Completing this Checklist Makes Buying a New Home a Million Times Easier

Trista - September 3, 2019

Photo: Credit: Credit.com

So, are you ready to take the plunge and buy your own home? Before jumping in with your eyes closed, make sure that you have reviewed all the necessary items off of the home-buying checklist. Being careful now can save you headaches later.

Purchasing a house, especially for first-time homebuyers, can be a daunting, yet exciting experience. Take some time to get over all of the details of what buying your home means thanks to this handy checklist. It will be one of the many checklists you use after you become a homeowner.

1. Save For a Deposit

There are many things to consider before you buy a home.

To buy a home, you have to have a deposit saved up, usually at least 20% of the total mortgage. The deposit tells the mortgage lender that you are serious about making this enormous financial investment. It also shows the seller and the real estate agent that you are ready to take the plunge.

In order to save for a deposit, you might need to scrimp and save for a year or more. If you are married, you and your spouse may need to consider where to cut corners and what extra jobs you can take to add some extra money to your deposit account. Keep that money set to the side; do not spend it.

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2. Get a Credit Report

Make sure you do your homework before applying for a mortgage.

Getting a mortgage doesn’t require perfect credit, but it does require that you not have any big marks against you on your credit report. Getting a free copy of your credit report will give you the chance to see what is on there before a potential lender does.

If there is anything on your report that you think shouldn’t be there, start making phone calls and sending emails to try to get it off of your credit. If there are any open accounts, like from old credit cards, close them. Little changes like that can help boost your credit report.

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3. Polish Up Your Credit

Before this can become a reality, you may need to improve your finances.

You may want to talk to an expert about things that you can do to polish your credit report so that you will be more easily approved for a mortgage. Even if your credit is sparkling and your score is high, there are things you can do to make it even better.

Having a sum of money that you are saving for a deposit will automatically boost your credit score because it improves your debt-to-assets ratio. Paying down debts and possibly consolidating debts can also help to improve your credit report so that you stand a better chance of getting approved for a mortgage.

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4. Pay Down Your Debts

Before taking on a mortgage, you want your debt-to-assets ratio to be as favorable as possible.

If you have a car loan out, try to pay it down before applying for a mortgage. If you have credit card debt, pay down as much of it as you can. Having outstanding debts, especially credit card debt, can cause your mortgage not to get approved.

Take a look at other debts that you may have, such as student loans. Some student loans will not negatively affect your credit report as long as you maintain your repayment schedule. However, some loans, especially private ones, may be detrimental. Talk to the company that holds your student loans to find out what you can do to boost your chances of getting a mortgage.

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5. Determine How Much You Can Pay Per Month

Buying more home than you can afford will lead to foreclosure.

You may be able to get pre-qualified for a half-million-dollar mortgage, but that doesn’t mean you will be able to maintain monthly payments. You, not the bank, are the one that is responsible for making sure that you can make monthly payments on your mortgage.

Consider upcoming expenses, like kids going off to college or needing to buy a new automobile, that may impact your ability to make payments. Keep those future expenses in mind when determining how much you will be able to pay on your mortgage each month.

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6. Find a Real Estate Agent

An excellent real estate agent can guide you through the process of becoming a homeowner.

A real estate agent isn’t just somebody who takes you to visit different homes that you may be interested in buying. This person will help guide you through the entire home-buying process, down to getting your mortgage underwritten and closing on your new home.

Don’t just settle for the first real estate agent that you find or the one who happens to be listing a home that you are interested in. Get a referral from friends, family members, and colleagues. An excellent real estate agent won’t just try to sell you a house so that he or she can get a commission. He or she will make the entire process much smoother from beginning to end.

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7. Ask Your Real Estate Agent For a Referral to a Mortgage Company

Make sure you calculate in advance the costs involved in buying a home.

Your first instinct may be to apply for a mortgage at the bank where you have your checking and savings account, or maybe the one that has your credit cards. However, different banks offer different mortgage packages and products, so you need to shop around to find what is best for you.

