TV shows would have told you that buying a home is a cakewalk. But let me break that myth here. Home buying is highly strenuous. Understanding the process of home buying itself is overwhelming.
Perhaps home buying is the most crucial and expensive investment you are gonna make and going wrong on anything related to it is the last thing you want to happen.
We’ve broken down the entire process into different steps. The specially designed new home buying checklist has got some steps that are simple while some can be strenuous. However, do not worry as each step takes you closer to being a homeowner.
Key points to remember
- On average, the home buying process would take roughly about 6 months, including 4 months of home shopping and about 35-45 of closing.
- Accurate & positive credit card reports, reliable real estate agents, and decent financial planning are crucial for smooth home buying.
- Just as the home price, your choice of home is also vital.
- If your new home is cross-country, a reliable moving company makes the home moving easier.
- If you have school-going children, the closing date needs to be near the opening of an academic year.
- When you’re moving cross-country and buying a home, confirm whether the state requires a real estate attorney.
So let us now dive into home buying essentials!
Do a financial check-up
Unless you’ve recently won a lottery or have inherited a fortune or have got some real rich relatives for assistance, home buying needs a mortgage in the US. Mortgage is another word for a home loan and you need someone willing to lend a huge amount.
In the US, the median home price is $300,000 and it is not easy to get someone on the friend list willing to give you $300,000 without a surety that it will be paid back. This means the mortgage lender is sure to study your finance details before making a positive move.
It feels terrible to hear from someone that you cannot afford a loan for a property that you already have eyes on just because you don’t have enough cash. To avoid such an embarrassing situation, check the finance before the bank puts a magnifying glass on it. Analyze the credit report and credit scores as banks would be going through them to determine the loan amount.
Determine how much you could afford
This is crucial as there is no point in brooding over a home you cannot afford. Once you have decided the budget, narrow down the searches to the range, which is more realistic. While you decide a budget, make an itemized list of expenses, including credit card payments, monthly expenses, loans, car payments, and other expenses. You need to know how much you would be able to repay every month. And based on this amount, your house buying budget needs to be realistic.
Decide on your home type
This can either be done even before you decide on the financial backup or at this stage. Whether you are looking for a short-term home or somewhere you can live for the rest of your life, there are many details to be taken care of but we have got some big decisions you need to consider.
- Detached or attached house: Your preference has got a big say in deciding the home. If you are looking for a house with a backyard, go for a single-family home. However, if you prefer staying in a populated area, a condo or townhouse is a good choice.
- Location of the house: Assuming you want to move locally and you are familiar with the state; your next task is to determine where you need to live. Your choice of the neighborhood is important. Consider factors such as safety, cost of living, amenities, and entertainment options. If you’re planning for a family, the proximity to schools also needs to be considered. This may also impact the resale value in the future.
Have a plan for the down payment
As now you have decided on the budget, decide how much should be your down payment. Though 20% is the normal down payment, most people prefer keeping it lower. While a lower down payment saves you from investing high in the first phase, you will need to pay mortgage insurance. The type of home loan you use also impacts the minimum down payment required.
Keep a 6-month strategic reserve
As a down payment is a significant expense, it is vital you have a strategic reserve for a minimum of the next 6 months. Keep it separate from your bank account. This is crucial as you may come across an unexpected expenditure or may lose the job. The strategic saving will be of great financial assistance.
Find the right mortgage
The type of mortgage is crucial as it can impact your wealth. When you have the right home loan, you’ll get the time to repay it and would not put strong pressure on the wallet. You’ll save thousands of dollars in a long time.
Find a reliable real estate agent
What we’ve got next in the buying new home checklist is home hunting. The earlier you begin the process, the easier it will be. Rope in an honest real estate agent who will guide you through the entire process, including giving tips on market conditions, giving a realistic quote for your dream home, and can also update you about late news in nearby neighborhoods. This works the best when you’re moving cross-country as you don’t have any idea about the new state. A real estate agent is a safe bet even when you want a new property locally.
Speak to several real estate agents and also take inputs from friends and co-workers to finalize a trustworthy buying agent.
Get pre-approved for a mortgage
The pre-approval process involves documenting the income, debt, and credit, organizing the paperwork, and understanding all the loan options. Though it may seem painful, trust me it will save your time. Not just that, when you are getting pre-approved, it also hints at how serious you are about buying a property.
As multiple types of mortgages are available, evaluate each one to see the best-suited one. Those boring 30- and 15-year mortgages offer big advantages.
Shop for the new home
While you go home shopping, remember that you are going to invest a lot of money and should buy something that you feel is worthy enough. Do not just compromise for a few hundred dollars. If you find a dream home but would need a little repair, do not lose it as by spending just a few thousand dollars, you would own your dream home. Similarly, when all the numbers strike right but you don’t find a home good enough, do not take the risk of buying it as it won’t be a happy decision.
