Home Buying Process — Step One

This is the first in a series on the home buying process. 

Rising interest rates mean the winds have shifted a bit in the Greater Sacramento real estate market. However, buyers in today’s market have some great opportunities for a home at a reasonable price without as much competition. Conditions are right for first-timers getting into the market, but it can be difficult to know where to start.

Buying a home is one of the most important financial decisions you’ll ever make. There are countless details to consider, from financing to moving, not to mention choosing a house itself. But new buyers don’t have to go it alone. A qualified agent can help you through the process from beginning to end.

Choose an Agent

Choosing the right agent is one of the most crucial first steps in the home buying process. Sure, browsing homes for sale online is fun and exciting, but when it comes time for open houses and showings, you’ll need an agent by your side. Agents share insider information with one another, so they’re often aware of homes for sale before they hit the market. They can show you all available housing in the market, not just listings from their own brokerage. Because they are area experts, they know about up-and-coming neighborhoods and can let you know whether a home is priced right. Finding an agent who understands your needs and wants can help save you time and money in the long run.

Secure Financing

Getting your finances in order is another important first step in buying a home, and doing so will allow you to determine how much house you can afford. If you haven’t already, secure money for a down payment. Traditionally, down payments are about 20 percent of the home’s purchase price, but they can be as low as 5 percent for some lenders. If you don’t have the funds for a down payment, there are programs that can help, especially for first-time home buyers and veterans. In addition, be sure you have money in savings — it’s recommended to have an emergency fund amounting to between three to six months of living expenses.

Before buying a home, you should also check your credit score and address any inconsistencies. Your credit score, combined with your income and assets, will determine how much you can afford if you choose to finance your purchase. It’s also important to determine how much you want to spend. You may have other expenses and may not want to be saddled with a huge mortgage payment each month. If you are financing your home, get pre-approved before you start shopping. Desirable homes can go fast, so having a pre-approval letter can give you a leg up.

Determine Your Needs

Before you start shopping, it’s important to determine your needs and wants. This can help you narrow down your search. First, consider your homeownership goals. Are you hoping to put down roots or will the property simply be an investment? Are you looking for a home that will accommodate a growing family? Do you want the amenities that come with planned communities or townhomes, such as communal swimming pools or gyms? Where do you see yourself in five, ten, or twenty years? Do you need a yard for pets? Do you prefer a quiet suburban neighborhood or a vibrant, urban area? The questions are endless.

Another thing that can help is to make a list of “must haves” and “wants.” For example, the minimum number of bedrooms is typically a must, as is the number of bathrooms. A single story may be a must for those with mobility issues. It’d be nice to have a remodeled kitchen, but it may not be a deal breaker. The same goes for other amenities such as swimming pools and outdoor kitchens.

It’s not enough to be financially ready to purchase a home. You should also consider whether you’re emotionally ready. Owning a home is a commitment, one that requires not just money but also time and effort. Home repairs and maintenance can take up a lot of free time. If you have a hectic work schedule, take frequent vacations or have other obligations such as school or caretaking, it may not be the right time. It may also not be a good idea if your work requires you to move frequently or if your job is less-than-secure.

That said, home ownership is one of the most rewarding and fulfilling roles you can take on. More security, more privacy, a stronger sense of community and pride in ownership are just a few of the benefits — not to mention building equity and wealth.

Once you’ve made the decision to buy a home and have put all the pieces in place, it’s time to start shopping! Our next post will cover the house hunting process, making an offer and negotiations.