8 steps to follow when buying a house By Creditkarma.com

If only buying a house was as easy as making a wish on Aladdin's lamp!

In fact, buying a home requires some effort. Although visiting houses can be fun, you also have to make sure you have all the financial and logistical aspects in order, one of the keys to a solid and relatively painless process. Let's review the steps to buying a home, from setting a budget and getting pre-approved to completing appraisals and inspections. Once you know the steps to buying a home, you can start your search with more confidence.

1. Review your finances and credit
2. Determine your down payment
3. Find a real estate agent and determine the area where you want to live
4. Get pre-qualified and pre-approved
5. Make an offer and apply for the mortgage formally
6. Manage appraisal and home inspections
7. Get home and mortgage insurance
8. Close on your home purchase

1. Check your finances and credit

Before you hit the streets to start buying a home, you'll want to get your financial affairs in order . That way, when you find a place you like, you'll know if it's financially possible to buy the house . Let's look at some areas of your finances that you should review before you start looking for a house.

Credit reports and scores

Credit scores and credit reports can be an important factor in the type of loan terms, including interest rates, that you may choose. Review your credit reports to make sure you know all the information they contain and that there are no errors.

Errors on your credit reports could negatively affect your credit scores. If you find any errors, be sure to dispute them . You will need to obtain a copy of your credit reports from each of the three major consumer credit reporting agencies. You can get a free copy of your Equifax, Experian, and TransUnion credit report once every 12 months at annualcreditreport.com.

If your credit isn't very good, you may want to put off buying a home so you have more time to work on your credit , which could help you get a better interest rate on a mortgage.

set a budget

Even if you haven't bought a home yet, you may want to start thinking about what your budget will look like after you buy a home. Evaluate your current spending habits and how much room you have in your budget for new expenses, such as your mortgage, home insurance, property taxes, and regular home maintenance costs. The ideal is to buy a house that you can comfortably afford .

2. Determine your down payment

Once you have an idea of ??how much you can spend on your home each month, sit down and figure out how much of your savings you want to put toward a down payment . Here are some things to consider when determining how much down payment you can afford.

• To find out how much funds you have, calculate your savings and any investments you are willing to sell, taking into account tax and other possible consequences.
• Add up estimated moving expenses, repairs, furniture, and other financial goals, and subtract that amount from your total available funds.
• You may want to subtract even more money from that figure to make sure you have an emergency fund ready in case of job loss or unexpected expenses. Being able to cover three to six months of living expenses is a good idea.
• Estimate how much it will cost you to close on the home (including fees ) and subtract that number from the total.

The amount left is the maximum available for the down payment.

3. Find a real estate agent and determine the area where you want to live

To make the home buying experience as stress-free as possible, it can help to find a good realtor, or real estate agent, to work with you and represent your interests. Your real estate agent should not only help you find a home, but also pre-approve your mortgage , help you negotiate the price, and provide you with key information about the neighborhoods you are considering. If you're new to the area or aren't sure which area is right for you, a real estate agent can help you find the right home.

Before choosing a real estate agent to work with, talk to a few of them to get an idea of ??their different styles and gain insight into their experience.

4. Get pre-qualified and pre-approved

Pre-approval and pre-qualification often represent different stages of the home buying process. Normally, before the pre-approval phase, pre-qualification is requested from a lender. In the case of prequalification, in most cases the lender will perform a basic review of your credit and finances to determine if you are likely to be eligible for a mortgage.

Typically, when you work with a lender to get pre-approved, you will need to share more personal and financial documentation with the lender. Although the documentation and other requirements can vary somewhat between lenders, with pre-approval you will usually receive a conditional offer to obtain a mortgage for a specific amount.

It's a good idea to get several offers from different lenders so you can focus on a mortgage with the best possible interest rates and terms. Paying less interest over the years can mean more money in your budget to invest in things like home repairs, gardening, or decorating.

5. Make an offer and apply for the mortgage formally

You found your dream home, made an offer, and the seller accepted it. Congratulations! Now is the time to formally apply for the mortgage. This process involves submitting documentation to the lender and taking other steps to validate the information you provided when you applied for prequalification and/or pre-approval.

6. Manage appraisal and home inspections

Once the offer is accepted, the lender usually requires a home inspection and appraisal. The purpose of the home inspection is to alert you to any significant problems with the home so that you can negotiate with the seller to resolve the issues or decide if you want to forgo the sale. An appraisal is an independent appraisal that determines the value of a property in your local market, something that lenders often want to confirm before granting the mortgage.

7. Get home and mortgage insurance

Home insurance is a type of property insurance that covers loss and damage to a residence. Most lenders will require you to have this type of insurance, and may even specify the minimum coverage you must obtain. Just like choosing a mortgage, you'll need to shop around for the best homeowners insurance policy. Once you choose your policy, let your lender know and share the necessary insurance details with them.

You may also need to purchase mortgage insurance. Mortgage insurance is designed to protect the lender in case you default on your mortgage. With certain types of unconventional loans, or if you can't put down a large down payment (usually 20%), the lender may require you to take out a mortgage insurance policy to help reduce your risk. If you don't make your mortgage payments, the underwriter will pay the lender.

8. Close on your home purchase

With all your home loan paperwork in order, you should be ready to close on your home purchase. Your lender and real estate agent will guide you through this process.

Whats Next?

Once the closing documents are signed, the house is yours! It takes a lot of work to go through the steps of buying a home, but now you can focus on making it yours and enjoying the fruits of your labor. If you have any repairs coming up, you can start looking for more information on home improvement loans .

"Call Eli Torres at (832) 430-2107, for your home buying and selling needs."

Source: www.creditkarma.com