15 Key Steps to follow when buying a house
Before you can close on your dream home, you must understand the steps to buying a house. Navigating the home-buying process can be challenging, but it becomes much easier if you have a plan and a clear path forward.
There is no time like the present to start working on your goals and dreams. When it comes to buying property, the rule is exactly the same: it is extremely important that you prepare for your home buying journey as soon as possible.
You wouldn’t want to find the perfect house only to realise that you forgot major things during your planning stages.
Here are some easy steps to follow on your home buying journey:
1. Start Your Research Early
As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.
2. Got credit?
The first step is to verify your credit score. It is highly unlikely that you will be able to buy a house cash and you will probably need to get a loan.
Hopefully this isn’t a surprise, but getting a home loan requires a good credit score. It’s a good time to check your credit reports for errors.
A fast way to improve your score is to pay down credit card balances and stop using them for two months before you apply for your loan. Also, you will want to avoid applying for credit (for example, a new credit card or car loan) until after you have bought your new home.
If you’re buying a home with a spouse or other co-buyer, your home loan lender will likely consider both buyers’ credit scores in the application process. That’s not to say you’re necessarily doomed if one person’s credit isn’t as good, but don’t count on things going off without a hitch just because one buyer has a stellar score.
Remember that improving your credit score significantly can take at least six months to a year, so get started if you need to! By verifying your credit score you make sure that you are clean as a whistle before approaching any institution.
As a South African, you have the right to review your credit score on an annual basis and it won’t cost you a cent!
3. Work out what you can afford
Use our calculators to get an idea of how much you can borrow, and what your monthly repayments will be over terms up to 20 years.
4. Start saving
You will need cash reserves to buy a home, and you will need to prove to a lender that you can afford home loan repayments that may be higher than what you currently pay in rent. In other words, start saving now! Here’s how to save for a house without feeling the pinch too much.
5. The debt-rimental step
This is the trickiest step and sometimes debt is the one thing that can drag home buyers down.
It is extremely important that you keep an eye on your debt as often as you can. Keep track of any money that you have borrowed or anything that you have to pay off. The sooner you start lowering your debt, the better your record will look when applying for a home loan.
Banks are more prone to loan money to those who are stable, so avoid opening new credit cards or even switching jobs anytime soon.
6. Earn extra cash
If you’re low on cash, as most first-time buyers are, consider taking drastic steps to cut spending. Or try out some ways to increase your income, such as selling some of your stuff or taking a part-time job.
7. Remember that deposit!
For many people, a deposit is regarded as a curse word and often seems like a form of punishment. However, when it comes to buying a house, the deposit can become your best friend. So, take the time to save as much as you possibly can. After all, the bigger your deposit is when buying, the less your installments will be over the course of time!
8. Get your documentation in order
Begin to collect documents that you’ll need to verify your finances on the home loan application: payslips, bank statements and, if you have freelance or self-employment income, copies of your last two tax returns.
9. Go shopping…for a Home Loan
Gone are the days where we have to travel from one bank to another to apply for a home loan only to get shot down and start all over again! There is a wonderful solution that will help you on your home buying journey: a home loan originator such as MultiNET Home Loans.
MultiNET will assist you by applying to several major banks on your behalf, but without the headaches and the fuss. What’s better is that they will automatically find you the bank that offers the best rates and interest on your home loan.
Just imagine all the free time you’ll have to think about decorating that new dream home of yours…
10. Keep it real with your estate agent
Make sure that you choose your real estate agent with effort and care! Ask around if you are unsure about someone. In the end, this is the person who will lead you to your dream house or who will turn your journey into a nightmare. They should know the area and the market well enough to make sure that you make an informed decision.
11. Shop for Your Home and Make an Offer
Start touring homes in your price range. It might be helpful to take notes on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.
Make sure to check out the little details of each house. For example:
• Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
• Try the electrical system by turning switches on and off
• Open and close the windows and doors to see if they work properly
• It’s also important to evaluate the neighbourhood and make a note of things such as:
• Are the other homes on the block well maintained?
• How much traffic does the street get?
• Is there enough street parking for your family and visitors?
• Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?
Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighbourhood.
12. Have the Home Appraised
Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.
13. Coordinate the Paperwork
As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.
14. Close the Sale
At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender.
15. Home Sweet Home
Time to move into your new home. If you are unsure about where to start your move, just follow these steps.
• Get rid of everything you don’t want through selling or donating items.
• Book a (reputable) moving service well in advance
• Remember to mark your boxes so you know what goes where!
• Pack and unpack only one room at a time.
• Clean your new home before you move in
Finally, your weird lawn ornaments have a…gnome. Welcome Home!