As I begin the process of locating and buying my first home, my mind is loaded with questions. This week, I’m answering the five biggest ones (for me, at least) in detail. Other questions involve true home ownership costs, hiring an agent, hiring a home inspector, and closing costs.
My wife and I have casually been looking at properties for the last several months to get a feel for the local housing market – what will a certain amount of money get us? However, we’ve both been quite timid about setting up a detailed plan to move from this “browsing” stage to the point of moving into a new home.
What does this path look like? I’ve read several different guides to home ownership and the basic roadmap from our position to that of a home owner is a ten step process. Please note that these steps are somewhat nebulous, and that’s why the second step is quite early in the process – we know we will need help as we move along.
Step 1: Get prequalified and preapproved. Spend some time looking at various mortgage options and learning about mortgages themselves. Once you’ve found a group that you like, meet with a mortgage specialist and lay out your financial situation. Be as open as possible; unless your finances are truly atrocious, the individual will have seen far, far worse than yours and will be quite open to lending you money in most situations. This process is necessary to determine what exactly you can afford and the framework in which you can afford it.
Step 2: Find an agent. This process can be fairly complex and if you’re not confident in what you’re doing, locate an agent as early as possible. This person can help you find appropriate homes and can guide you through the whole home purchasing process.
Step 3: Start looking at properties, and select one. This is the step that many people jump in with, and while this is admittedly the fun step in the process, it’s also one that can get you into a lot of trouble if you aren’t preapproved and already know what you can reasonably spend on a home. Remember that your home location can affect your insurance rates.
Step 4: Tender an offer. This doesn’t just mean throwing a dollar amount on the table. What elements of the home are you expecting to come with it (appliances, that swing in the back yard, etc.)? Are you requesting that the buyer cover some closing costs? This offer is also dependent on the findings of the inspector…
Step 5: Find a home inspector and schedule an inspection. Once an offer looks like it will work, you’ll need to schedule a home inspection to see if there are any major flaws in the home. You’ll need to select a good home inspector, schedule an inspection, and go to the inspection with the inspector. The conclusions might dissuade you from buying, or it might find things that become contingencies for the purchase.
Step 6: Close the deal. Once the contingencies of the purchase have been set and the price is negotiated, you can (finally) close the deal. But you still have at least a month to go before move in.
Step 7: Finish the mortgage process. Keep up with the mortgage process. Make sure the money you need to put into escrow is available. Keep this process moving along.
Step 8: Arrange homeowner’s insurance. You won’t be able to move in until you set up homeowner’s insurance, so you’ll need to get this done as soon as possible. Look at various insurance options, then pick the one that matches your needs.
Step 9: Arrange moving. When things get close, schedule a moving date and start packing. You may need to hire a mover, and you will need to do all sorts of change of address paperwork.
Step 10: Move into your new home. When the moving day comes, move all of your stuff, then enjoy your new home.
This is only the basic framework of the process, but it is a good enough framework for me to get started on the process. My wife and I are looking at preapproval in March (we want our latest debt reductions to clearly be on our credit report before we go).
Tomorrow, I’ll look at the question of what the real month-to-month costs of home ownership are.