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What Do You Need To Buy A House in 2020?

What Do You Need To Buy A House?

As a realtor, one of the most common questions I get asked is, "What do I need to buy a home?" There are so many steps involved when buying a home; it's not uncommon for first time home buyers to completely overlook one or more of them.

This article will cover all of the critical things that are required for most home purchases. Other requirements may come from your mortgage lender, such as the previous year's tax returns, employment verification, credit scores, etc. In this article, I'll stick with the most critical items that typically cover the amount of money you'll need. I also created an infographic at the bottom of this post that you can save and use as a reference.

Breakdown Of Items Needed To Buy A House

#1 What Do You Need To Buy A HouseMortgage Loan Pre-Approval

The first step in buying a home is to acquire the money to buy a home. For most people, that means getting a mortgage. A mortgage is a type of loan used to buy a home. So how do you get a mortgage pre-approval?

Colorado Springs Mortgage Pre-ApprovalThere is no end to the number of places you can go online to get a mortgage pre-approval. In Colorado Springs, we have some excellent mortgage lenders who we regularly recommend. The right mortgage lender will help you understand all of your borrowing options and make the whole process as easy as possible.

Once you have found a mortgage lender, they will run a credit check, ask you some questions about your current financial situation, and determine your eligibility based on these answers. They will work with you throughout the buying process once you have found a house. They will also issue you a pre-approval letter to share with Realtors, buyers, and home builders. This letter lets everyone know that you can purchase a home within the price range recommended by the lender.


 

#2 What Do You Need To Buy A HouseEarnest Money

Earnest MoneyEarnest money is money that you have to provide upfront when you buy a house. Think of earnest money as your way of saying, "I EARNESTLY want to buy your house, so I am putting this money with my offer." It's kind of like a deposit to prove that you are serious about purchasing the seller's home.

In Colorado Springs, the earnest money is usually around 1% of the purchase price of the home. If all goes well and you get to the closing table with the seller, that money is credited back to you at closing. If you terminate your sales contract within your inspection or loan objection deadlines, you will typically receive your earnest money back. If you are past those dates, it's much harder to get your earnest money back, if at all. Earnest money is usually held by the title company or listing agent's office.


 

#3 What Do You Need To Buy A HouseMoney for Down Payment

Downpayment to purchase a houseOnce you talk to a mortgage lender about your pre-approval, they will be able to tell you what amount you need as a downpayment to purchase a home. There are different loan types, like VA loans or USDA loans, that do not require a down payment and offer 100% financing. You will need to check with your loan officer to determine if you are eligible for this type of loan product.

The most common downpayment amount required is usually between 3% to 5% of the purchase price. Some lenders will require a 20% down payment if you already own a home and are looking to purchase a second home. In Colorado Springs, most loans above $417,000 will require a minimum down payment amount of 10% down. There are many different options available that your lender will help you navigate. If you need a recommendation for an excellent local loan officer, contact us, and we can help you with that.


 

#4 What Do You Need To Buy A HouseMoney for Closing Costs

Mortgage Loan CostsWhen you purchase a home with a mortgage, your mortgage company will have fees that they charge for originating and generating your loan. These can be anywhere from 1% to 4% of the loan amount, depending on the type of loan that you choose. Talk to your loan officer to get a reasonable estimate of what your closing costs might be for your loan type.

It is also possible to ask the seller to contribute to your closing costs when you write the purchase contract. This option will be dependent upon the market that you are in and the demand for homes in your price range. If homes are selling in a day or two in your area, it's challenging to get a seller to agree to offer money towards your closing costs. I typically advise finding a way to save up that money just in case you find the perfect house, but the seller will not offer any closing cost assistance.


 

#5 What Do You Need To Buy A HouseMoney To Hire A Home Inspector

Money To Hire A Home InspectorOnce you have found a home and you have an executed contract with the sellers, you'll need to hire a home inspector. In Colorado Springs, we usually write a 7 to 10 day inspection period that allows enough time for homebuyers to hire a home inspector to make sure that there are no significant issues with the home.

The average cost of a home inspection can be from $250 to $600+ depending on the size of the home. Depending on the type of property you are purchasing, you may also consider hiring radon, septic, well, structural, mold, pest, or methamphetamine inspection. Your real estate agent will help advise you on these options and also help you determine the extra expense of these additional inspections. If you require multiple inspections, make sure that you write enough time into your Inspection Deadline to complete all of them.


 

Final Thoughts

Buying a home is a huge commitment. It's not like buying any other item. You can't take it back later if you have buyers remorse. For this reason, it's wise to research as much as you can before buying a home. Research your loan officer and Realtor online before committing to work with them. If you are skeptical, then find a new professional to work with. Don't move forward until you have all of the proper pieces in place. Once you have the five things taken care of, along with an adequate loan officer and Realtor, then you're ready to buy a house.

A Good Realtor Makes The Process Very EasyYour Realtor is your most valuable asset when buying a home. They can help you with each of the five steps above and help guide you through the entire buying process. They are your "go-to" contact for almost every question that you may have. If you are feeling intimidated by the process, let your agent know. If they are not helping things make more sense, let them know. You should feel like you are entirely informed of all your options and have an advocate in your corner who fights for you when you need them to. An excellent Realtor will make the complicated process of buying a house feel like a simple transaction. They do a lot of work behind the scenes, so be sure to thank them when they do an excellent job for you. :)

Now that you are prepared for these five critical things that you need to purchase a home, you can be sure that you have what it takes to get into the home of your dreams. Happy house hunting!


What Do You Need To Buy A House Infographic


Andrew Fortune

Hi! I'm Andrew Fortune, the founder of Great Colorado Homes and the creator of much of the content on this website. Thanks for taking the time to read this article. Please feel free to share this article with someone who might benefit from it. I appreciate your time here on this site and am always open to suggestions and ideas from our readers.


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