How to Buy a House

If you are viewing our article “How to Buy a House”, it may mean you never bought a house before. Buying your first house may cause you anxiety. This is probably your largest investment. Don’t worry! We’ll take you through the entire process here.

 

KEY TAKEAWAYS

• Understanding the Ins and Outs of house buying.
• When is a good time to buy a house?
• Should I buy a house?
• How to begin your house buying process.
• Review your credit score.
• Saving for your down payment.
• Investigate getting a mortgage.
• Hire a Realtor.
• Visit many houses.
• How to make an offer.
• Understand the closing process.

 

How to Buy a House Requires Knowledge

 

Buying a house involves understanding the ins and outs of home buying.

Here are questions you must answer and things you must consider before looking for your first house.

 

Is it a Good Time to Buy a House?

 

Maybe, depending on mortgage rates, current demand, and home prices. Here’s a quick summary of these three factors.

1. Prices: According to the CoreLogic Case-Shiller Home Price Index, national home prices rose by 20 percent between May 2021 and May 2022.

2. Mortgage Rates: On August 28, 2022, according to Nerd Wallet, a 30-year fixed rate was 5.618%.

3. Demand: Supply and demand affect every product for sale. Houses depend on how many are for sale at a given time. Few houses on the market put pressure on buyers due to increased competition from other buyers. Yet, a large supply of houses on the market pressures sellers to lower their prices.

Remember these three factors as we explain how they work in the housing market.

 

Should I Buy a House?

As long as you jump in with your eyes open and well-prepared, Buying a house will give you pride of ownership and boost your long-term financial health.

Should you buy a house depends on your goals. Are you ready to put down your roots? Or, do you want the ability to change your living style? Are your job and income secure? Have enough funds to pay monthly payments, budget maintenance, and home repairs?  Do you want to remain in one place for a long time?

 

When Should I Purchase a Home?

 

Normally, spring is the best time to search for a new home. It’s the beginning of the home-buying season. Closing on your house purchase during summer makes it easier to move weather-wise and for your kids who may have to change schools.

More importantly, your financial ability determines if you can afford a house. Likewise, you must get your credit in order and organize your finances to qualify for a mortgage loan.

Summary: You must budget your monthly mortgage payment, homeowner’s insurance, and property tax. Also, set aside funds for unexpected repairs and ongoing maintenance.

Now that you decided to buy a house now, let’s begin your journey.

 

1. How to Start Your House Buying Process

 

First, you must define your financial and personal goals. You need to answer these questions:

• How much of a home can I afford?;
• Where do I want to move to?;
• When do I want to move?;
• What’s important to have in my home?; and
• Am I ready to maintain a home?

Your answers become your goals.

 

2. Look into Your Credit Score

According to Investopedia, “A credit score is a number from 300 to 850 that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders.”

Credit scores are based on the credit history of these items:

• Number of open credit accounts;
• Total debt;
• Your repayment history; and
• Other factors.

Your lender will look at your credit score first. Then, uses it to predict the probability you will pay your loan on time.

As you see, your credit score determines your loan options. Lenders first look at your credit score to see your financial health. The higher your credit score, the greater chance you will pay your loan obligations promptly and fully.  Also, a high credit score awards you with getting the loan on better interest rates and terms.

Tip: How to get your credit score for Free? Obtain your credit report and score for Free from these credit reporting agencies:

• Equifax;
• Experian; and
• TransUnion.

 

3. Save for Your Down Payment

 

Most conventional mortgage loans require a 20 percent down payment. The 20% saves you from paying a “Private Mortgage Insurance” (PMI) premium paid every month with your mortgage payment. It’s either paid in full at your closing or added every month to your mortgage.

Tip: Yet, many federal and state programs allow much lower down payments, if you qualify.

Bonus: Learn more about the many government first-time homebuyer mortgage programs. Read our post “Financing Tips for First Time Home Buyers”.

