8 STEPS TO BUYING YOUR HOME

Buying a home is one of the biggest financial decisions most families will ever make. The process can feel complicated, but having a clear plan can make it easier to understand what you can afford, prepare financially, negotiate confidently, and avoid costly mistakes.

Here are eight important steps to consider when buying your own home.

As you go about your weekends, spend some time visiting open houses in the areas where you would like to live.

Think about the memories you could create there—holidays, family reunions, celebrations, sporting events, and everyday family life. Visiting different neighborhoods can help you better understand what you like and what matters most to you.

Get to know the real estate agents conducting the open houses and ask questions such as:

• What is the neighborhood like?
• Are there nearby schools, parks, shopping centers, and restaurants?
• How long have homes been staying on the market?
• What are comparable homes selling for?

Drive around the neighborhood several times, at different times of day. The more familiar you become with an area, the better prepared you will be when the right home becomes available.

Before shopping seriously for a home, take time to understand your financial situation.

Start by reviewing your monthly income and expenses. Determine how much money is coming in, how much is going out, and how much you can realistically afford to spend on housing.

Buying a home is exciting, and it is easy to begin imagining yourself living in a beautiful new property. However, purchasing a home without knowing exactly how much you can afford can lead to financial problems later.

A personal financial plan should include your:

• Income
• Monthly expenses
• Debts
• Savings
• Emergency reserves
• Short-term financial goals
• Long-term financial goals

Your goals may include taking vacations, purchasing a vehicle, eliminating debt, helping children with college expenses, starting a business, saving for retirement, or purchasing a home.

It is also important to review your credit history and credit score before applying for a mortgage. Your credit profile can affect whether you qualify for financing and the interest rate you may receive.

Your debt-to-income ratio is another important factor. Lenders generally look at how much of your monthly income is already committed to debt payments when determining how much mortgage you may qualify for.

Taking the time to understand your complete financial picture can help you determine how successfully a home purchase will fit into your overall financial plan.

Not all real estate agents specialize in working with buyers.  Buying a home can be a lengthy and sometimes complicated process, so you want an agent who is willing to spend time showing you properties, answering questions, negotiating on your behalf, and helping you understand each step of the transaction.  Consider interviewing several agents before choosing one.

Ask about their:

• Experience working with buyers
• Knowledge of the local market
• Communication style
• Availability
• Negotiating experience
• Understanding of financing and purchase contracts

The home-buying process may take several weeks or several months. Choose someone you trust and feel comfortable working with throughout what may be one of the largest financial transactions of your life.

Before making an offer on a home, speak with a lender or mortgage professional about financing.  A mortgage pre-qualification or pre-approval can help you understand approximately how much you may be able to borrow.

It can also strengthen your position when submitting an offer, as sellers may feel more confident that you have already taken steps toward securing financing.

Common documents lenders may request include:

• Pay stubs for the last 30 days
• W-2s and/or 1099s for the last two years
• Federal income tax returns for the last two years, including applicable schedules and attachments
• Government-issued photo identification
• Bank statements for all accounts
• Statements for investment or retirement accounts
• Additional documentation for co-borrowers, when applicable

Consider speaking with more than one lender. Interest rates, fees, loan programs, and lending requirements may differ.  Always review the terms and conditions carefully before selecting a mortgage.

Once you have found a home you would like to purchase, you will need to prepare an offer.

The strength of your negotiating position may depend on local market conditions.

Possible items that may be negotiated include:

If multiple buyers are competing for the same property, offering substantially below the asking price may reduce your chances of having your offer accepted.

In a slower market, however, there may be greater opportunity to negotiate.

Depending on the transaction, you may also be able to negotiate items such as:

• Termite clearance or repairs
• Closing date
• Home warranty
• Appliances
• Seller credits
• Certain repairs or improvements

Remember that asking for too many concessions can sometimes make your offer less attractive compared with competing offers.

Work closely with your real estate professional to determine an appropriate strategy based on the property and current market conditions.

If your offer is accepted, the next step is typically to open escrow and submit your deposit in accordance with the terms of the purchase agreement.  Escrow is an important part of the transaction because it helps coordinate the transfer of funds, documents, and ownership between the parties involved.

Make sure you understand the terms of your purchase contract, including deadlines and contingencies.

Real estate transactions are serious financial commitments. Once an offer has been accepted, both the buyer and seller have obligations under the contract.

Stay in close communication with your real estate agent, lender, and escrow company throughout the process.

Once escrow opens, consider hiring a qualified professional home inspector to evaluate the property.

A home inspection may identify problems involving areas such as:

• Roofing
• Plumbing
• Electrical systems
• Heating and cooling
• Foundation
• Appliances
• Structural components
• Water damage
• Safety concerns

Some issues may be minor, while others could be expensive to repair.  Review the inspection report carefully and discuss significant findings with your real estate professional.  Depending on your contract and the circumstances, you may be able to request repairs, negotiate credits, renegotiate certain terms, or decide whether to proceed with the purchase.

Purchasing a home can be a lengthy, demanding, and complicated process, but reaching the finish line can also be extremely rewarding.  Stay organized and maintain communication with your lender, escrow officer, real estate agent, inspectors, and other professionals involved in the transaction.

Many variables and different parties are involved, so patience and consistent communication are important.  Before moving into your new home, remember to arrange or transfer essential services such as:

• Gas
• Electricity
• Water
• Trash service
• Internet
• Phone service
• Television or streaming services
• 
  

Then enjoy your new home!

Buying a home should fit into your overall financial picture—not just your mortgage payment.

A thoughtful financial plan can help you evaluate your income, expenses, debt, savings, credit, future goals, and the long-term responsibilities that come with homeownership.

Art De La Rosa
Financial Planner | Real Estate Professional
USC Graduate | Author

Wealthy Dollar
Phone: (626) 820-9013
Website: WealthyDollar.com