STEP 1: DETERMINE HOW MUCH YOU CAN AFFORD

Before you start looking through listings in the hope of finding your dream home, conduct a personal audit of your finances. Taking a serious look at all of your finances will prepare you for this huge step. You will be better able to know how much of a house payment you can afford and if you can cover the ongoing expenses of owning a home. A self-audit of your finances includes these three steps:

How much savings do you have? Before you consider purchasing a home, you should make sure you have a solid savings plan in place. You also need to have two to four months of living expenses already in savings. These funds can help pay some of the initial expenses like a down payment and closing costs. Lenders will want to see that you are responsible and have a savings plan that works.

What does your current spending look like? It’s important to know how much you spend every month. You also need to know exactly where your money is going. This step is essential for calculating how much of a mortgage payment you can afford. Make sure to account for all of your expenses, including everything from utilities to groceries and clothes to student loans. Count retirement funds, regular savings, entertainment, and kid’s activities.

STEP 2: FIND A REAL ESTATE AGENT

Most people work with a real estate agent when purchasing a home. They are your representative and will look out for your best interests. An agent will help you find homes with the features you want, help you get showings, and help you make offers and negotiate. You generally do not have to pay for a Realtor’s assistance. The seller pays them a commission, usually about 3% of the purchase price. Real estate agents know how the process works and offer their help as you work through the steps of making the purchase. Some of the ways a real estate agent can help you when purchasing a home include:

Knowledge of Market Trends: Agents identify home value trends, buyer demand, the overall state of the market, and new developments.

Price and Value: An agent knows what a home is worth and can help you with a reasonable offer price.

Negotiations: They will know when a lower price is appropriate and argue to negotiate prices based on repairs needed or other contingencies.

Insider Tips: An agent is familiar with localities and can offer tips about schools, neighborhoods and how those may influence property value.

Professional Recommendations: If you need a lender, contractor, attorney, or another vendor, an agent will make referrals.

Experience: The agent is familiar with the process and brings their expertise to the table to help handle the process and oversee paperwork to ensure you stay ahead of due dates.

STEP 3: OBTAIN A PRE-APPROVAL FOR A MORTGAGE

Getting a pre-approval from a lender removes a lot of the hassles from the home buying process.

Your lender will provide a pre-approval letter stating how much you are approved for. This will be based on your credit standing, income, and present assets.

The pre-approval letter will help your agent find homes within your budget and proposed loan amount.

STEP 4: START VIEWING HOMES WITH YOUR REAL ESTATE AGENT

The agent will recommend properties that have the features you want and are within your budget. Don’t get discouraged if you don’t find the perfect match right away. You may need to look at several options before finding the one that is right for you.

Most of the time, the agent will have a handful of homes for you to preview to see if you like them or not. Be patient; your agent will help you find what you want.

You may see several homes so it’s a good idea to take photos or videos so you can remember each one.

STEP 5: MAKE AN OFFER

Once you are sure of the home you want to buy, work with your real estate agent. They will help you negotiate an offer based on the fair market value of comparable homes in the same neighborhood. When you and the seller agree on a price, the home goes into escrow while the home buying process gets completed. Don’t get discouraged if the offer doesn’t work out. Sellers have the option of rejecting or accepting offers. Sometimes, several offers are made until successfully closing on a home. Once you make an offer, several things can happen.

The seller may accept the offer, and you’ll begin the process of finalizing the paperwork to complete the purchase.

The seller may reject your offer.

The seller may counter back with another offer. They may not like the price or some other part of your offer. They will request changes and then accept the amended offer.