 

4. Look into Getting a Mortgage

 

Meet with your bank and a mortgage broker. Beware, your bank is limited to the types of mortgage programs they offer. Thus, you will see more loan options with a mortgage broker.

To qualify for a mortgage, your lender will look into these factors:

1. Your credit score and credit history;
2. Current income and sources; and
3. Your debts.

What does your lender do with this information?

Income-To-Credit Ratio: Lenders use a formula to see if your income is high enough to pay your mortgage obligations after paying your usual debts. Read our post explaining this formula “What Debt To Income Ratio Do I Need To Buy A Home?”.

Tip: Always get a Pre-Approved Mortgage Letter from your lender before looking for a house. Sellers don’t want to waste time with unqualified buyers. They appreciate a buyer with a Pre-Approved Mortgage Letter who is already deemed qualified. Read our post, “Improve Your Chances For Home Loan Approval”.

Bonus: Learn more about selecting the best mortgage for you by reading our post, “4 Things First-Time Home Buyers Should Do”.

Also, learn about how the mortgage process works in our post, “What To Expect During The California Mortgage Process”.

 

5. Hire a Realtor

An experienced local Realtor who knows the market in the location you want to move to will save you time and money. Also, a Realtor can tell you if your budget is realistic. Realtors know how to find the best house fitting your needs much faster than searching for yourself.

Know how to negotiate with a seller? Of course not, that’s where a Realtor saves you money by getting the best price and terms for you.

Do you know the difference between a Realtor and a real estate agent? Read our post, “Is a “Realtor®” Better Than a “Real Estate Agent”?”.

 

Got Questions?

 

6. Look at Many Houses

 

Looking at photos of listings on the internet isn’t as good as seeing them in person. Likewise, you need to explore the neighborhood to see if it’s right for you.

Your Realtor can do the online searches to find the best fits to save you time, Likewise, your Realtor can set up a profile on the local multiple listing service (MLS) for automatic searches based on your desires and needs.

Your Realtor can make viewing appointments with the seller for you. Also, accompany you with each visit to advise you about the condition, amenities, and ability to expand the house for your growing family.

 

7. Making an Offer

 

Your Realtor knows how to negotiate with sellers. Also, how to get the best price and terms when writing the sales offer. Similarly, your Realtor can demand “contingencies” in the purchase and sales agreement to protect you. Learn more about contingencies by reading this article, “What are Real Estate Contingencies in California?”.

 

8. The Closing Process

 

Once the parties sign a purchase and sales agreement, an escrow is set up with either a title insurance company or an escrow company.

The escrow officer makes sure that all home inspections, appraisals, and contract contingencies are performed and acceptable to the parties. Your mortgage lender will file lending documents with the escrow officer.

Tip: You should make a final walkthrough to make sure all repairs and conditions are met by the seller before the closing.

The closing involves signing legal documents about your mortgage payments, making the down payment, and paying all fees. Then, the escrow officer files the title deed with the county recorder’s office making you the new owner.

Tip: Learn more about the escrow process by reading our post: “San Diego Closing Costs – The Complete List”.

 

How to Buy a House  – Conclusion

 

Now that you learned how to buy a house, find and enjoy your new home!

Buying a house involves many steps. Yet, hiring a Realtor will make the process easier while saving you money.

 

Why We Are The 49th Best Independent Real Estate Brokerage In The Country

 

Buyers are so satisfied with our services that we are ranked as the 49th Best Independent Real Estate Brokerage in the country in 2022 by The Wall Street Journal partnering with Real Trends Rankings.

 

Looking for a House in San Diego?

Best in San Diego: Big Block Realty recognized as the best brokerage in San Diego for four straight years (2018 – 2021) by the LocalBest.com site.

Big Block Realty will introduce you to a qualified Realtor experienced with the location you desire. We service the entire San Diego County.

Contact us before you start looking for your new home in the greater San Diego area.

 

Steven Rich, MBA – Guest Blogger

 

 

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