Buying a home is a huge step for anyone. It’s exciting to become a homeowner, and this will likely be the biggest purchase that you make in your entire life. Considering how much homes cost and what a commitment they are, the buying process takes some time, and you definitely don’t want to rush through it. To make sure it goes as smoothly as possible, follow this guide to get through every step of the process.

Figure out What You Can Afford
The last thing you want is to find a house that you love, only to then realize that it’s out of your price range.

Before you even begin looking at houses, you should make sure that you have stable income and savings to cover your expenses for at least three to six months. Financial experts recommend this amount for an emergency fund because three to six months is how long it takes most people to find a new job.

There are two numbers to look at when figuring out how expensive of a home you can afford. The first is the amount of money you have saved for a down payment. Ideally, you want to be able to pay at least 20 percent of the home’s cost upfront, which will help you avoid paying for mortgage insurance. If you don’t have that much, you should have at least 10 percent ready.

The second is how much your mortgage payment will be. This shouldn’t exceed 25 percent of your take-home pay. Of course, if you have a spouse who also works, add their take-home pay to your own. Bankrate has a calculator to determine how much house you can afford.

Don’t forget about closing costs, either. These typically run between 2 and 5 percent of the purchase price on the home.

There are alternative financing options that don’t require as much money upfront. If you get a Federal Housing Administration (FHA) loan, then you may be able to get a home with a down payment of 3.5 percent. With a loan backed by Fannie Mae or Freddie Mac, you could get a home with a 3-percent down payment. Depending on where you live, there could also be programs available through your state or city.

Find a Lender and Real Estate Agent
After you’ve determined your home budget, you’ll need to choose a lender and a real estate agent. See if your friends and family have any recommendations. You can also search online for lenders and agents in your area. Check potential options with the Better Business Bureau (BBB) to make sure they’re reputable.

If you haven’t done so recently, it’s a good idea to check your credit score before meeting with any lenders. Many credit card companies and banks offer you a free look at your current credit score every month through one of the credit reporting bureaus (Equifax, Experian and TransUnion). You’re also entitled to one free credit report per year from each bureau. Reviewing your credit report is smart to ensure that there aren’t any mistakes, which happen more often than you may think.

Consumer credit scores are between 300 and 850. Higher is better, but credit scores also fall into ranges. Anything under 630 is considered bad credit and will make getting a mortgage very difficult. From 630 to 689 is the fair credit range, 690 to 719 is good and 720 and up is excellent.

Most lenders will require a score of 680 or higher for approval on a mortgage. If you apply for an FHA loan, the minimum score is 620.

You can improve your credit score several ways, but the factors that have the largest impact on your score are your payment history and credit utilization. Pay all your bills on time and avoid using more than 25 to 30 percent of your available credit, and you’ll score well in each of those categories.

One part of the home buying process many people skip is getting a preapproval. This is a major mistake. Being preapproved for a mortgage means that there’s no risk of finding a home you like, only for your lender to deny your mortgage application. Not only does it give you peace of mind, but sellers are far more likely to accept an offer that’s backed by a preapproval.

When you’re choosing a mortgage lender, make sure to read the fine print for any supposedly great deals. Remember that lenders are trying to sell you on getting a mortgage with them.

Narrow Down Your Options
At this point, you should have a real estate agent. Since you know exactly how much you can afford through your preapproval, you can look more closely at your home options.

Narrow factors down into your needs and your wants. For example, if you need a certain minimum number of bedrooms or a home in a specific neighborhood, filtering out homes that don’t match that criteria can speed up your search process. Wants are usually specific amenities that would be nice to have, but you could live without them, such as a pool.

Adjust your search parameters as necessary to either filter out more homes or include more. If your initial search brought up quite a few homes, you can add in more of those wants so you don’t have as many options to go through. If your initial search didn’t return many results, then you’re probably looking for features that won’t be within your price range.

Make an Offer
You could find a home you want within a couple days, or it could take weeks. Be patient during your search, as you don’t want to rush things and make a decision you regret.

When you’ve found a home you want, it’s time to make an offer. A good starting point for negotiations is an offer 5 percent below the asking price, assuming the home is fairly priced. However, you’ll want to compare the asking price to how much similar homes in the area have sold for recently. If the asking price is much higher than these, you may want to go even lower in your offer.

Finalize Your Mortgage
It’s important to understand how mortgages work. Your mortgage will have a down payment, fees and a monthly payment.

The down payment is what you’re paying upfront towards the home. The fees are the costs associated with the mortgage, also paid upfront. The monthly payment is the amount you pay every month for the mortgage. This typically includes a portion of your interest and loan principal, although this isn’t always the case. It could also include a portion of your property taxes or other fees.

There are three different types of mortgages available, which are:
• Fixed Rate
• Adjustable Rate
• Interest Only

With a fixed-rate mortgage, your interest rate and monthly payments stay the same throughout the term of the loan, which is usually 15 or 30 years.

With an adjustable-rate mortgage, you have a fixed rate for a set period of time (usually three, five, seven or 10 years). After that, the interest rate adjusts annually throughout the remainder of your loan. These loans usually have 30-year terms.

An interest-only mortgage means you only pay your interest with your monthly payments. The term will have a balloon payment at the end to cover the loan principal. The interest rate on this type of mortgage adjusts just like with an adjustable-rate mortgage.

Obviously, fixed-rate mortgages are the safest because you know how much you’ll pay throughout the term of the loan. Adjustable-rate mortgages may have lower monthly payments during that initial fixed-rate period, but higher payments after. Interest-only mortgages will keep your monthly payments low, but you’ll need to save for the balloon payment at the end.

Close the Deal
The final stage of the home-buying process is closing on the home. Although this is straightforward, you will need to get a home inspection done when closing.

During a home inspection, the inspector will go through the home and look for any potential issues. These could include mold, mildew, issues with the electrical systems, deterioration on the roof, or other problems. Obviously, you wouldn’t want to purchase a home only to find that it’s infested with mold, and a home inspection helps you avoid that.

You can discuss repairs for any issues the home inspector finds with the seller. Just remember that some wear and tear is normal, and the seller will likely only agree to fix serious problems. If there’s mold or the roof is leaking, the seller should fix that. If the roof is old but still in good working order, don’t expect the seller to foot the bill on replacing it.

Make the Move
Once the home is yours, you’re ready to move. Moving costs are often more expensive than people realize, as the average is $1,170 for moves within the same state and $5,630 for out-of-state moves.

You’ll need to hire movers or rent a truck and handle the moving yourself. You may need to put some belongings in storage. Setting up the utilities at your new home could include connection fees or deposits. You may need to replace certain items, such as cooking and cleaning supplies that you threw out during your move.

For the most efficient and stress-free move, start planning for it at least two to three months in advance.

With all the details involved in buying a home, it’s a time-intensive process. Breaking it down into the steps listed above makes it easier and keeps you from getting overwhelmed. Take your time as you go through it step by step, and you’ll end up in a home you love that fits your budget.

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