Once you've found the home of your dreams and you're ready to make it yours, the real excitement begins. If you don't already have a real estate agent, now is the time to find one. Although the seller's agent can help you, their job will be to look out for the best interests of the homeowner, so it's wise to have an expert to make sure you're getting a fair deal too. Your agent may recommend that you retain a real estate lawyer as well, and in some cases, it's mandated by law. Each region can have additional stipulations and regulations, but this quick guide will help you understand how the overall process of buying a home works.
You have decided to start the process of buying a home and achieving the American dream. Deciding what kind of home you wish to buy is the first step when trying to buy a home. Consider:
- What area you wish to live in?
- How close is it to parks, shopping, work, transportation, etc?
- How many bedrooms, bathrooms, and garage stalls you need?
- What style of home you wish to buy?
Choosing Your REALTOR®
Hiring a professional REALTOR® is the most important step when buying a home. Your agent represents you, working in your best interest, educating you about the real estate home-buying process, and providing their negotiating experience to get you the best home. There are many relationships you can have with a real estate agent.
Contact me to learn more about how I can help you achieve your home-buying dream.
What Can You Afford?
Rule of thumb: you can afford a home that costs about 2½ times your yearly income. Some other factors that will help you determine how much you can afford are:
- How much money do you need for bills? (Be sure to include utilities, doctors, groceries, car payments, insurance, etc.)
- How much do you have for down payment? (The typical minimum down payment is 3-5% of the total loan amount.)
- How much will you need for closing costs and other payments? (Be prepared to get out your checkbook. There are several costs — along with down payment — that will arise, such as earnest money, inspection, appraisal fees, and insurance binders.)
- Click here to read more information about financing including some useful mortgage calculators
Qualifying for a loan: do not confuse loan qualification with loan approval. Even before you begin looking for a home, meet with a lender to determine how much you qualify for. Keep in mind that prequalifying with a lender does not bind you to that lender. Do not sign any paperwork that would obligate you to a lender at this point.
One of the most exciting aspects of buying a home is looking at different properties in your price range and seeing houses in all sizes, conditions, and styles. It's the best real estate education of all. Finding homes to see has never been easier; you can:
- Work with your REALTOR® and have them send you properties directly
- Take the reins and search for homes online on my website. Click here to view properties. Ask me questions about any properties that you are interested in
It is recommended to always try to schedule showings 24 hours in advance. Last-minute showings are possible but should not be the norm.
Preparing An Offer
You will work with your agent to create a formal offer to be submitted to the homeowner or their agent. If you're happy with the home as-is and are willing to pay the full price, creating an offer is fairly straightforward. However, you may request a lower price, ask for changes to be made, and add specific stipulations to the deal. A typical offer contains many of the things detailed below:
- The price you're willing to pay for the home
- The date you want to close on the home
- The date you want to take possession of the home
- A list of items you want left in the home (such as specific appliances and home equipment)
- Things you want to have happen before you sign (like a home inspection, pest inspection, or any repairs)
- Contingencies (specific things that must happen in order for the deal to take effect, like your loan approval)
Approval and Negotiation
Once you've submitted an offer, the homeowner usually responds in one of three ways. They may accept it, in which case you can move on to the next step. On the other hand, they may also deny your offer or provide you with a counteroffer. In either of the last two situations, there is often room to negotiate. Your agent will help you sort out what's fair, and will have a good idea as to what the homeowner may negotiate further on, though you ultimately have total control over what alterations you're willing to accept.
Once You're Approved
Getting your home ready for closing is very important. There are many steps that still occur behind the scenes, and many agents will play a role in closing the sale of the home. Again, your real estate agent will likely introduce you to each of these individuals and monitor progress for:
- Hiring a reputable home inspector who will spend several hours scouring through your new home to ensure that there are no surprises (consider hiring an inspector who is a member of one of the major home inspection associations)
- Removing contingencies (sometimes it's required that any stipulations are officially removed from the contract)
- Renegotiating the offer (if there are any issues observed by the various agencies involved, you may be able to request a reduced price for the home and/or have repairs made)
- Securing your home loan. Your loan officer will work diligently to get the loan approved with the mortgage lender
- Locking in your interest rate if you haven't already done so (your loan officer will likely guide you as to when the best time is to lock in your rate to ensure you're getting the best possible terms)
- Obtaining an appraisal of the home if required or requested
- Considering obtaining insurance (such as title, home warranty, flood, and homeowners insurance)
Steps Before Closing
Each of the aforementioned agents will play a role in closing the sale of the home. Again, your real estate agent will likely introduce you to each of these individuals and monitor progress for:
- Opening escrow (usually done through a third-party title company)
- Verifying title and obtaining insurance (may be done through the title company)
- Performing a walk-through so that you can confirm any necessary changes have been made and that the residence is as you expect
- Having an attorney verify documents are in order if required or preferred
- Funding your escrow account
Sign and Make It Yours
Although it takes a lot of work to get to the final signing, it's worth it. The documents needed to buy a home may be 100 pages or more, so plan to spend some serious time at the office reviewing them before you sign. All payments usually come out of the payment made to the seller, so after signing, you can accept the keys.
Once you've signed, the house isn't yours just yet. You'll have to wait until you reach the occupancy date to move in. However, you can use this precious time to prepare to move into your new home and schedule services to start. Congratulations, you're a homeowner!
Your agent will be able to introduce you to key players and will help keep track of where you are in the chain of events. Oversee the various agents and entities, as they handle the tasks that will lead to a successful closing:
- REALTOR®: as your real estate professional, I am committed to helping you reach all of your real estate goals
- Mortgage lender: the bank or firm that provides your home loan
- Mortgage officer/broker: the person who works for the lender and helps you obtain a loan
- Home inspector: the individual who examines the home for hazards and defects
- Home appraiser: the person who gives an educated opinion as to what the home is worth
- Title company: the agency that makes sure the home can lawfully be transferred, issues insurance, and may maintain the escrow account
- Real estate attorney: optionally, you can choose to hire an attorney to review the closing docs