Buying a home is an exciting and often nerve-wracking adventure. First-time buyers may be surprised at all the details the homebuying process entails, from finding a real estate agent to reading an inspection report. We’ve created a step-by-step guide to help you understand the nitty-gritty of the homebuying process.
KEY TAKEAWAYS
- Assess your financial readiness and credit score before buying a house.
- Determine your budget and calculate how much you can afford to spend on a house.
- Research and explore different financing options, such as conventional, FHA, VA, and USDA loans.
- Get pre-approved for a mortgage to strengthen your offer and streamline the buying process.
- Conduct a thorough home inspection and appraisal before finalizing your purchase.
1. Make Sure You Are Ready
If you (or you and your partner or spouse) want to buy your first home, start by determining if you are ready to make a long-term (and expensive) commitment to a house. Your short-term or long-term plans, such as starting a family or moving out of state, could inform that decision.
Next, look at your big financial picture. You’ll want to assess your financial stability, from your annual salary to how much you have saved for a down payment, to help you figure out how much home you can afford.
Check your credit score. Lenders use this score (and other criteria) to determine your mortgage interest rate. You’ll need at least 620 to be considered for a conventional mortgage, but lenders may set their minimum credit score higher. A Bank loan (more on that later) may only need a high score.
2. Set a Budget
Don’t make the mistake of buying a house you cannot afford. A general rule of thumb is to use the 28/36 rule. This rule says your mortgage should not cost you more than 28% of your gross monthly earnings, while your total debt payments should equal no more than 36% of your monthly earnings. This rule isn’t set in stone but can give you a good jumping-off place when setting a budget.
Researching home values (which drive prices) can provide insight into your local market.
Unless you buy a home with all cash, you’ll need a down payment, a percentage of the purchase price. Your mortgage (and what the seller will accept) will dictate the amount. Conventional loans usually call for 20% of the purchase price (if the buyer isn’t paying mortgage insurance), while loans only need 5% down payments .Property loans can be taken out without a down payment.
The good news? Most mortgages in the Zimbabwe call for a full 20% down. According to recent data from the Most Brokers In Zimbabwe, the range for first-time buyers is between 6 to 7%, depending on the housing market in your area.In Zimbabwe houses are usually bought out and if you are going to mortage they need proof that you are able to pay back the money succesfully11 If you put down less than 20% on a mortgage, your lender may require you to take out private mortgage insurance (PMI), which will be added to your monthly mortgage payment.
The trick to finding the right property is making an upfront wishlist. For example, is a single-family detached home with a big yard for a couple of kids and a dog your priority, or do you want a condo with shared common spaces? How much space do you want? The median size of a new single-family home in 2022 (most recent data available), is 350sqm, according to the ZimSTAT.12 Ask yourself how much house is enough for you, from the number of bedrooms to bathrooms.
Some properties have the potential for a convertible space (not listed in the square footage), like an attic, basement, or garage; others do not. Outdoor living space has become extremely important to buyers, according to the many estates agents, and homes with decks, porches, fire pits, and swimming pools may cost more.13 Decide if they are worth the potentially extra price tag.
Location, Location, Location
When buying a house, consider its proximity to essential and recreational services, like schools and playgrounds (a plus if you have or plan on having children), shopping areas, libraries, greenspaces, commuter trains or buses, and medical facilities.
Other questions to ask yourself: Do you want to buy a fixer-up and do the job yourself versus hiring a contractor, which will add additional costs? Thinking about the kind of home (and how much work you want to put into it) can help you find the right fit. And who knows, you may find your forever home or starter in the real estate market.
Find a Real Estate Agent
Working with a good real estate agent who understands the local market, will stick within your budget, and can guide you through negotiating with a seller is worth their weight in gold.
Ask your friends and colleagues for recommendations or visit a few real estate offices. When you find an agent you like (interview a few to find the best fit), you may be asked to sign a buyer’s agency agreement. This states you agree to work exclusively with the agent for a set period. Most buyer’s agents are paid on commission from the house sale so you won’t pay anything upfront.
Your agent will be a bridge (or lifeline) between you and the seller of your dream home. You want to make sure you have the right match—personally and professionally—before you sign an agreement with one. Open communication between you and your agent is crucial, and you will want to work with someone you feel is trustworthy to advocate on your behalf.
Go House Hunting
The fun part begins when you start house hunting with your real estate agent, who can show you a variety of homes based on your wishlist. While it’s fun to scroll through listings online, it is always best to walk through the house in person to look at all the nooks and crannies and feel for the outdoor space and neighborhood.
You may have to act fast in a hot housing market where houses are getting multiple offers. Make sure you’ve done your homework. Ask for a comparative market analysis from your real estate agent to see what other homes in the area have sold for, so you don’t over or underbid.
When your agent makes an offer on your behalf, don’t be surprised if the sellers make a counteroffer, a common occurrence. Your agent will negotiate if you want to bid higher or add contingencies to your offer like the home passing an inspection.
When you enter a purchase contract with the seller, it’s time to hand over your earnest money. This deposit will demonstrate your willingness to buy the home. Plan on paying 1% to 3% in most markets and up to 10% in competitive markets. Your earnest money will be applied toward your down payment but may be non-refundable if you back out of the deal.15 Make sure to have access to your funds, which will go into an escrow account until after the closing.
After you have the inspection and appraisal reports in hand, your agent (on your behalf) may be able to negotiate the price depending on the results.
If you are in a buyer’s market, you will likely have more room to negotiate the price down. If you are in a seller’s market, you may not be able to negotiate as strongly because the seller will likely have a line of potential buyers behind you.
Tips for negotiating:
- Be kind and professional—buying (and selling) a home is often emotional, but try to keep your feelings to yourself.
- Always negotiate after an inspection and an appraisal because you will have access to details on the home you might not have known otherwise.
- Be prepared to make a counteroffer if your first offers are rejected
