10 home buying steps you should follow
Confused on how to buy a house? That’s understandable—searching for and buying a new home is a complex process, as well as the largest investment you’ll probably ever make!
The following home buying steps, along with the guidance of an experienced Indianapolis Realtor like Kristie Smith and the Indy Homes Team, will ensure you have the keys to your new home in hand in no time, with less hassle and stress.
Home buying step 1: Find a great Indianapolis Realtor
Naturally, finding an experienced, competent Realtor who knows Indianapolis should be your first step. She will go to work for you from the get-go and add value to every step of the home buying process, from scheduling showings to negotiating the best price and terms for your new home.
Some qualities to look for in a Realtor:
- Experience. Is she licensed? What is her sales volume? Does she know the areas of Indianapolis you’re interested in?
- Patience. No doubt you’ll have many home buying questions, and it may take time to find the perfect place. A good Realtor won’t rush you.
- Communication. Does she take time to explain things? Does she listen? Does she return phone calls and emails?
Ask your friends and family for referrals, or check out services like Angie’s List for reviews of Indianapolis Realtors. Kristie Smith and the Indy Homes Team earned the Angie’s List Super Service Award in 2009, 2010, 2011, 2012, 2013, 2014 and 2015.
Home buying step 2: Get organized… and get prequalified
Developing a plan can help you focus and organize each step of the home buying process. Tip: You might want to set up a binder with sections for house hunting, home financing, service providers, etc. and make lists of your home buying questions to review with your Realtor.
Your Realtor can refer you to a mortgage counselor so you can be prequalified for a home loan. Getting prequalified helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28 percent formula (your monthly mortgage cannot exceed 28 percent of your monthly income) in approving your loan.
Home buying step 3: What are your wants and needs for your new home?
You’ve been searching online Indianapolis real estate listings and have an idea of what you’d like in your new home. Now it’s time to prioritize. Focus on the things that are the most difficult to change, like location, school district, number of bathrooms, etc. Stuck? Your Realtor can help you develop realistic expectations for the home best suited to your needs… and wants.
Establishing your criteria early on with the help of your Realtor will save time looking at inappropriate homes and may keep you from buying a home on a whim. And, if you discover that you can’t afford all of the amenities you’d prefer, you’ll have already decided what is most important to you in a new home.
Home buying step 4: Look for value
As you consider your options, the classic rule of buying the worst house in the neighborhood still applies. Buy with an eye towards improvement and adding value to your new home. An experienced Realtor can often suggest simple, imaginative changes that could make a home more suitable for you and improve its utility and value.
The adage, “Make money buying a home, not selling one,” will keep you focused on the long-term importance of your investment.
Home buying step 5: Shop for a home loan
With thousands of lenders competing for your business, one of the biggest decisions to make before putting a contract on a home is how to finance the purchase.
Creating a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker) can help you make apple-to-apple comparisons and find the best option for you.
Home buying step 6: Decide on a home loan and understand costs
Which type of home loan fits your situation and needs?
- ARM—If you’re purchasing your first home or a “transitional home”—one you plan to own for a short time—an ARM may be best. If you choose an ARM, and rates are increasing, the index should be based on the cost of funds index. If rates are decreasing, the index should be based on treasury bills. Make sure you understand the teaser rate and what the real rate will be.
- Fixed rate—If you’re purchasing your dream home or one in which you plan to raise your family, then you probably will want the stability of a fixed rate mortgage.
Your Realtor can help walk you through these options. If you lack the necessary down payment, she can suggest ways to accrue additional funds, as well as explain alternative financing methods.
Whichever loan you choose, make sure you do the following:
- Scrutinize all closing costs. In advance of closing, your Realtor will obtain closing figures for your review and answer any questions you have.
- If you are required to have a mortgage escrow account and private mortgage insurance (PMI), make sure you understand the terms and cancellation procedures.
- Make sure there are no prepayment penalties so you can use an accelerated mortgage plan, which can shorten the term of your loan with just small extra principal payments. A good plan can save you tens of thousands of dollars in interest costs!
Kristie Smith and the Indy Homes Team can direct you to a reputable mortgage broker and ensure you understand all of the costs involved in buying your home.
Home buying step 7: Sign a contract that protects you
Make sure that the contract you put on a house allows you to arrange financing, inspect the home and negotiate any problems that you uncover. Your contract should minimize any potential legal battles and let you rest easy.
Home buying step 8: Put yourself in the seller’s shoes
Take time to understand the reasons the seller bought the home, his reasons for selling, and the home improvements he has or has not made, and you’ll be in a better position to evaluate the home and negotiate a better deal.
In the end, the steps of the home buying process exclude the professionals and come down to the individuals buying and selling the home. A closer look at the seller may help you decide whether and for how much to buy the home.
Home buying step 9: Get a quality home inspection
It’s a fact: more people pay for inspections before buying used cars than when making the biggest investment of their lives—their homes.
Paying for a qualified home inspection before you buy a house isn’t just spending “a little extra” for peace of mind—it’s absolutely essential if you don’t want to be surprised with an enormous bill for major home repairs.
Your Realtor can provide you with a list of qualified home inspectors in the Indianapolis area.
Home buying step 10: Purchase a home protection plan
A home protection plan, or home warranty, will protect both you as a buyer, as well as the seller. A home protection plan is a service contract, normally for one year, that protects a new homeowner against the cost of unexpected repairs or replacement on major systems and appliances that break down due to normal wear and tear.
This type of warranty does not overlap or replace homeowner’s insurance and can save you lots of headaches, as well as put the seller’s fears to rest. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage. For example, if a hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall.