When it comes time to buy your first home, they’re a lot of steps you need to take to make sure the process is as smooth as possible. Too many people make offers on a home only to feel disappointed when the deal falls through or the house doesn’t turn out to be what they wanted.
First time home buyers need to approach the process methodically. We realize this is new territory for you, but you don’t have to do it alone. Keep reading for our home buying checklist.
THE HOME BUYING CHECKLIST
What does it take to buy a home in Manhattan Beach? How much money do you need to make each month? How important is your credit score?
Whether you’re single, married, or part of a large family, you need answers to the above questions to prepare you for your first home purchase. The following steps will tell you everything you need to know.
1. OPTIMIZE YOUR CREDIT
Most people don’t realize how big of a role their credit score plays on the home buying checklist. If you have a poor credit score, you may find it quite difficult to get approved for the loan amount you want for your dream home.
Improving your credit score may mean delaying the house buying process for six months or longer, depending on your unique circumstances. However, it may be necessary to get you and your family into the home you want, rather than settling on something you won’t be happy with. Here are some tips on how you can improve your credit:
- Pay all your bills on time
- Don’t allow your credit cards to be at or near the max amount
- Lower your debt to income ratio (improve your revenue, lower your debt, or both)
- Consolidate your debt
- Dispute any inaccuracies on your credit report
- Don’t close unused credit card accounts
- Don’t apply for multiple new loans
2. SAVE FOR A DOWN PAYMENT
Once you feel like your credit score is high enough to get you approved for a decent mortgage, you need to start saving up for the down payment. The down payment you need depends on the type of house loan you get.
For example, you may choose to put as much money down as possible to get the best loan terms possible. However, if you don’t have a lot of money saved, FHA loans require as little as 3.5 percent down, and you can get a VA loan with zero percent down.
Lower down payments, however, often require private mortgage insurance. PMI is a backup for lenders to ensure they’re covered if you stop making payments on your loan. PMI also increases your monthly payment amount.
3. GET PREAPPROVED
You’re probably getting antsy to start shopping for homes, but we’re not quite ready for that. First, you need to go to your bank or other lending agency to get preapproved for a loan. This is a vital step on the home buying checklist to make sure you know how much house you can afford.
Too many potential home buyers hit the market shopping for their dream home, only to feel disappointed when their offer falls through because they’re not qualified for the loan. Additionally, in a competitive market, your offer will carry more weight if you have a preapproved loan.
While different lenders may come back with different numbers, you should avoid applying with too many agencies. Doing so can lower your credit score. With that said, just because you’re approved through a lender, it doesn’t mean you need to use them when it comes time to put an offer on a home.
4. HIRE A REAL ESTATE AGENT
It’s important that you hire an experienced real estate agent. They’ll have the answers to all of your questions. They have intimate knowledge with the real estate market, different neighborhoods in your city, school districts, and more.
Real estate agents also have fantastic negotiation skills and know-how to leverage certain factors of a home in your favor. They also have plenty of connections with people you may need after buying a home, such as contractors, insurance companies, and more.
5. ESTABLISH YOUR PRIORITIES
One of the most important parts of your home buying checklist is figuring out what features of a house are top priorities. Think about your current and future life and what’s important to you. Ask yourself the following questions:
- Do you plan on expanding your family?
- How close do you want to be to work, shopping, etc.?
- How important is the school district your house falls under?
- How much room do you need?
- Do you need to be able to run a business out of your home (does the coding allow it)?
6. START HOUSE HUNTING
With the help of your realtor who’s armed with your list of priorities, it’s time to start finding your future home. This is one of the most exciting steps in the home buying checklist. It can be fun walking into potential homes and envisioning your life there.
However, it’s also important at this point to stay level-headed. Try not to become emotionally attached to any houses until you’re certain your offer is locked in. Take your time and make sure you get a good idea of your options before pulling the trigger on anything.
7. START THE BUYING PROCESS
Once you’ve found the house that meets your needs, you can make an offer on it. Then, you’ll need an appraisal and inspection of the house.
The appraisal will determine the exact market value of the home, to make sure both the buyer and seller are getting a fair deal. The inspector’s job is to take a thorough look through the home and uncover any underlying issues, damages, etc.
If any red flags or issues come up during the inspection, it may give you some leverage to either ask for a lower price or allow the seller to make the necessary repairs.
LOOKING FOR MORE REAL ESTATE ADVICE?
If you’re looking to buy a home for the first time in Manhattan Beach, make sure you follow our home buying checklist. Also, check out some of our home buying services that will help streamline your process, manage your escrow, and more. Feel free to contact us with any questions!