Buying a home, especially your first home, could seem like a confusing and complicated transaction. It doesn’t have to be if you become familiar with the process before you even begin shopping for a home. Below is a general break down of the stages with some basic information.
10 Stages for Buying a Home
1. Check Your Credit Score
2. Call a lender to get pre-qualified and determine what you can afford
3. Research desired areas and neighborhoods
4. Make a wish list of wants, needs and deal breakers
5. Find a REALTOR®
6. Search for homes
7. Make an Offer
8. Home inspection, Appraisal and Title Search
9. Do a final walk through
10. Close on your new home!
1. Check your credit score – This is different than running an actual credit report, but your score is just as important. Lenders and banks rely heavily on how strong your credit is to determine if lending to you will be a potential risk. If possible, repair any credit issues to help boost that score!
2. Call a lender to get Pre-Approved – Pre-approved is better than getting pre-qualified. (See my other blog explaining the difference!) This could be the loan office at your local bank or a bigger mortgage company or broker. Not all lenders are created equal. Make some calls and ask questions. Find a lender who is straight forward and is willing to give you answers. Make a list of the documents the lender will need. The sooner you can gather these, the smoother the process will be. Find out how much cash in savings that will be needed for a down payment and closing costs. Be honest with the loan officer, this will help prevent any surprises later.
3. Research desired areas and neighborhoods – Real estate agents are not able to answer questions such as “Is this a good school district?”, “Is this a safe neighborhood?”. Answering these types of questions would be a violation of Fair Housing Laws. It is up to the buyer to do their research on schools, crime rates, and general demographics in the community. Drive around potential areas, look at the condition of the homes. Check for high traffic areas if you have young children or pets. If public transit is needed, map out bus stops and routes. If it’s a rural area, see how far to travel to get to stores. One person’s opinion easily can be different from another’s.
4. Make a Wish List of Wants, Needs and Deal Breakers – While this may seem really easy, it’s not always as easy as you think. You might want four bedrooms, but really only need two. You might want 20 acres, but can make due with 5, but a true deal breaker might be if it doesn’t have a fire place. Make that list and weigh the most important needs.
5. Find a REALTOR® - There are so many real estate agents, who is the best? Most agents work from referrals from past clients. Ask friends and family who may have recently bought a home how their experience was with their agent. Check social media or Google for agents in your area. Interview them! Some questions that should be asked:
§ How long have you been working as a real estate agent?
§ How many clients are you currently working with?
§ Are you knowledgeable about the area and recent sales?
§ Can you provide any references?
The more questions you ask, the more you will learn about the person that you want to trust to help you make one of the largest financial investments in your life.
6. Search for Homes – Now that you selected an agent that you feel comfortable with, further your discussion about your wants and needs list. Schedule homes that fit your criteria. Tour as many in your search area that you can. If it’s a fast seller’s market, be ready to see homes with little notice so you don’t lose the opportunity to view it. Look closely inside and out at all the little details – open closets and drawers, go into basements and attics (when possible), open windows and turn faucets on. Learn as much about the home in the short time you are there.
7. Make an Offer - You found it - the home of your dreams (or close to it!). Speak with your agent about their suggestions to make the strongest offer possible including things such as how much for an initial deposit, inspections, included items, and when is the best target date to close.
8. Get a Home Inspection, Appraisal and Title Search – Congratulations! Your offer was accepted. Now what?
§ Home inspection – This is a very important part of home buying. Hire a local certified inspector to do an in-depth look at your prospective new home. They will check everything from the foundation to the roof, from water flow to grounded outlets. If the inspector sees anything significant that could potentially cost over $1500, the buyer has the right to negotiate with the seller to remediate or credit the repair, or to back away and cancel the contract. It is highly recommended not to skip this part! There are a lot of hidden areas in a home. Don’t find out later there is a big issue that should not have been over looked.
§ Appraisal Report – your lender will require for the home to be appraised. A certified appraiser will provide an estimate of the home’s worth based on comparable homes, area sales and trends and inspection of the property. Lenders will want to make sure that money loaned is less than or equal to the appraised value.
§ Title Insurance – All homes have a deed. The deed will give property measurements, owner’s name, and any restrictions that the property may have. Along with that, there is a “footprint” of all past owners and any possible liens. A title company will review all past information to make sure the deed and title are clear for the new owner. This can be a lengthy process depending on the age of a home and how many past owners.
9. Final Walk Through – It’s almost time! Once all the steps are complete and the lender has gathered all the information, they will issue a “Clear to Close”. This indicates to all the involved persons that they can begin to schedule a date for the closing. Just prior to that, you and your agent will visit the home one last time. This is to walk through and check the home for: the current condition, make sure all appliances are present and in working condition, check for any items that were not removed, and any other agreed upon conditions. If anything is missing, damaged or not working, this is the time to bring it to your attorney’s attention.
10. Closing – This is day you will become a new homeowner. Buyers, sellers, their attorneys and a member of the title company all come together to review all the paperwork. Once everything is reviewed, all documents will be signed. This is when you will be expected to pay any closing costs and additional down payments. After everything is finalized, you will be handed the keys to your new home.