I Want to Buy a Home, Now What?
You’ve decided you want to take the plunge and become a homeowner — how exciting! You’ll need to make a lot of moves before you can move into the new place, though. Do you know where to begin?
If not, don’t worry! We’ll let you in on a little secret: most first-time homebuyers are not sure of all the steps in the home purchasing process. Even second-time homebuyers and on will have questions. Buying a home is not something the average person does regularly, and the market can change greatly from year to year (as we’ve seen!). All it takes to get started is a little education about the process and professionals to help you along the way.
Where do I begin?
So, what’s the first thing you do when you’ve resolved to buy a house? Do you get right to work looking at homes in your favorite neighborhood? Head straight to a realtor? Or maybe just call your parents and ask for advice?
These are all ways to get the ball rolling, but they might not be the best place to start. (Sorry, mom and pop!)
Frankly, buying a home is a major financial decision and it shouldn’t be taken lightly. That being said, getting the loan for your dream home does not have to be a stressful process.
[Get Your Ducks in a Row for a Mortgage Loan]
Examine Your Finances and Credit
First thing’s first – stay on top of your credit and know your financial situation. This will set you up for success when it comes to budgeting, securing a Home Mortgage Loan, and having a plan to pay the loan off.
One of the biggest factors when being considered for a home loan is your credit score. Of course, trying to figure out your credit score from square one can be confusing and sometimes overwhelming.
Luckily, you can easily monitor your credit profile. Most credit card companies give their cardholders access to free credit monitoring services.
If you don’t have access to credit monitoring services from your credit card, try checking out services like Credit Karma. You can easily view your credit profile and identify possible problem areas that are holding your credit score back.
What Credit Score to Aim for and How to Improve It
If your credit score is below 640, we recommend working to improve your credit score before looking to secure your home loan. Not only will that likely save you thousands in closing costs, but taking that time will offer a clearer picture of how you can save for a down payment as well.
How do you improve your credit score? Everybody’s situation is different but here are a few guidelines outlined by Experian:
- Be diligent about paying your bills on time. Note that, although you shouldn’t make a habit of it, you can also pay overdue fees prior to them being 30 days late without it negatively impacting credit.
- Keep balances under 30% of your revolving credit limit.
- Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t improve your credit score.
- Pay off debt rather than move it around.
- Don’t close unused cards as a short-term strategy to improve your credit score, either. Owing the same amount but having fewer open accounts may actually lower your credit score.
[How to Build Credit When You’re Just Starting Out]
Outline What You’re Looking For in a Home
As Goldilocks would advise, your home needs to be just right — and you’ll need to establish what “just right” means for you.
Now that you’re better in touch with your financial situation, you can set up the parameters for your home search. You will need a focus when you start the house hunt! Remember to stick to your guidelines and be realistic how much certain features add to the total cost of a home.
Begin by outlining your budget. What amount are you looking to spend? Next, you’ll need to balance that budget against your different wants and needs in a home.
Consider must-haves and wish list items, including:
- Square footage
- Number of bedrooms
- Number of full bathrooms and half-bathrooms
- Backyard space
- Parking and garage situation
Think about things you don’t want, as well. For example, a pool can be an asset to some buyers, but a deal-breaker for others.
Also, give thought to how much more you’re willing to pay to have — or avoid — the items on your lists.
Connect with a Lender and Work on Pre-approval for a Home Mortgage Loan
After laying the foundation for what you feel you can afford and what you’re looking for, it’s a good time to touch base with a lender and real estate agent.
It can be helpful to start by talking to a lender like Great Midwest Bank first, as you’ll get a better idea of the loan amount and terms you’ll be able to secure — and help you understand your budget even better.
It is also wise to start working on securing pre-approval for a Home Mortgage Loan before diving in too far with a real estate agent. When you decide to make an offer on a home, you will need pre-approval on-hand to show the sellers you’re a serious buyer. Ideally, you’ve established pre-approval before you go out to tour prospective homes. That way, you’ll be ready to jump as soon as you’ve found the perfect home!
Connect with a Real Estate Agent and Start the House-hunt
When you’re ready to get going with the home search, connect with a real estate agent. To find an agent, search around and read reviews, ask friends and family, and consider going with a local agent who knows the area.
Have an open discussion with your agent about exactly what you’re seeking and what your budget is. Real estate agents can help you better target your home search and walk you through the processes involved with buying a home. Along with your lender, think of the agent as your coach and cheerleader throughout the home-buying process.
Search, Tour and Offer
Your real estate agent will help connect you with homes that fit your needs. They’ll know about homes entering the market well before those homes are visible publicly. You can then discuss homes you’d like to go see, set up tours and reevaluate your plan if needed.
Once you’ve found a home you’re interested in, your real estate agent will guide you through the process of putting in an offer to the seller. A good agent will help you craft an offer that is enticing to the seller but still keeps your best interests in mind as a buyer.
Notably, offers typically include the right for you as a buyer to conduct a home inspection. This allows the buyer to:
- Fully understand what they’re getting with this home purchase
- Request repairs or potentially get a lower purchase price to make up for any repair costs
- Walk away from the transaction if major problems are uncovered during the inspection
When the homebuying market is tight, some buyers will waive the home inspection to make their offer more desirable. Although it may be tempting, we don’t advise this. Your home is a big investment, and you should be in touch with the condition of your home before purchasing.
[How to Buy in a Tight Real Estate Market]
Seal the Deal
Your offer was accepted — congratulations! From here, it will mostly be paperwork, an inspection, potential renegotiations, waiting and more paperwork.
If you go with Great Midwest Bank for your Home Mortgage Loan, you’ll have less waiting! Our digital loan process makes the mortgage closing timeline short and sweet. Expect to close in a few weeks — not months.
When closing day is around the corner, you can speed up the process even more. Sign most of your documentation online through our secure portal. That means your closing day appointment will be lightning fast, so you can get on with your day and open the door to your new home.
[Digital Banking Options at the Click of a Finger]
Ready to start your home journey?
There are a lot of moving parts to buying a home, and we get that! The good news? Great Midwest Bank is here to help all homebuyers navigate the financing side of your journey home. If you need advice on improving your credit or if you just have some questions about applying for a mortgage, contact us to set up an appointment with one of our friendly and local loan officers. You can also visit our site to apply for a Home Mortgage Loan. With Great Midwest Bank, you’ll experience a state of BankquilityⓇ in your journey toward home financing.
A version of this article was originally published in March 2016. It was last updated in November 2022.