5 STEPS TO HOMEOWNERSHIP
Buying a home can be overwhelming and intimidating. It is a large commitment that many people tend to delay until they are fully ready to commit and settle. These are 5 steps to homeownership that we think will help you start your journey towards finding your home.
1. Understand the risks of homeownership
Before buying a house, ask yourself – Are you ready? Be honest with yourself before starting the home buying process. Homeownership is a huge commitment and requires one to be financially prepared and ready.
Some experts states that a safe timeline for home buying is 5 years in advance. You have to consider the financial obligations of homeownership:
- Paying your mortgage on time: A 10 – 30 years commitment
- Home repairs and maintenance cost
- Other housing cost: Homeowners insurance, property taxes and unexpected emergencies. Some pay for HOA fees.
It’s hard to predict the future so it is important to be prepared for what may happen. Seek advice and learn from others experience.
2. Prepare your Finances
You have to understand your financial situation and get everything prepared for homeownership.
- Set up a realistic budget of what you can afford.
- Get to know the cost and expenses. Some cost involves, home inspection (usually $200 – $500), upfront fees, closing costs ( 2 – 5% of purchase price), etc.
- Improve your credit score. Having a good credit score is essential in the approval process for loans and mortgages. The minimum FICO credit score that many lenders consider for a loan is 630.
- Save for a down payment. Typically range from 3.5 – 20% of the home purchase.
- Prepare your paperworks. Have a copy of your W2, pay stubs, tax returns, statements from all bank and investment accounts and for all outstanding debt.
3. Set up your Team
The steps to homeownership does not have to be done all by yourself. Build a trustworthy team of experts to help you throughout the process.
Find a lender that will evaluate your financials, determine what mortgage/loan you qualify for and help you secure the best financing. Then hire a real estate agent to help you look for a house that meets your needs and requirements.
4. Get Pre-approved
Getting pre-approved for a loan will tell you what the maximum amount you can borrow for a home loan. This will help you figure out what you can afford, the down payment amount, and the monthly mortgage payments. Remember to keep in mind your budget as this will help you in the long-run.
5. Start the Home Buying Process
before becoming an official homeownerNow that you have everything prepared, it is time to start looking for you new home.
First, figure out what you want. Start asking yourself questions of what your requirements are and what you consider an essential. Questions like – What type of house do you want? Do you want to have an HOA? What are your requirements for the neighborhood?
Second, make an offer. Once you find the house you like, submit an official offer to the seller. When the offer is accepted, you will start a series of house inspections, appraisal and walk-throughs.
The final step of the 5 steps to homeownership before becoming an official homeowner is closing. Sign the remaining paperworks, turn in the down payment and pay for other remaining costs. This process usually takes several days to finalize. Once everything is complete, your new journey officially begins.
A house is a large commitment and many people often delay it. The process to owning a new home can be an overwhelming and intimidating one. There are a lot of things to prepare and keep in mind during the process. It is important to understand this and be financially ready. Use these 5 steps to homeownership as a guideline to start your home buying journey.
By Shannea Sumabal
Shannea is a web designer and writer with a passion for creating engaging websites and helping clients grow their global web presence. With a background in marketing, she has an interest in creating content and enjoys any opportunity to help people learn to use digital tools and grow their own skills. When she’s not working on web design projects or blog posts, you can find her reading a good book, watching movies, and crocheting different projects.