making an offer on a house you want. On top of that, it gives you a better idea of how much you can comfortably afford. However, remember that once you’ve been pre-approved for a mortgage, you’ll still have to get final loan approval.

Be patient with this part of the process. You’ll have to document your income, assets, and monthly expenses so your lender can determine if you’ll be able to afford the monthly principal and interest payment. Getting final loan approval means that you have to keep your finances and credit in line during underwriting.

Make an offer

It’s best to make your offer based on a CMA (comparative market analysis) done by your real estate agent. Understanding how you can make an attractive offer on a property will help increase your chances the seller will accept it.

Protect your investment

Home Price Protection helps you safeguard your home in case of an economic downturn. Just like homeowner’s insurance, a monthly payment provides coverage during times your home’s value drops, supplying payments to offset rising costs, job loss, and other concerns.

Takeaways

  1. Before starting your buying journey, decide on a budget and build up a support team. You will likely need a real estate agent, lawyer, and a banker or mortgage broker.
  2. Consider how your credit score impacts your interest rate and monthly payments.
  3. Confirm your finances and have a loan approval from your bank or lender before getting serious about a property.