The home buying process is a long and complicated one. Many soon-to-be home buyers might feel intimidated by the amount of paperwork and steps it takes to finally buy your own house. This is why it’s always recommended for potential buyers to do their homework and understand everything involved before diving in. Not only will this give you some peace of mind, but it will help produce the best possible outcome.
Step 1: Evaluate Your Current Financial Situation
The first step to buying a house is evaluating your current financial situation. This doesn’t mean simply looking at how much you have in your checking account. You’ll want to take a bigger look at your current debts, where your credit score stands, and the amount of money you have saved up.
A lot of potential buyers don’t realize that buying a house is a huge financial investment and can cost more than people plan for. Some added costs to owning a home are home insurance, HOA (homeowners association) fees, repairs, and upgrades. You’ll want to make sure you have a steady income and have plans to live in your house long enough to build equity. Some homeowners find themselves in situations where they can’t sell their home for as much as they owe on the mortgage.
Step 2: Find a Great New Jersey Real Estate Agent
If this is your first time buying a house, you might not know the ins and outs of the home buying process. Considering laws and process are always changing, even home buyers with prior experience might be out of the loop. This is why it’s always recommended to partner with an experienced real estate agent to make sure everything is done correctly.
Real estate agents stay up to date on all laws and procedures in real estate and will be able to take a lot of the weight off your shoulders. Not to mention they will be negotiating with the seller’s agent for you, in order to give you the best deal. It’s also important to remember that sellers typically pay the buyer’s agent commission fees, meaning all of these great services are essentially free.
By working with Clever, you have access to a nationwide network of top-rated real estate agents who have already agreed to offer a commission rebate of $1,000 of the purchase price of your home if you qualify.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Step 3: Read Up on Local Real Estate Market Trends
Choosing the right time to buy a home is going to make a world of a difference in the price you pay and the amount of competition among buyers. The market is always changing and different regions and states all have peak seasons for various reasons. Right now, the New Jersey real estate market is very hot.
RIght now, the median home value in New Jersey is $327,500 and the median price of homes currently listed in New Jersey is $329,000 while the median price of homes that sold is $283,000. Over the past year, home values have gone up 4.6% and Zillow predicts they will rise 2.9% within the next year.
Typically, you see spikes in the market during the spring and summer months because it brings warmer weather and the desire to make a change. Warmer months bring out more competition and can lead to rising listing prices so sellers can get as much as possible. However, you don’t want to fall prey to inflated prices. This is another reason it’s important to work with an experienced, local agent who can help you time your purchase to get the best possible price.
Learn More: Will it Be a Buyer’s or Seller’s Market in 2019?
Step 4: Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is an important step in the home buying process, because it’s the determining factor on what houses you can afford. Many potential buyers want to start looking at houses before even speaking to a lender. However, this isn’t recommended because it tends to lead to disappointment and heartbreak.
The good news is that getting pre-qualified is actually really easy. Most of the time you fill out a few simple questions about yourself and your financial standing. It’s typically done at no cost to you and can be done online or over the phone. This then gives you a general idea of how much of a loan you can qualify for, and is usually all you need to begin looking for your dream home.
Next, you’ll want to get a pre-approval letter which requires an actual mortgage application. These are normally required to make an offer on a house because most sellers don’t want to begin a deal with someone that might back out for financial reasons. After you fill out the necessary documents and the lender does a thorough search through your financial history, you will receive a conditional commitment in writing for an exact loan amount.
Step 5: Start House Hunting
House hunting is the step most buyers can’t wait for. There’s something about touring homes that you’re looking to plant your roots in. Unfortunately, this is one of the reasons buyers tend to get carried away with what they can actually afford. In order to save yourself some time and disappointment, think about what you are looking for in a house before house hunting.
First, you’ll want to set a budget. This number will typically be how much of a loan you qualify for, but some people choose to find houses that are less than that amount. You will also want to think about neighborhoods to live in. If you have kids, you’ll probably want a neighborhood that’s quiet, is in a highly rated school district, and has a low crime rate.
You can take note of open houses and showings to see as many homes as possible that fit your selected criteria. When you start looking for market-specific data, you’ll want to utilize online tools and consult your real estate agent to figure out what neighborhoods to live in.
For example, Zillow offers tools to look at median home values in specific areas, which can help you narrow down areas that are in your budget. Some other factors to consider when looking for a house are if they have solid medium-to-long-term market outlooks, and are generally considered safe.
Learn More: Free House Hunting Checklist
Step 6: Make an Offer
Now that you’ve found the perfect home, it’s time to make an offer. This is when having an experienced, local real estate agent is going to be especially helpful. You and your real estate agent will decide on a price that you want to offer on the home. Then your real estate agent is going to submit a written offer with what you decided on. Some buyers will submit offers that include changes to be made to flooring or paint color.
If the seller accepts your offer you will move onto the next step. However, if they decline your offer, they may send a counteroffer and it’s then up to you to accept or deny. This cycle will continue until the buyer and seller are both happy with the terms or the deal falls apart. Keep in mind, your real estate agent will be doing the negotiating and submit proper documents on your behalf.
Learn More: How to Make an Offer on a House
Step 7: Inspections and Negotiations
After you and the seller have reached an offer agreement, it’s time for the house inspection. Typically, the buyer will pay for the home inspection, but some buyers will try to negotiate this with the seller. The home inspection is important because it is a thorough check of everything in the house. If the findings report that there are many serious issues with the house, it might be time to return to the negotiation table.
A real estate agent has the experience to negotiate terms after the home inspection. If the house comes up with several defects, your agent will be able to help negotiate to have some of these problems fixed. If it seems like some of the problems are going to be too expensive to fix and the seller won’t negotiate, it might be best to look for another house.
Step 8: It’s Closing Time!
Now that you’ve done your negotiations and home inspections, it’s finally time to close on the house. This is an important day and is full of paperwork, so make sure to bring all the required forms and identifications. Your real estate agent will be able to tell you all the documents that are required to bring to closing. This is also when you will be paying your closing costs and other fees.
Typical closing costs are roughly 3% for the buyers. So let’s say the house you’re buying is $250,000, our closing costs are going to be ~3% of that price, therefore you will be responsible for paying roughly $7,500. In New Jersey, the average home buyer pays around $2,175 in closing costs. On closing day, you are also going to be paying any required down payment.
Partnering with an experienced real estate agent is going to help make this process run smoother. They will be able to set accurate expectations in terms of what fees and costs to expect during closing.