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How to Start the Home Buying Process

home buyer with their hand out getting the key to their new home
January 11 2019 • by Andrea Rodrigues • Home Ownership, Home Tips, Loans

Imagine what it was like buying a house 50 years ago, when online search tools like Trulia and Zillow didn’t exist. We’ve come a long way from those days! Now, in addition to the tried-and-true techniques like finding a realtor and attending open houses, home buyers have an array of online tools at their fingertips as well. With the click of a button buyers can determine an appropriate price range, research school rankings and property tax rates, and find available homes with the right number of bedrooms, bathrooms, and square footage.

Here’s a look at some of the things you can do both online and offline to start the home buying process on the right foot:
  • Start saving! While there are certainly home loans available that don’t require a down payment, having money to put towards a down payment does have its benefits. A sizable down payment can provide you with instant equity in your home, and it can prevent you from having to pay mortgage insurance premiums as well. You’ll also need cash on hand to cover things like closing costs and appraisal fees. And it’s important to have some money in your savings account after the sale goes through as well. Having an emergency fund can help you cover your mortgage payments in the event of a job loss, or allow you to pay for unplanned expenses like a leaking roof or a busted washing machine.

  • Determine a home budget. Be sure to account for property taxes, insurance, utility bills and necessary repairs and renovations when estimating your monthly home budget. Keep in mind that your home's expenses include a lot more than just your mortgage and interest payments. You can estimate how much money you can potentially borrow with online calculators like Mortgage Qualifier Calculators and Mortgage Loan Calculators. These types of tools can help you determine your monthly loan payments based on different mortgage amounts, terms, and interest rates. You can even factor in property taxes and insurance, and estimate the interest you would pay on a 30-year versus a 15-year mortgage.

  • Review your financing options. These days, there are countless home lending products for borrowers to choose from. These can include special loans for first-time home buyers, military personnel, and borrowers purchasing properties in rural areas. There are fixed and adjustable rate mortgages to consider, jumbo loans for borrowers looking to finance more than $450,000, and mortgage programs offered through local housing authorities like Rhode Island Housing and Mass Housing. You’ll also want to consider the length of your loan. Is a 15-year or a 30-year mortgage a better fit for you? With all of the different home loan options available to you, it can be a bit intimidating trying to decide which one is right. That’s why it’s a good idea to meet with a qualified mortgage professional who can help guide you toward the right mortgage product for your unique situation.

  • Attend a first-time home buyer or education workshop. Taking a class or seminar about home buying can be extremely helpful. These types of courses can teach you about homeownership, the benefits of owning versus renting, and the estimated costs of maintenance and home improvements. Many financial institutions routinely offer these types of home buyer workshops, and organizations like My Mass Mortgage and Rhode Island Housing offer classes as well.

  • Review your credit reports. You are entitled to a free credit report each year from each of the three major credit reporting bureaus. If you’re in the market for a new home, it’s very important to access your reports and review them for accuracy. Do this prior to applying for a mortgage to ensure that there are no errors in your reports, as negative information could lower your credit score and result in a higher interest rate on your loan, or a denial of your mortgage application altogether. And, if you pull your reports and find that your credit score is very low, you can get to work improving it. The higher your credit score, the better your chances of securing a home loan with favorable terms.

  • Search for properties. Whether you use online search tools like Zillow, or prefer the real estate section of your local newspaper, getting a sense of which properties are available in your price range is necessary if you’re going to find the home of your dreams. And, if you don’t yet have a realtor lined up but want to see some properties in-person, open houses can be a great, unintimidating way to start the process.

  • Find a real estate agent. Ask family and friends for the names of realtors they have dealt with, or do your own realtor search online. Once you’ve selected a realtor, tell them what you’re looking for and give them some examples of properties you’ve identified in your search efforts. They can help zero in on properties that match your needs and wants, and schedule times for you to view the homes privately.

  • Get pre-qualified. Before you put an offer in on a home, it’s a good idea to get pre-qualified or pre-approved with your lender. To do so, you’ll need to submit an application, providing your lender with your financial and employment details. They’ll use this information to determine an estimate of the amount they’ll let you borrow, and they’ll typically issue you a formal pre-qualification or pre-approval letter documenting that amount. Having this type of letter in hand can let a seller know that you’re a serious, qualified buyer, which can give you an advantage over less-prepared buyers who may be interested in the same property.
By being as prepared as possible from the start of your home buying journey, and by using all of the various tools available to you, you’ll have the best chance at finding (and obtaining financing for) the home of your dreams. Good luck!