Home Buying Process

The Home Buying Process

While the homebuying process can seem intimidating, knowing what to expect before you begin the process can lessen some of the anxiety for you. We will educate you throughout the process so you will never feel overwhelmed.

Because we want to help you be successful in your home search, we’ve written this step-by-step guide to the home-buying process. Follow these steps to enter your home search prepared and ready to make an offer on your dream home.

 

Step 1: Check your Credit

Before contacting a lender or an agent, it is smart to check your credit report to see what your options are. You can get one free credit report a year, and this will determine what the interest rate on your mortgage will be, along with what kind of loans you can apply for. A good rule of thumb is that a good credit score is 720 or above, while the minimum to secure a loan through FHA is 580 or over.  But even at 620, you can typically get a conventional loan. We will introduce you to our preferred lenders who can provide an accurate estimate of your payment and closing costs after asking just a few questions.

 

Step 2: Decide on a Budget

It is important to find out how much you are willing to pay. Make sure to include mortgage payments, taxes, and insurance into your budgeting. And in some cases, PMI (Private Mortgage Insurance) will be required without at least 10% down, so DON’T rely on the Zillow monthly payment estimate – it is not accurate to each individual borrower.  Even if you qualify for an expensive house, you will probably not want to max out your housing payment for the long term.  We always say, “Don’t be house rich and cash poor.”  You must still have money to enjoy your life!  Remember, your housing cost should typically be no more than 35% of your income, and it cannot be more than 50% of your income for most loans.

 

Step 3: Find an Agent

Buying a home is one of the biggest decisions you will make in your life!  It is very important that you trust your agent because they will be your lifeline through the home buying process. Check reviews online or ask your friends and family for a referral, and make sure to ask a lot of questions and meet with a few candidates so you can find out your best fit.  Note that good agents will not push you to buy a home!  The best agents will provide insight on the local market conditions, the condition of the home, and potential pitfalls for each and every home that you tour.

 

Step 4: Get Pre-Approved

Getting pre-approved for a loan is critical to get your offer accepted once you’re ready to make offers. No seller will even consider offers without a pre-approval letter or proof of funds like cash in the bank or in an investment account.  For a pre-approval, a lender will pull your credit information and then give you a letter stating how much they would be willing to lend you.  The best lenders will also provide you with a fees worksheet that shows you all of the potential closing costs and monthly mortgage costs. This letter gives the sellers some confidence in you because they know for sure that you will be able to afford their home. Take a look at standard home loan options and preferred lenders here.

 

Step 5: Start Looking at Homes

By now, you’ve done all of your financial prep and talked to an agent, and you probably have a pretty good idea of what kind of house you would like and in what area. Your agent will also help you greatly, as they will have a good knowledge of properties coming on the market and homes like the ones you are looking for.  And if you’re not sure what home or area you want, your agent is there to help guide you through the process. Note that showing homes and making offers is only one of many steps to purchasing a home. A good agent will be there for inspections and will negotiate for any repairs or credits, will help negotiate if the appraisal is not at value, and in the end, they will be your moral and financial guide to help you make sound decisions.

 

Step 6: Make an Offer

Once you’ve found a home that you are excited about, your agent will help you decide on an offer based on the listing price of the property. Your agent will understand how to craft your offer, based on the current market conditions, what contingencies to include in the offer to protect yourself, how much money you need to put into escrow, and what additional “chips” you can put on the table to get your offer accepted. Also, if you have a home to sell, this would be the time when you’re getting it ready to put on the market.

 

Step 7: Home Inspection

This is an important time for negotiating. If the inspector finds any unseen defects, your agent will present them to the seller to try and bargain for repairs or credits. Also, this is a good time to measure the house and have your family or contractor come to the home.  After the inspection contingency is completed, you will have no other opportunities to negotiate the condition of the home UNLESS the appraiser from the bank calls out any repairs, which is more rare. And the inspections contingency is also an opportunity to walk away from the property if the seller is not willing to negotiate repairs or credits.

 

Step 8: Get Insurance and Utilities

If you have owned a home already, you will only have to call your insurance agent and let them know you’re buying a new home. But if this is your first home, you will need to get homeowner’s insurance. Lenders require insurance, and it is a critical part of protecting your investment. If you are a cash buyer, you must still obtain homeowners insurance – once you sign the docs and own the home, you will be responsible for any repairs, so insurance will protect your investment. You will also want to make sure you have utilities set up for your move-in date because you will not want to arrive, ready to move in, only to find that you have no electricity.  Your agent will communicate with the listing agent prior to closing to get the utilities information so that you can easily make the transfer.

 

Step 9: Close on Your Home

This is arguably the most important day and most exciting in the process, and your agent will be with you to help everything go smoothly. Before closing, you will complete a final walkthrough of the home to ensure it is in good order. At closing, you will read and sign all of the papers and policies that go along with officially owning the home.  This is a good time to ask any final questions before you sign the papers.

 

Step 10: Move In!

You have officially reached the finish line by step 10! Your contract will specify the exact date that you can move in, and after that you can officially make your new house into a home. Now that you’re settled in, let’s look at the benefits of owning a home.