The home buying process can be long and complicated. For first time buyers, and even seasoned buyers, it’s easy to feel intimidated by the endless amounts of paperwork and steps it takes to finally buy a house.
This is why it's always recommended that all buyers do their research and try to understand everything before diving in. Not only can this give you some peace of mind, but it can help produce the best possible outcome.
Step 1: Evaluate Your Current Financial Situation
The first, and arguably one of the most important steps of buying a house is evaluating your current financial situation. This means going beyond, let’s say, how much you owe on your credit card, and looking at the entire picture. You’ll want to look at how much you have saved up to possibly foot the bill for an unplanned repair, or extra costs on your closing day.
You’ll also want to determine whether your current income and spending habits are compatible with the value of the home you’re looking to purchase. If you want to get a loan with better interest rates and conditions, you’ll want to monitor your credit score and have enough saved up for a downpayment.
In the end, it’s much safer to ensure you are in great financial standing before making a large purchase such as a house. No house would be worth the risk of getting behind on your mortgage because the payments are too much.
Step 2: Find a Great New Jersey Real Estate Agent
If this is your first time buying a home, chances are you don’t know a whole lot about the home buying process. Even home buyers with prior experience should partner with a local, top-rated real estate agent when purchasing a home.
Real estate agents stay up to date on laws, regulations, and current real estate market conditions. Not only that, but real estate agents are masters at negotiating, which can help take some weight off your shoulders when you’re trying to get a good deal on a house.
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 eligible home.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Step 3: Read Up on Local Real Estate Market Trends
When it comes to buying a home, choosing the right time is going to make a huge difference in how much you end up spending. Different regions and states all have peak seasons for various reasons. North Carolina specifically has been experiencing a rapidly growing housing market and it’s not predicted to slow down anytime soon.
Over the past year, North Carolina home values have gone up 8.4% and are expected to rise another 4% within the next year. Typically, you will see seasonal fluctuations in the spring and summer months. This is fairly common for most states because it brings warmer weather and the desire to change things up.
However, some seasons can bring unexpected events like Hurricane Florence that hit in 2018. In North Carolina, there was a spike in the need for housing after Hurricane Florence hit, which then inflated the prices of houses during the fall and winter months.
Learn More: Will it Be a Buyer’s or Seller’s Market in 2019?
Step 4: Get Pre-Approved for a Mortgage
Before you jump right into looking for houses, you need to get pre-approved for a mortgage. This is one of the most important steps to take before making any decisions, or starting the house hunting process because it determines your buying power.
The first step is going to be getting a pre-qualification, which gives you an idea of how much of a home loan you’ll likely qualify for. The pre-qualification process is fairly simple and requires a very brief overview of your financial standing, and can often be done over the phone or online. Once you have your pre-qualification, you’re ready to start looking for houses.
However, before you can even start making offers on a house, you’ll need a pre-approval letter. Pre-approval letters are normally required to make an offer on a house because most sellers don’t want to start a deal with someone that might back out for financial reasons. Pre-approval requires an actual mortgage application, which takes a deep dive into your debt to income ratio, credit history, and current financial standing.
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. This is the letter you can use to prove to sellers that you are ready to make an offer.
Step 5: Start House Hunting
House hunting is understandably one of the more exciting steps to buying a house. Because this tends to be so exciting, it’s easy for buyers to get carried away and forget what qualities are a priority for them. In order to save yourself some time and potential disappointment, have a thorough list of what exactly you are looking for in a house.
You’ll also want to set a budget and stick to it, as well as think about neighborhoods you want to live in. Some sellers will host open houses, which are a great way to meet the seller’s agent in person. This means you can have a discussion about the home and any aspects you might be concerned about.
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. Zillow offers online tools like these that show you median home values in specific areas, which can help you narrow down areas that are in your budget. You’ll also want to use this to research market outlooks and the crime rates of neighborhoods. If you have kids or are planning to have kids, you might want to research possible school districts to live near.
Learn More: Free House Hunting Checklist
Step 6: Make an Offer
Now that you’ve found your dream home, it’s time to make an offer. This step is going to be a lot easier if you are working with an experienced, local real estate agent. You and your agent will decide on a price that you want to offer for the home, as well as any other changes or conditions that you feel are necessary. Once you have all of that laid out, your agent will send that over to the seller’s agent.
If the seller accepts the offer, then you move onto the next step, but if they decline the offer then they will send you a counteroffer and you will decide if you want to take it. However, it’s important to know that a seller can reject your offer altogether. Typically, if you get to a point where you and the seller can’t agree on a deal, most people will look for a different house. 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
If you and the seller agree to conditions on the house, it’s time for the home inspection. Typically, the buyer will be the one paying for the home inspection, but it’s not unheard of for a buyer to negotiate for the seller to pay for it. The home inspection is important because it’s a thorough check of everything in the house from the roof to the electrical outlets. If the findings report that there are serious issues with the house, it might be time to return to the negotiation table.
The negotiation process is when having your real estate agent will be especially helpful. A real estate agent has the experience to negotiate terms after the home inspection. If you aren’t sure how serious some of the defects are, your agent and home inspector can provide some guidance. Some buyers will negotiate that some of the defects be repaired in order to complete the sale.
Step 8: It’s Closing Time!
Now that you and the seller have finalized all of the negotiations, it’s closing time. Closing day is a big day, so it’s important that you come prepared with all the required documents. If you’re unsure of what is required from you to bring to closing, your real estate agent will be able to help you.
Closing day is also when you will be paying all of your closing costs and home buying fees. Typically, closing costs are roughly 3% of the sale price of the house for buyers. So, let’s say the house is $192,000, your closing costs are going to be approximately 3% of that price, therefore you will be responsible for paying roughly $5,700.
According to a recent study by Bankrate, the average home buyer in North Carolina pays around $2,242 in closing costs, including origination and third-party fees. During closing, you are also going to be paying any required down payment. However, if you went with a home loan that doesn’t require a down payment, such as the VA loan, this won’t be applicable to you.
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.