Eight Steps to Home Ownership
1. Decide to buy.
- A home is the largest financial asset most people have due to equity and appreciation over time.
- Average annual appreciation rate nationally is 4 to 6 percent since 1977. (Note: Local appreciation rates vary greatly.)
- At 3% annual appreciation, a home purchased for $150,000 would grow to $364,000 in 30 years.
- Even at 1.5% annual appreciation, this same home would still grow from $150,000 to $234,462 in 30 years.
- Buying your first home is an emotional decision—“Home is where the heart is.”
- A home represents your personal tastes and provides a haven of stability and security for both you and your loved ones.
- Provides a pride of home ownership, because it’s yours.
2. Hire your agent. Real estate agents perform 7 main roles:
- Educate you about the market
- Analyze your wants and needs
- Steer you to homes that fit your criteria
- Coordinate the work of other needed professionals
- Negotiate on your behalf
- Review paperwork and deadlines
- Solve any problems that may arise
3. Secure financing. Six steps to financing a home:
- Choose a loan officer (or mortgage specialist).
- Make a loan application and get preapproved.
- Determine what you want to pay and select a loan option.
- Submit to the lender an accepted purchase offer contract.
- Get an appraisal and title commitment.
- Obtain funding at closing.
4. Find your home.
Define your home criteria—analyze your values, needs, and wants.
Consult with your agent to understand the rules of your market.
When viewing a home, what you consider and what your agent considers are different.
You’ll want to look for…
Layout, space, a sense of value, convenience of location to work and schools, and features and amenities.
Your agent will look for…
How the home compares in terms of size, layout, and value to other homes in the area, as well as maintenance and structural concerns.
5. Make an offer. Three components of an offer
Price—offer must reflect true market value of the home.
- Terms—six basic categories address timing and financial considerations.
- Contingencies—often referred to as “conditions” that allow you to opt out of a deal if the home has a problem.
6. Perform due diligence.
- Property inspection—exposes any structural or hidden issues.
- Home owner’s insurance policy—protects against loss or damage.
- In your inspection, it’s the big stuff that really matters.
- Cracks or crumbling in the foundation
- Cracks inside the house over windows
- Water stains in ceilings, floors, or walls
- Faded or worn shingles
- Mold issues
Preclosing responsibilities include:
Appraisal, survey, title search, and title insurance.
Keeping yourself mortgage worthy!
Doing a final walk-through of home.
Countdown to closing includes:
Getting your settlement statement, certified funds, evidence of insurance, and transfer of clear title.
8. Protect your investment.
Two keys to good home habits:
- Keep it clean. – Perform routine maintenance on your home’s systems, depending on their age and style.
- Keep an eye on it. – Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.
Tip: Keep a file of receipts for your repairs.