You may ultimately go with a mortgage company that is not even a bank. Your real estate agent will be able to refer you to a company that can best meet your needs and gets you and your family speedily into your new home.

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8. Determine What Kind of Mortgage You Want

Owning a home is a huge investment.

Not all mortgages are created equal. If you can remember back in the 1990s and early 2000s, adjustable-rate mortgages became immensely popular ways for people with sub-par credit and no deposit to become homeowners. The problem is that many of these people were unable to repay their mortgages, and their homes were foreclosed.

Look into the different kinds of mortgages that might be available to you. Consider interest rates, repayment schedules, and how much of a deposit is required. Also look into what special programs may be available, like mortgages for first-time homebuyers. See if you can take advantage of any of those programs to get the best mortgage for you.

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9. Take Note to What Could Get Your Mortgage Application Declined

Make sure you travel the process of buying a home well from beginning to end.

There are few things worse than finding your dream home, having been pre-approved for a mortgage, and then getting it declined during the underwriting process when you are trying to close. Doing your homework now could save you a lot of time and heartache down the road.

There may be things missing on your credit report, so make sure you get reports from all of the credit-reporting bureaus. A change in marital status, income, or new liens could cause your mortgage application to be declined, even if you were already pre-approved. Mistakes on your credit report, even mistakes in your favor, could delay the process or cause your application to be declined.

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10. Get Pre-Approved For a Mortgage

Pre-approval for a mortgage can make the home-buying process much, much easier.

You want to get pre-approved for a mortgage instead of pre-qualified. What is the difference? Pre-qualification is a letter that says that the lender has evaluated your credit and determined that you will probably be eligible for a mortgage. However, many real estate agents and sellers feel the letter is worthless.

Pre-approval means that the bank has given a conditional guarantee to grant you a mortgage. The pre-approval process is much lengthier, as it involves a complete review of your finances – your credit report, income, debts, and other obligations, everything. Having a pre-approval letter gives you a huge competitive advantage when you are buying a home.

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11. Do Not Make Any Large Purchases

Making a large purchase can derail your home-buying efforts.

Once you are pre-approved for a mortgage, your conditional guarantee of a mortgage can be overturned if anything in your financial status changes. Any purchases that could liquidate your assets at all could cause your mortgage to be declined. Don’t even apply for a new credit card.

Wait until after you have already closed on your home before you buy that new washing machine or dishwasher. If the holidays are coming up, you may want to opt for spending quality time with people instead of buying gifts. After all, people will usually appreciate your time more than your material offerings in the long run.

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12. Determine Where You Want to Live

When buying a home, location is everything.

Now that you have gotten your finances in order, the fun part can begin. Decide where you want to live, based on different factors. Are there particular schools that you want your kids to go to? Do you want to be in proximity to specific locations, like a train or metro station?

Deciding where you want to live is a huge step. If you live in an area that has extraordinarily high housing prices, like in Silicon Valley, then unless you have a gold-tier budget, you may need to make compromises and live further away from where you work than you had hoped.

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13. Determine Your “Non-Negotiables”

There may be some things that you are not willing to compromise on.

You may be insistent that central air conditioning is an absolute must; you will not settle for window units. Another big wish would be making certain that your kids have a safe playground nearby that they can go to after school. Having a yard or a certain number of bedrooms may also rank up in your non-negotiables.

Having in mind what you will not compromise on will help narrow down your options when you begin looking for a home. Your real estate agent will have a much better idea of what homes to show you, meaning that you both will save much time in the process of house hunting.

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14. Realize What You Can Afford in Your Location

Home prices can vary significantly by location.

You may have decided that you want to live in a location that has higher-than-average home prices, meaning that you will probably be able to afford much less home than if you lived somewhere else. Get an idea of how much home you can afford based on your budget.

At this point in the game, do not try to play with your budget. You have already been pre-approved for a mortgage and do not want to do anything that could interfere with that process. You may have to settle for smaller bedrooms or less square footage than you had initially hoped.

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15. Begin House Hunting

Do you want new construction or a previously owned home?

Now the fun part really begins. Make sure that you try to enjoy this part of the process instead of letting it cause you stress. Your real estate agent will begin showing you homes that you may be interested in and will take you out to view the homes that you wish to see.

You can also go rogue here and begin looking at real estate listings on your own. You can check listings online and even drive around town, looking for “For Sale” signs. Be sure that you keep your real estate agent in the loop, in any case. He or she will be able to recognize a scam or a potential pitfall from a mile away.

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16. Consider the Costs and Benefits of Buying a Foreclosed Home

A foreclosed home can have hidden damage.

The thought of buying a foreclosed home can be tempting, especially since they tend to be so much cheaper than market-value homes. However, consider that foreclosed homes tend to have higher repair costs. The previous occupants probably were not able to maintain repairs, as they were struggling to maintain mortgage payments.

Foreclosed homes also tend to be on the market longer, meaning that they have had more time to fall into disrepair. If you choose to look at foreclosed homes, keep in mind that you will need to make room for repair costs in your budget.

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17. Keep in Mind Repair Costs

Nearly all homes will require repairs.

If you have ever watched a house-hunting show on television, you know that repair costs come with the territory of buying a home. Houses labeled as “fixer-uppers” can entail repair costs that could be as high as the cost of the home, as do homes that have been foreclosed.

Newer homes tend to have lower repair costs, but they can also have higher appraisal values. Even if you are buying a relatively new home, make sure that you leave room in your budget for repair costs. Ideally, you will want to subtract the cost of repairs from your overall budget, with the remainder being what you are willing to spend on a home.

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18. Continue House Hunting

You will eventually find the home that you are looking for.

You may have expected that you would fall in love with the first house that you saw but then been sorely disappointed. Maybe it needed extensive repairs that you weren’t prepared for. Perhaps it was much less impressive in person than it was on the listing.

Maybe you didn’t like it as much as you thought you would.

Keep looking at different houses. The process can drag out for several weeks or longer, but in the end, it will pay off. You may need to dedicate a few afternoons/evenings a week to look at homes with your real estate agent.

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19. Don’t Get Discouraged

You’ll find the right home eventually.

The process of buying a home can be drawn-out and tedious. You probably got so excited at getting pre-approved for a mortgage that you jumped and assumed the process would be short and quick. Now that the weeks have turned into months, you may be ready to throw in the towel.

Don’t give up! Imagine how wonderful you will feel when you and your family are situated in your lovely home that you are able to call your own. Keep that vision in mind as you struggle through the days and weeks of house hunting and wrestle with the thought of having to go through the closing process.

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20. Find the Home You Want

The home you want may find you, not the other way around.

You may have believed it would be impossible, but you finally found the house that you want. It is in your price range, has at least some of your non-negotiables, and is at least close to your desired location. Finally, you are nearing the end of the journey to becoming a homeowner!

This is the best part of the process when everything starts to come together, and all of your hard work starts to pay off. As you go through the rest of the process, you have something real and concrete to envision: your new home, and yourself and your family inside of it.

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21. Inspect Every Aspect of the Home Critically

Look for hidden repair jobs, which can become costly.

Now that you have found your dream home, you want to make sure that you do all of your homework carefully so that you have fewer problems down the road. Check out every single surface of the home, both on the inside and out.

You may find traces of lead paint that have to be removed, water damage that requires extensive repairs, or blown electrical systems that need to be replaced. These things may not necessarily mean that you shouldn’t buy the home, but you will need to figure the costs into your repair budget.

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22. Make an Offer

A good offer can lead to a quick closing process.

Making an offer can be the most essential part of the home-buying process. If you have found a home that you like, you need to make an offer that very day, especially if the house is in a competitive area. Your offer will stand out if you’ve been pre-approved because it is second-best to a cash offer.

