The Buying ProcessFor many first-time homebuyers the process of buying a home is a gray area. The process is long and there are many steps that need completed before you can claim it yours. Here is a step-by-step breakdown of what you will likely encounter along the way.
7 Steps to Buying a Home
Buying a home can be a very emotional process, especially if you’ve never done it before. It’s tempting to window shop via your favorite real estate app, drive by homes or attend open houses. Pretty soon you let your emotions run the show. That cute brick ranch on the corner? Or the yellow 2-story with fenced yard?
More important than WHAT house you buy is HOW you buy that house.
So, the first thing you should do before you start the home buying process is to figure out whether owning a home is right for you. Take into consideration that if you do buy a home, there are extra responsibilities and costs that go along with owning a home – such as lawn care, home maintenance and repairs, etc.
Buying a house doesn’t have to be a stressful, draining experience. It actually can be a lot of fun, if you’re making smart decisions that focus on the long term. These tips will help you to:
- Set realistic expectations for the home-buying process
- Calculate how much home you can afford and how much to save
- Select the best real estate agent
- Define what to look for in your first house
- Know what to expect from contract to closing day
Step 1: Determine How Much Home You Can Afford
Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt. Remember that you don’t always have to put down 20 percent as your parents once did. There are loans available with little to no down payment. Don’t forget to save up cash for the down payment, closing costs, moving expenses and an emergency repair fund.
Step 2: Get Preapproved for Your Mortgage
To find the right mortgage lender it’s best to shop around. Get recommendations from your friends and family and real estate agent. Talk to at least three mortgage lenders. Ask lots of questions. Find someone that you are comfortable with and who makes you feel at ease.
Step 3: Find the Right Real Estate Agent
What should you look for in a buyer’s agent?
You may know a lot of real estate agents in your area. But keep in mind that not all agents bring the same knowledge and experience to the table. Don’t work with an amateur just because they are a friend of a friend.
You want an expert who can show you how to buy a home!
When you’re interviewing real estate agents, don’t settle. A true professional will have:
- Specific experience assisting home buyers like you
- Full-time real estate experience for at least two years
- Great communication skills
- A super-serving attitude that makes you feel like you’re their only client
- An impressively long list of sold homes every year
- Exceptional knowledge of your local market
As a home buyer, working with a rock-star agent is one of the biggest advantages you can give yourself, especially in a competitive market place.
Step 4: Go House Hunting
- Don’t compromise on location or layout. Those are two things you can’t change about the home you buy. No amount of curb appeal can make up for a truly terrible floorplan. And buying a great house in a not-so-great neighborhood is a bad plan. If you don’t love the location or layout, chances are potential buyers years from now won’t either.
- Look past the surface. Don’t let a neon pink bathroom keep you from an otherwise great home. Other buyers may not be able to look past those easy-to-fix details like décor and paint color, which could score you a deal.
- Buy the least expensive home in the best neighborhood you can afford. That gives your home room to appreciate in the future.
- Pay attention to home values in that area. Are they rising or declining? Are businesses opening or closing? You can tell a lot about home values in a neighborhood by what’s happening in the community.
- Research the school districts. Even if you don’t have kids, school districts can be an important factor when you sell.
he average home buyer looks for around 30-60 days before finding the right house. I’ve seen some fall in love with the first house they viewed, and others needed more time to find the special features they wanted.
Step 5: Make an Offer on the Home
Keep in mind that both parties want the same thing. The sellers want their home sold, and you want to buy it! Sometimes it pays to compromise on smaller details if that will move the process forward. Your buyer’s agent can give you advice about when to give in and when to hold firm.
Step 6: Get a Home Inspection & Appraisal
Most purchase offers are contingents on a satisfactory home inspection and an adequate appraisal. Often your agent will have references for qualified inspectors, or you can research online. If the inspection reveals major problems with the home, you can ask the seller to fix the problems, reduce the price, or cancel the contract.
You can also consider getting other professional evaluations, like a termite inspection or radon test, depending on the advice of your real estate agent and the age and condition of the home you’re purchasing.
Tip: Inspection time is usually the most amount of time you’ll get to spend in your new home until closing. Go ahead and start measuring things and figuring out what goes where. This may be the last time you are inside the home until it is yours, several weeks from now.
Most lenders will wait for the results of the home inspection before ordering the appraisal, just in case you decide to cancel your contract. An appraisal protects you from paying more than the home’s true value. If the appraisal comes in lower than your offer price, your real estate agent can provide the best guidance for what to do next.
Important: Your lender will now finalize your mortgage. Whatever you do, don’t open a new credit card, take on more debt, make major purchases or change jobs once you’re under contract! That new fridge for the new house can wait! Any changes in your financial situation can and will jeopardize your loan process.
Step 7: Close on Your House!
Your lender should provide you with a copy of your closing documents to review ahead of time so there are no surprises on closing day. Typically, buyers pay for:
- Closing costs and lender fees
- Homeowner’s association fees
- Homeowner’s insurance
- Title company fees
- Recording fees
If there are any confusing terms or conditions as you work through the paperwork, don’t be shy about asking questions! This is one of the biggest purchases you’ll ever make, and you should know exactly what you’re signing up for.
You will get to move in and take possession of your new home as agreed upon in your contract – either at closing or a predetermined time after that. Whatever the date, you’ve just ended the adventure of home buying and started the adventure of homeownership. Congratulations!