5 Steps on How To Buy a House in 2022

Are you ready to buy a home this year? You’ll want to know the steps before you start the process, so you can make everything go smoothly. You should first think about your financial situation and decide whether or not you’re ready to commit to a new home.

There are five main steps that you need to take to buy a house in 2022. This post will walk you through the home buying process— here’s what you should do!

1. Evaluate Your Situation 

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Before committing to an expensive mortgage, you need to make sure you can afford it, so you must evaluate your money situation. However, you must also ensure that you’re emotionally ready to move. Otherwise, you might feel rushed into making a decision.

Consider why you want to move and if you think you’ll feel happier in your new home. Then, review your finances. You want to ensure you know how much house you can afford, so you should work out a monthly budget with your expected mortgage. It’s also important to save for a downpayment unless you find a lender offering low or no downpayment loans.

Lastly, if you’re renting, you need to check that you’re still not tied up in the lease agreement. When you want to move, you’ll have to either break the lease early or wait until it runs out before moving to your new home. However, ending the lease early can result in fees and other penalties, so it’s usually not worth it.

2. Review Your Credit Score

Lenders always inspect your credit score and history, so you’ll want to make sure that you review it first. Your credit score is fundamental in buying a house because it lets lenders determine how risky you are. If you have time, you should work on improving your credit score before trying to purchase a home. 

Most conventional home loans want to see a credit score of 620 or more. Although, you can qualify with a lower score through specific organizations, like the FHA or VA. 

If you don’t know your credit history or score, you can easily find out for free online— so you never have to apply without knowing first! Many credit card companies and banks keep a log so you can access your credit score.

You want to know your credit score and report before applying for housing loans. Your credit report includes your entire history. So after reviewing it, you can contest mistakes you see, allowing you to improve your score.

3. Save for the Downpayment and Other Fees

You must first put down a certain amount of money when buying a house. The more you can put down on the loan, the better since you won’t have to pay back more interest over time. Plus, there are fees, like closing costs, that you’ll need to cover. It can feel like an overwhelming amount of money to save, but knowing how to do it helps immensely. 

Ideally, you want to put down 20% on the house. Lenders will view you as less risky, and you also avoid paying additional costs in the form of PMI or MIP mortgage insurance. This amount even offers more equity faster and reduces the number on your monthly mortgage bill.

However, you’ll want to know how to start saving first. Many people keep their tax returns for the home down payments in their savings accounts. You can also save any work bonuses or gift money for it.

One of the easiest things you can do is set up an automatic transfer to your savings account every two weeks (or how frequently you get paid). The bank moves the money for you, so you don’t have to remember to do it. Although, it’s good to set up a special savings account for the house so you don’t feel tempted to touch your savings.

4. Research Your Mortgage Lender and Loan Options

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Next, you must spend some time conducting research into your options. You’ll want to ensure you choose a reliable lender and a loan that works best for you. If you pick the first one you find, you might not get a good deal. 

Some lender options include banks and credit unions, although you can access an infinite amount of online lenders. You should also feel comfortable talking with the lenders and asking them any questions that you might have.

Then, try to find a loan with a low-interest rate— the lower, the better! Even a tiny 1% difference can save you from spending thousands of dollars more in interest over the mortgage. 

In short, you never want to jump in without first checking all of your lender and loan options. Make sure to keep notes and consider all of your needs with the loan.

5. Seek Out Preapproval

After you’ve found the lender you want to go with, you should start the preapproval process. You’ll need to do a credit check and provide the lender with information on your income and what home you’re looking to purchase.

Then, you’ll receive a preapproval letter. This letter will give you more leverage on the housing market because sellers will consider you over those who don’t have one yet. The letter shows sellers that you’re more serious about buying their home.

Plus, getting a preapproval letter will let you know how much you can afford on the house. The lender will ask you multiple questions to determine how much you can reasonably pay on the mortgage.

Closing the Sale!

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After you buy the house, you’ll need to pay the closing costs and sign a lot of paperwork. However, homeownership is always worth it in the end. No matter your reason for moving, you’ll enjoy finally having your own house.

To summarize, you’ll want to assess, research, and review everything involving home buying. It’s also best to start saving earlier than you think to cover the down payment, among other expensive fees.