If there are multiple offers on your desired home, you will need to talk with your real estate agent about how to make your offer stand out above all the rest. Factors such as appraisal value, time spent on the market, and the seller’s willingness to negotiate will all factor into the offer that you make.

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23. Get a Home Inspection

An inspection may be required by your lender.

Before getting your mortgage underwritten, you will need to hire someone to do a full home inspection. The lending company will likely require this document, as it will factor in the appraisal value of the home.

If the home appears to be in pristine condition but actually has termite damage, the lending company might decide not to underwrite a mortgage for that particular home. Remember that the home itself is the collateral for the loan, so if the appraisal value is less than the selling value, the bank will probably not approve the loan.

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24. Set Aside Money for Closing Costs

Not planning for closing costs can lead to anxiety.

As the buyer, you are responsible for the closing costs of the home. These costs can go well into the thousands of dollars, so you need to make sure that you plan for them. Otherwise, they can take you unaware and cripple your budget.

While you are closing on the home, the seller deposits the deed to it, and you collect the money for it into a state called escrow. Once the conditions of escrow are met, the deed is released to you, and the funds are released to the seller.

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25. Become Familiar With Closing Laws in Your State

Your state may have its own requirements for closing on a home.

Each state has different laws regarding closing on homes. Being familiar with those laws can prepare you for whatever may happen during the closing process. You may be required to get a home inspection or waiver on the inspection, make a final walk-through, and get documents signed and notarized.

Your real estate agent will be familiar with the closing laws in your particular state; this is yet another reason why finding a good agent is an absolute must at the beginning of the home-buying process. If you have any questions, check with your real estate agent.

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26. Begin the Closing Process

You’re almost there!

If your loan was pre-approved when you began the home-buying process, then closing on the home will be much, much faster than if you were only pre-qualified. All of your financial information has already been verified, so as long as there aren’t any surprises, you might get your home closed within a few weeks.

The closing process ends when the deed to the home comes out of escrow, and your funds are released to the seller. Congratulations, you will be completely broke but will be able to move into your dream home.

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27. Get Your Loan Underwritten

Once your mortgage is underwritten, you are almost ready to move in.

For the home closing to go through, your loan has to get underwritten by the mortgage company. This means that they have to actually release the funds to the seller and hold you legally responsible for the repayment.

If you did all of your homework at the beginning of the process, then there won’t be any surprises here. However, if there were things hidden from your credit report, if your job or marital status changed, or if you made any big purchases from the time you got pre-approved, your loan may not get underwritten. Meaning, you got to the end of the process but will not be able to close on the home.

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28. Begin Making Repairs on Your New Home

Make sure that your home is safe before you move in.

Depending on the repairs that you need to make to your home, you’ll want to begin making repairs before you move in. It is especially important if there are significant repairs concerning safety, such as the removal of lead paint or replacing damaged electrical systems.

Some repairs may be minor and can be done when you have already moved in. If you are on a time frame, you may elect to perform repairs once you are already in. However, make sure that these repairs will not compromise yours or your family’s safety.

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29. Start Packing

Buying a home can be a very costly process.

It’s time to get ready for the big day! Begin packing your stuff up and get prepared to move. Living in cramped quarters, like in a small apartment or with a family member? Living in this situation while saving for a deposit and going through the home-buying process probably makes you motivated to start packing and head out.

Make sure that you pack carefully and label boxes correctly. This makes unpacking and moving in go much more smoothly. Make sure that fragile items are carefully wrapped. You want move-in day to be a celebration, not a headache!

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30. Move Into Your New Home

All of your hard work will pay off when you move into your new home.

Now it is time to move into your new home. Use a moving company! The movers will pack everything for you and move everything into your new home. All that you will need to do is unpack all of your items and arrange them in your new home.

Time to decorate, arrange furniture, do everything that you need to do to get your new home looking perfect. Do something special to commemorate that you are finally in your new home. Pop upon a bottle of champagne or have a house-warming party. Congratulations!

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