Gather the documents you need
You must have all documents ready as you may need them at any time. The earlier you start gathering it, the better, but if you haven’t already done it by the time you begin house hunting, you need to get started.
Among the documents you’ll likely be asked to supply:
- The last two years’ worth of your tax returns
- Pay stubs or other documentation of income for the last two months
- All bank statements, plus brokerage and investment account statements, for the last two years
- Proof of funds for the down payment and closing (or a gift letter, if someone is giving you the money)
- Letter of recommendation from the previous landlord, if you’ve been a renter
- ID (preferably a driver’s license or passport)
Make a purchase offer and negotiate
Once you’ve found a home, making an offer is the next step in the checklist for buying a new home. Your real estate agent can be of great help here. He/she can compare multiple property costs in your area and tell you whether the offer you are making is a decent one. Based on the expertise of your realty agent, you can make out whether the price is higher than the market value and how far you should negotiate.
Do not hesitate to negotiate as the more you do, you have a higher chance of owning the home for a low price. You may have to go back and forth in negotiations for several days; that can be frustrating but that is a part of the game.
In some states, a lawyer is required to be part of any real estate transaction. Check with your real estate agent and hire an attorney if needed.
Schedule a home inspection
Assuming that you are moving within the state, the next in line in the buying a new home checklist is the personal home inspection. This is vital as you need to ensure the home is in perfect condition as shown in photos and videos by the house owner. Also, a home inspection will protect you from unforeseen costs and liabilities. For example, you’ll know how much “roof life” is left, whether the foundation is failing or if the electrical system is up to par.
If the new home is in another state, it is impossible to personally inspect the home and check with the real estate agent whether he can get you, home inspectors, with a good reputation. Most real estate agents will get you one. These inspectors will check every minor problem at home, including plumbing issues or minor plastering problems. It is normal to come across minor repairs and there is no need to panic here. However, when there are serious issues, get the homeowner to repair them before you finalize the deal.
Some good home inspectors would also hold a termite or pest inspection which is great for the home in the long run. A separate pest control agency needs to be roped in to make the home termite-free. You don’t want a moving company to unload the household belongings into a pest-infected home.
Get a mortgage
As now you know the property and its cost, it is time to find funds. You can either go to a lender who pre-approved you or can approach a new one. Be prepared to go back and forth with your loan officer and mortgage dealer as it is a complicated task and requires a high level of patience. You would need to answer many questions like the back office people who look through the documents would have endless queries. Be ready to show documents wherever clarification is needed.
Get a home appraisal
The home appraisal is the next task in the checklist for buying a new home. Before you ask why home appraisal when you have already inspected the home before obtaining the mortgage, you need to know both are different.
While the home inspection was for your peace of mind (to confirm the home is in perfect condition), the home appraisal is for the lender to ensure that he is paying the money for a home that is worth it. While appraising the home, the lender will see it in detail; compare the cost with recently sold homes in the neighborhood, and analyze the market trend.
Closing on your new home
And finally, it’s done. Now you’ve got a lot of papers to be signed. Do not be nervous as this is a thrilling moment and getting familiar with the standard closing documents can make you comfortable. Your lender would give you the closing disclosure a minimum of 3 days before the actual closing day. Compare it with the loan estimate to see whether there is any change in closing costs. With this, you’ll come to know how much you need in cash to close.
While most closing processes are done in person, there are a few states where closing can be done online. Check whether your state permits the closing process online. When you have an attorney, you feel more relaxed as the attorney will read all the papers for you and confirm everything is in order.
In case you are not able to attend the closing process in person, the power of attorney to attend the closing can be given to another party.
It’s true you will feel both nervousness and excitement as you are making the most important decision in life. You were in a whirlwind of endless paperwork for some time and now are back to normal life but as an owner of the dream home. At this moment, you realize that all the stress and pain you took for long months were all worth it.
Till now we were looking at things to do while buying a home but the next in the line is the list of things to do after you have bought a house.
Hook up your utilities
You don’t want to live in a world without internet, telephone, or cable. Make sure you’ve got the internet, telephone, electricity at the new home even before you reach there. While you can transfer the internet and telephone providers to the new home when moving locally, this may not be the case if you are moving long-distance. Confirm the network providers have service in the new state and if not, make new connections.
It is important to ensure previous homeowners have no outstanding bills or debts to utility companies as this can create issues in seamless services.
