Buying your first house can seem overwhelming, but you don’t have to go it alone. 

Key takeaways:

  • There are many steps to buying a home
  • Do your homework to figure out what you can afford
  • It’s easier if you get the right people (realtor, lender, and insurer) on your team 

Buying a home is a major life milestone, a significant financial commitment, and a huge responsibility. It’s not surprising, then, that the process brings up a lot of emotions—fear, hope, excitement, worry—all of which can make an already heavy decision that much more stressful.

Luckily, you don’t have to take this journey alone. Here are eight tips and tricks to make the process smoother and achieve some much-needed peace of mind.

1. Connect with the right realtor

Your right-hand ally in this process is the realtor. They keep an eye out for your best interests, lend their expertise when it’s time to negotiate the sale, and know what questions to ask during inspections.

It’s often incorrectly assumed that realtors drive up your costs because they take a commission off the price of the house. But this commission comes from the seller, not the buyer. Contrast this with a real estate agent, who may take part in both sides of the negotiation and doesn’t share the realtor’s code of ethics.

2. Decide what you want

Once you’ve found a realtor, they need an idea of what you’re looking for. So it’s time to start asking the real questions.

  • Where do you see yourself 15, 20, 30 years in the future? Will marriage and kids be part of the equation? Do you see a career change down the road?
  • What type of home fits your lifestyle? Single-family, duplex, condo, townhome? How much space do you need? How much can you afford?
  • Where do you want to live? How are the schools? How high are the property taxes? Is downtown within walking distance? What about parking?
  • What are your must haves? Reasonable commute length? Number of bedrooms? A three-season porch? A jacuzzi?

Write all of this down and go over it with your realtor. This will determine what properties you consider in your search. You’ll probably need to adjust the list as you go, depending on what’s actually available in your price range.

3. Go see some houses

Now that you’ve got your list of wants and needs, your realtor can set up some viewings. The timing can vary depending on where you live and how hot the local market feels. In a region with a glut of properties, you might visit a few in one day, make an offer, and have it immediately accepted.

In markets with less inventory and more interested buyers, it may take weeks or months for something new to show up and when it does, the bidding might get fierce. Indeed, home inventory in general has been low since the 2008 housing crash and it’s probably going to stay that way for a while. But there are signs of positive change in the wind.

Regardless of the state of the real estate market in your area, there are homes out there waiting to be bought. And you need to go out and see them!

4. Find the right mortgage lender

Finding the right mortgage lender is a lot like dating – you don’t have to settle for the first suitor who comes along. You’re picky about your house, so it’s ok to also be picky about the lender who helps you find the money to pay for it, too.

Be sure to ask questions before signing on with a mortgage lender, including:

  • What fees do you charge? (Be sure to ask about commissions, credit reports, points, and appraisals.)
  • Will you consider waiving any of the fees?
  • How much down payment will I need?
  • How long is the preapproval process?

That last question brings us to a key point – be sure to get preapproved for your loan. The process will show how much home you can afford based on how much you’re able to borrow. This is a critical step because it will save you from shopping above your limits and being disappointed down the road.

5. Set up your financing

This is the most important step to ensuring a smooth homebuying process. Here’s what you need:

  • Debt that’s under control. Lenders need to see that you can effectively manage your current debt since you’ll be taking on more with your mortgage. If you’re not sure where you stand, check out your debt-to-income (DTI) ratio. It measures how much of your monthly income goes into debt payments. Lenders are looking for a low DTI, which usually means you can afford your current lifestyle. A DTI ratio of 36% or lower is ideal, though some lenders allow up to 43%.
  • Solid credit. Go over your credit score carefully because it may have some incorrect information. This is not uncommon, and errors can usually get resolved in less than a month. The Consumer Financial Protection Bureau has a handy free credit report checklist to help with this process. Lenders usually want your score to be at least 620 to 680, though some accept scores as low as 500.
  • A clear budget. A good lender will be very helpful in creating a budget to keep track of everything. It makes it clear what level of monthly payment you can afford and includes expenses like utilities, repairs, and property taxes. Some lenders require the buyer to have two months of reserves in the bank for mortgage, insurance, and taxes. If you’re jumping into condo ownership, HOA fees should also be included.
  • A good interest rate. You have two choices here. A fixed rate offers less risk because it stays the same no matter what the market does. An adjustable rate can be tempting when the market is favorable but can shift and change over time.

6. Make your best offer

Once you find a home you like, your realtor will help you put together the best possible offer. Then it’s a waiting game while the seller decides to accept, reject, or negotiate. If it’s a seller’s market, you may be waiting a while. If your offer is rejected (and you can’t go up in price), then you have to keep looking. If it’s accepted, then there are some additional hurdles to overcome.

7. Get an appraisal and inspection

Once your offer is accepted, the lender sets up an appraisal to determine the actual value of the home. This usually happens within a week, and then it takes a few days to get the report. If the value of the property is higher than the price you’re paying, you’re in good shape. If it’s lower, you may need to renegotiate with the seller or increase your down payment.

Your lender will also hire an inspector to make sure your new home is safe and solid. This usually has to happen within 10 days of your offer being accepted and takes 24 hours to get the report after the inspection. At that point, you can either sign off as is or go back to negotiations if there are any problems. Ideally, you want the seller to pay for anything that needs to be fixed before the sale is completed.

Assuming all is well, you can close on your new home, which involves some additional cost and a wagonload of paperwork.

8. Don’t forget homeowners insurance

Homeowners insurance is often required by your lender. He or she will let you know when in the process you need to purchase it, but you can shop for it anytime once you know your new address. You’ll want to make sure to check the limits on coverage for personal property and liability, make note of any exclusions, and be certain that the deductible falls within your budget.

The experts at NICRIS can help you find a policy that fits your needs. For a free, personalized insurance review, just schedule an appointment with one of our friendly agents, and we’ll help you get started.