Between credit scores, mortgages and the physical search for a new home, home-buying can quickly start to feel like a second job. After you’ve taken care of the first essential steps, like fixing any errors on your credit report and building a rainy day fund, you can turn to this home buying checklist to make sure you stay ahead of the curve. Here are a few of the most essential and too often overlooked steps of the home-buying process:
Figure Out What You Can Afford
Before doing anything else, it’s essential to make sure that you can afford the type of home you’re looking for. If you’re in debt or have minimal savings, you’ll probably want to delay buying a home until your finances are in better shape–in the short-term, owning a home is more expensive than renting, since homeowners have to pay for things that renters typically don’t, like basic maintenance, taxes and home insurance. As far as price range goes, there are a couple of rules of thumb: some experts suggest that no one should buy a home that costs more than five times the annual household income, while others say that your monthly housing costs shouldn’t amount to over 30% of your earnings. Whatever your rule, Discover’s affordability calculator can help you figure out what is and isn’t a reasonable amount to spend on your new home.
Pre-Qualify for a Loan
Once you feel ready to buy a home, it’s important to provide your financial information to your lender of choice so that you can prequalify for a mortgage. Being prequalified will give you a clear price range for your home, and best of all, it will let every seller know that you’re serious about buying. With pre-approval, you’ll avoid the disaster of finding your dream home, only to discover soon after that you can’t afford it, and you’ll ensure that no other potential buyer has a significant leg up. It’s okay to take your time searching for the best mortgage lender, but it’s never a good idea to start looking for a home without pre-qualifying for a loan.
Find a Real Estate Agent
A good realtor can make all the difference in your search for a new home. Reach out to friends and family members to ask if they have any recommendations, and then sit down with an agent or two to see if they’re a good fit. Unless you want to spend several days researching and filing paperwork, you can’t really go without a realtor–their negotiation experience and insights on the local market make them virtually indispensable. And since they make all of their money off of sales commissions, you’ll never have to pay your agent a dime.
While you’re looking at houses, don’t forget to dot your I’s and cross your T’s every step of the way. Rather than hoping you’ll remember every nook and cranny you encounter, keep careful notes of what you do and don’t like about each home you visit by using a checklist like this one. Take videos and pictures, and conduct simple household tests: turn the shower on to make sure the plumbing works; check the electricity by switching lights on and off; turn on the AC or the heat to see how well insulated the home is. When you finally find a home that meets all of your criteria, you can enter into negotiations with the seller.
Get a Home Inspection
Whenever you’re thinking of buying an expensive used piece of property–be it a car, a house or land–it’s essential that you have an expert give the property a thorough once-over before finalizing your purchase. If your home inspector discovers any hidden problems like dry-rot, asbestos or black mold before the sale is complete, you’ll have the leverage you need to negotiate a lower price on the house or to make the current owner pay for repairs. It’s important that you personally hire the home inspector to ensure the inspection is thoroughly and objectively conducted–you don’t want to rely on an inspection that’s already been paid for by the seller.
Assuming you follow our steps, escrow and closing will be the most exciting phases of the home-buying process–all of the hard work is finally behind you, and you can look forward to moving in. Take this moment to celebrate your new status as a homeowner, because soon you’ll have to start focusing on furnishing your new digs and finding a reasonable home insurance plan.