According to realtor.com, homebuyers can expect to compete for home offers because nearly half as many homes are on the market now as this time last year.
Buying your first home can be overwhelming. But if you break it down into simple steps, you can feel more confident and enjoy the excitement of the process rather than the stress. Here’s what you can expect when buying a home in Washington D.C., Maryland, Virginia, New Jersey, or elsewhere.
1. Save up for a down payment and closing costs
Before you fill out any paperwork, start saving up for your down payment. Most traditional home loans require 20% of the home’s purchase price upfront, while other types of mortgages, like an FHA loan, require much less.
Regardless, you’ll want to make sure you have a big chunk of money set aside for the purchase of your future home. The more money that you put down upfront, the lower your monthly mortgage payments will be. You’ll also need money to pay for your closing costs if you’re not financing them into your mortgage. As a general point of reference, closing costs are typically 2-5% of your loan amount:
- The average closing costs for a home in Maryland are $11,708 per Business Insider.
- The average closing costs for a home in Virginia are $6,186 per Business Insider.
- The average closing costs for a home in New Jersey are $7,823 per Business Insider.
2. Clean up your credit
Check your credit report and credit score before applying for a mortgage loan. By law, you can get a free copy of your credit report every 12 months at annualcreditreport.com. Be sure to review your credit report for any errors and dispute them early on in your home buying process. It can take time for credit bureaus to change incorrect information, so cleaning up your credit may take a while. Also, it's a good idea to avoid applying for any new credit while you're going through the home buying process. Learn more about your FICO® score and how to improve your credit score from Andrews Federal Credit Union.
3. Determine how much home you can afford
Before you start shopping for houses, determine your budget to a better idea of what you can afford. Use Andrews Federal’s mortgage calculator to get started. Knowing your budget will give your real estate agent a good idea of your price range. Remember, you may get approved for more than you can realistically afford since most calculators and mortgage companies don’t ask about or factor in the cost of living. It’s wise to add a dose of common sense to any mortgage payment decision to ensure you can comfortably afford your monthly payments.
4. Get pre-approved
Another step you’ll want to complete before house shopping is to get pre-approved or pre-qualified for a home loan. Having a pre-approval in hand will show sellers that you are a serious potential buyer, which can help in the negotiation process. Andrews Federal can help you get pre-qualified for a mortgage here.
5. Shop for a home within your budget
Now comes the fun part: shopping for your dream home. Before you begin, determine which amenities are non-negotiable for you and which aren’t. It’s also important to consider the neighborhood and quality and local school districts. Ask your friends, family, or an Andrews Federal lending professional to refer an excellent real estate agent who can help you navigate the process. Or, use the Andrews Federal Home Center to point you in the right direction. The Home Center makes it easy to find an experienced agent in your area and view available properties.
6. Make an offer
When you find a home that you would like to buy, it’s time to make an offer. There may be some wiggle room to negotiate on the price. However, the Covid-19 pandemic created a massive desire for more space among existing homeowners, which has driven demand through the roof. The housing market remains a seller’s market, so we suggest offering a little more than the asking price to avoid losing in a bidding war.
7. Put down a deposit
Once you and the seller have both agreed to the home’s purchase price, you’ll need to put down a deposit to show you are serious and to secure the house. This money will go into an escrow account to pay certain property-related expenses.
8. Submit your mortgage application
To finance your home, you’ll need to submit a mortgage application. Andrews Federal offers various mortgage options for first-time homebuyers and seasoned experts including, fixed-rate and adjustable-rate mortgages, FHA loans, VA loans, Jumbo loans, and more. Loan payment terms can vary, but typically they range from 15 to 30 years for most loan types. Talk to an Andrews Federal lending professional to determine which loan type would be ideal for you and your family.
9. Get a home inspection
You’ll need to have your home inspected before you can move in. Home inspections are a great way to figure out if the house has any major defects before you agree to the sale. A home inspection can also help with your negotiation, as many buyers ask sellers to fix things or lower the price based on the inspection results. Once all terms are met, you will need to deposit the funds, and the seller will need to transfer the deed. Depending on where you live, this process may vary.
10. Move into your new home
After you’ve closed, you will be handed the keys to your new home. Then, the fun can begin. Start packing or seek out a moving company to do the heavy lifting. Don’t forget to pick a date and send invitations for your housewarming party!
Buying a home is a significant milestone and should be handled with care. Make sure you find friendly and knowledgeable people along the way to help make your home buying journey as seamless as possible. If you’re ready to apply, go here.