10 Steps in the Home Buying Process
Looking to buy your first home? There are several steps first-time homebuyers needs to take before they can become a homeowner. This infographic will walk you through the ten steps to buying your first house and getting a mortgage.
- Step 1: Save up for your down payment and closing costs. Traditional home loans require 20% of the home's purchase price as a down payment for a mortgage. FHA loans require much less, but the down payment percentage required is based upon your credit score. Here are the down payments needed according to the 2017 guidelines: 10% down payment needed for scores of 500-579. 3.5% down payment needed for scores of 580-850. 500 minimum credit score needed to qualify for an FHA loan. Do the math to buy a $200,000 home, you'll need to put down 20% for $40,000, 10% for $20,000, or 3.5% for $7,000. Closing costs are on average 2-5% of the purchase price of a home. For a $200,000 home, you'll want to save: $4,000-$10,000. Down Payment and closing costs snapshot: down payment for a traditional home loan is $40,000. Down payment for an FHA loan is $7,000-$20,000. Closing costs for a traditional home loan is $4,000-$10,000. Closing costs for an FHA loan is $4,000-$10,000. Totaling $44,000-$50,000 for traditional home loan and $11,000-$30,000 for an FHA loan.
- Step 2: Clean up your Credit. Get a free copy of your credit report and review it for errors. By law, you can get a free copy of your credit report every 12 months at annualcreditreport.com. Cleaning up your credit can sometimes take a while for the credit bureaus to change the incorrect information. Top 3 credit report errors: First, identity error, such as wrong name. Second, Incorrect account details, such as accounts being closed or open, or incorrect credit limits. Third, Fraudulent account.
- Step 3: Determine how much home you can afford. Before you start shopping for houses, you'll want to figure out your budget to get a good idea of how much home you can afford.
- Step 4: Get pre-approved or pre-qualified for a mortgage. Before house shopping, get pre-approved or pre-qualified for a home loan to show sellers you are serious.
- Step 5: Shop for a home within your budget. Now you can start shopping for your new home. Look online and find a real estate agent so you can start seeing homes in person. Be sure to know your wants, needs and budget.
- Step 6: Make an offer on the house you want When you find the home of your dreams, now's the time to put in an offer. Make sure you know what other comparable homes have recently sold for, too, so you can negotiate accordingly. 5% is the minimum amount to ask below the listing price.
- Step 7: Put a deposit down. Once you've come to an agreement with the seller on the home's purchase price, you'll need to put down a deposit to secure the home. This money will go into an escrow account.
- Step 8: Submit your mortgage application. If you already got pre-approved and pre-qualified, you'll simply finish up the application that was started during that process.
- Step 9: Prepare for closing. Before you can move in, you'll need to get a home inspection, and then you can close on your new home.
- Step 10: Move into your new home. Congratulations, you did it! Now you can move into your new house. Don't forget to throw a housewarming party.