A Roadmap to Homeownership
Homeownership in Minnesota
With interest rates low and predicted to go lower this year, many of you are thinking seriously about buying a home. Am I right? Don’t be shy. Raise your hand if you want to buy a home this year. Wow, look at all the potential homeowners!
Your enthusiasm is inspiring! Buying a home in Minnesota is an adventure. However, before you dive into the housing market, you need a plan. Buying real estate is a journey, and the road to homeownership is rarely a straight line from point A to point B. Often the route is a winding mountain road with hills and valleys, twists and turns but worth the effort to reach the top.
Buying a home in today’s market, especially for first-time home buyers, is challenging. But having your path mapped out from start to finish will help you avoid obstacles and delays. Completing each portion of the journey before proceeding to the next will build confidence in the process. Here are my 7 Steps for a successful home buying experience.
1. Organize Your Finances
2. Shop For a Mortgage and Obtain a Pre-Approval
Now it’s time to find a lender. Of course, your first instinct is to secure a mortgage at the lowest possible rate. Don’t get me wrong that is extremely important. But customer service also matters. The variety of programs offered will make it easier to find a loan that meets your particular financial situation.
A mortgage banker will review your financial documents and run your credit. Then she can tell you how much you can borrow, the rate, terms, and estimate of closing costs. You are going to gather two years of tax returns, 1-2 months of pay stubs, 1-3 months of bank statements, other asset documentation, debt statements, a copy of your driver’s license, proof of residence of the last two years for your appointment.
Hopefully, you will walk out with a preapproval so you can start shopping for a home.
3. Choose the Best Real Estate Professional
There is not one good reason for a buyer not to work with a professional when buying a home. Find one with experience, excellent online reviews, and a personality that is simpatico with your own and let him or her be the guide on your home buying journey.
The best real estate agents will help you avoid the bumps and the potholes in the road as you maneuver through the process of buying a home in several ways. By being an excellent resource for other professionals you may need along the way, by answering your questions about the buying process and the community, by drafting your purchase offer, negotiating terms, and working as your team leader every step of the way to the closing table, the professional’s service will be invaluable.
We think choosing an agent is so important; we wrote an entire article on how to choose the best Realtor.
4. Shop For Your New Home
5. The Offer to Purchase Agreement
If you haven't already, now is when you pat yourself on the back for your wisdom in choosing a seasoned professional. Your Realtor, using comparative market data, will help you craft an offer that is competitive yet protects your interests as a buyer. Your agent will submit your offer to purchase to the seller, along with your approval letter from the lender and earnest money. Then you wait.
While you should absolutely be excited, also be aware that if you love the house, chances are someone else does too. At the least, your offer will most likely be countered or even rejected in favor of a better one. If it doesn’t work out, be ready to pick yourself up and carry on with your search. It’s not unusual in today’s market to lose out to a higher bidder on a desirable home.
6. Time for the Home Inspection
Things are now getting serious. Before you agree to a long-term commitment to this house, you want to look into all the nooks and crannies with a professional inspection. It is crucial to hire an inspector that is thorough and honest. You can ask your agent for a recommendation.
You should be present at the inspection. It would also be a good idea to bring your agent if possible. You can ask questions during the process, and the inspector may also point things out to you. Warning: don’t lose a home you really want by demanding the seller address every minor flaw or repair. Remember, no house is perfect so expect there will be at least minor issues. If there is a significant problem that comes to light in the inspection, you and your realtor can discuss the next steps.
7. Complete the Loan Process and Attend the Closing
You have worked through any renegotiating post-inspection and have a signed sales contract. Hurray! You pass the document on to your lender, and events can proceed quickly from this point forward, providing you don’t hit a bump in the road. Your mortgage banker will order an appraisal, may ask you to update some personal documents, and request you shop for homeowners insurance and a title company.
Once the appraisal is complete, your loan moves to the underwriting process, where there will be a deeper dive into your credit and finances. The underwriter may also ask for more documents or have questions. Once you receive approval on the mortgage, you will receive a confirmation of the closing date and a complete breakdown of costs and the amount you will need in a certified or bank check. A day or two before closing, you and your agent will do a final walkthrough of the property.
The day arrives and you are soon to become a homeowner. The closing is like a meeting with a few people sitting around a large table. Title Insurance, check. Homeowners Insurance and Certified Bank draft, check. You're ready! You’re excited. Prepare to sign your name many times and then you will receive the keys to your new home.
Please check out these other posts on the topic of buying a home.