Clean up the home
Do not assume that your previous homeowner of the construction company would have left the home cleaned. Be prepared to spend the first few days cleaning the home. Pay more attention to the kitchen and toilet. You can also rope in cleaning professionals if you feel more effort is required.
Secure the safety of the home
One of the first things you need to do after buying the home is to change the locks and ensure safety. Do this before the moving company delivers household items as you don’t want to take a risk when the expensive or precious items are at home. Don’t forget to make a few spare keys and store one in a safe location outside, so you don’t get locked out. You should also reset the garage security code.
Set up the new address everywhere
Now that you have moved to a new home, inform your friends, relatives, and others about it. Update the new address in all documents, including government records and bank details. If you have moved for professional reasons, your HR should also know the new address.
Here are a few places to notify the change in address:
- The DMV – Update your Driver’s License
- The IRS (Fill out Form 8822)
- Voter registration
- Personal and business banking
- Investment accounts
- Credit cards
- Loan servicers
- Insurance companies
- Doctor’s offices
- Online/e-commerce retailers
Purchase a safe
If you don’t have a safe at home, buy one immediately. It is important as you need the space to store all important documents and inspection reports. As the moving company you have hired would have delivered all your personal belongings, it is crucial to safely keep them.
Check smoke detectors
As you have reached the new home, check the batteries for smoke detectors. Maybe the detectors require a minor repair. See if the batteries are still under warranty and how old the detectors are. Usually, smoke detectors work intact for about 10 years after that will start giving problems. Confirm your smoke detectors are in perfect condition.
Learn where everything is
The next in the checklist for moving to a new home is learning where everything is. Take some time to know where each item in the home is. Maybe the old house owner has labeled the circuit breaker switches. Find your water shut-off valve. Know how to open the attic door. Figure out where to replace the HVAC filters. When you get an idea about everything at home, it feels good.
Buy emergency kit
The checklist now has things to buy for the new home. And the most important is an emergency kit as you never know when an accident will happen, or when you will feel sick. We suggest you keep the following items in the medical aid box:
- Cotton balls
- Petroleum jelly
- Hand sanitizer
- Antibiotic ointment
- Antiseptic solution
- Cold/heat packs
- Icy Hot
- Aloe Vera gel
- Anti-diarrhea medication
- OTC pain relievers/fever reducers
- Hydrocortisone cream
- Cough and cold medications
Instead of purchasing each item separately, pick up a complete First Aid/Medical Kit which may have all these items.
Get all essential tools
Whether you are handy or not, you’ll need some basic tools to fix minor things around the house, hang pictures, and put together furniture. The normal essential tools that need to be in the home include:
- Adjustable wrench
- Screwdrivers (Phillips head and flat head)
- Utility knife
- Allen wrenches
- Scraper/putty knife
- Tape measure
- A variety of hardware (nails, screws, bolts, etc.)
- Tape (duct and electrical)
- Stud finder
Paint the home
One of the easiest ways to give your home a new decor is to paint it. Decide the color, texture, and timeline to give your home a new look. Either you can do it yourself or can take the help of a professional company before the moving company brings in your furniture and other heavy stuff.
Meet the neighbors
Once you have moved in, say hello to the neighbors. This is a great gesture; especially when you are in a new place. Enquire if there is a neighborhood party happening which you can take part in. Calling in the neighbors for an evening tea or dinner is a good idea to break the ice.
Tip: While you’re moving home, the safety of your belongings will be the priority, and having a good moving company can resolve your stress. Check for the best movers in your area.
Frequently Asked Questions
Can I back out after the final walkthrough?
You can back out after the final walkthrough but it needs to be done in the right way, which otherwise can cause serious consequences. This may include refunding the earnest money or even compensating for the expenses incurred. Your contract is a legal document and you need to be extra cautious from the beginning about the decisions.
What is a broom clean?
Broom clean is a real-estate term referring to the condition the seller or renter must leave the home. Leaving a home in broom-clean condition doesn’t require painting the walls or professionally repairing the ceilings, but having the rooms swept, cleaned, and carpets vacuumed.
Does my credit score impact buying a home?
A credit scorecard states your credit history based on which lenders give mortgages. The higher the score means the better the chance of getting a loan with an attractive interest rate. However, having a low credit doesn’t mean you won’t get a load but it may take a longer time.
How much do I need for the down payment?
As per the standard norm, 20% is accepted as a down payment. However, you can go for lower down payments, provided the lender agrees to it.
When is the best time to move?
When saving the moving cost is your intention, plan your home moving in winter as it is the lean time in the industry. The harsh climate and short daytime in winter prompt most people to relocate in summer. And movers in your area will be happy to offer you discounts in winter which is not possible in summer. However, if you are moving with your children, consider the beginning of an academic session as the moving time.