Buying a home for the first time can be an overwhelming and daunting experience.
As a realtor, the majority of questions I get when meeting with a home buyer for the first time revolve less around the home itself and more around what the process will look like and how they can make sure they are prepared every step of the way.
Every first-time homebuyer is nervous about the steps involved to buy a home. This is quite possibly the largest investment of their lifetime, and they'd like to make sure it goes off without a hitch.
The best way to stay on top of your home purchase is to be aware of and understand each part of the process before you enter into an agreement to purchase. Being educated about what to expect will help keep your anxiety low and your thoughts level-headed so that in the off chance a small glitch occurs, you're prepared and have a good grasp on what will cause a major derailment and what is a minor inconvenience, but will ultimately not affect your end goal of owning a home.
Here are the 13 steps to buying a home that every home buyer should know before they step foot into their first in-person viewing:
1. Know Your Credit Score
Before you even start talking to financial institutions, do your research and understand your credit report and score. Many people aren't aware of minor infractions on their credit that are affecting their scores negatively and knowing your score before you begin applying for financing can greatly increase your chances of solidifying the best interest rate.
Make sure you use a reputable service that gives you an updated and comprehensive version of your report and scores across all bureaus. You're allowed one free credit report a year .
2. Get Pre-Approved for a Loan
Once you know your score and are confident of your ability to finance a home, it's time to call a mortgage broker. Do this before you call a realtor or start even start "window shopping" online. Other lists may say finding a realtor would be your next step, however, in today's market, most agents won't get out of bed for a buyer that is not qualified up front.
They want to know you've done the work to verify your ability to purchase before they spend time taking you to look at homes, so do this step first and your future realtor will consider you a serious, educated and ready buyer. You won't know until your information is processed what you are qualified to purchase and nothing hurts more than having to downgrade your dream home from the one you already fell in love with because you jumped the gun. Some lend ing institutions offer a pre-qualification rather than a pre-approval. Make sure that if thi s is the type of verification you are receiving that they have verified your credit and your financial information. It will make you a stronger buyer when the time comes. Shop some of the most popular mortgage companies to find the best match for you.
3. Find a Buyer's Agent
In today's atmosphere of having access to anything and everything we could ever want literally at our fingertips, it's easy to try to figure things out on your own. This is one scenario, however, where guidance and having a qualified professional on your side is never a bad move. A buyer's agent will help navigate you through the process of buying your home as well as negotiate on your behalf when the time comes.
Find someone who is well versed in the area you'd like to move. Be transparent and upfront about your expectations from your agent and then, do them the same respect by making sure you are committed to them. It is helpful to use a comprehensive list of tips when interviewing to find the best agent for you.
4. Start House Hunting!
This is the fun part! Your agent should be able to tailor a search for local homes in your criteria. Don't be afraid to let your agent know exactly what you are looking for so they can do their part to help you! As you walk through homes, make notes you can refer back to later. In some cases, you'll only have limited options to view. But in others, you may have dozens of options to choose from and having distinct characteristics written down that remind you of the reasons you loved (or didn't love) about that home will come in handy later.
5. Research Comparable Properties
If you've found a home (or two) you are considering, ask your agent to do a little digging and make sure the value of the offer you are considering presenting to the seller is reasonable. Your agent can search for comparable properties to verify the proposed value of your offer is on point with the neighborhood trends. This is beneficial for two reasons:
1. You want to make sure you are getting a fair price and also that your home will appraise at the value you are willing to pay.
2. You don't want to offend the seller by presenting an offer that is exceptionally low for the current market.
6. Write an Offer and Negotiate
When you've found the home you've been searching for you'll want to claim it as soon as possible! Your agent will assist you in compiling the necessary paperwork to complete an official offer to present to the sellers. Your agent is well versed in the best way to negotiate, so be open about your expectations and what you are and aren't willing to bend on.
7. Make Sure You Understand Important Contingencies and Dates to Meet Them
Contracts vary from state to state but many include important deadlines for actions such as completing a home inspection, applying for your mortgage or securing your financing with a clear to close from your mortgage broker.
Be aware of the important dates on your contract by asking your agent or attorney to review these with you.
8. Complete a Home Inspection
A professional home inspection is paramount as a buyer. In many states, it is not required of you to complete an inspection, but many agents would not recommend skipping this important step as it reveals any defects or deficiencies in the home that you cannot see with the naked eye. Make sure you're fully aware of the issues in the home you're about to purchase before you close and those issues become yours with no way of backing out once it's too late.
9. Consult an Attorney
Some states use an attorney from start to finish, while others use a title company to complete the closing and the agents facilitate the transaction. Depending on where you live, this step may not be absolutely necessary, but regardless of whether or not your state standardly uses an attorney for the purchase process, consider consulting yours before you close just to be safe.
10. Apply For Your Mortgage
Your lender will discuss different loan options with you and request you to furnish a list of documentation to them in order to complete the mortgage application process. This will include financial documentation, taxes and any other debt/income relevant to your approval. Make sure to submit your documents as quickly as possible because every delay can later delay your closing, which in turn *could* cost you fees.
As your loan moves through the underwriting process the lender may reach back out asking for conditions that have come up, which is just a way of saying there are some items they require from you in order to push the loan to "approved" status. Don't hesitate and don't get frustrated. This process can be overwhelming, but, if you are using a loan to buy your new home, you can't avoid the lender request and the sooner you complete them the closer you are to turning the key in your new home.
11. Have an Appraisal Completed
If you are seeking a loan to purchase your new home, your lending institution will require this step. But even if you are intending on paying for your home in full with cash, getting an appraisal is worth the added expense. You want to verify your home is worth what you're paying.
12. Final Walkthrough
Plan to take one final look at the home before closing. This is the time when you can check any repairs you requested of the seller are completed, check to make sure they did not do any damage while moving out, and verify that the home is in the same condition it was when you first proposed an offer to purchase. Once you close on a home, the burden of any items breaking down or malfunctioning will be your responsibility. So, use this as your chance to confirm the condition of the home before you take over ownership.
Your lender or attorney will furnish you with final figures a day or two before you close to let you know what you're expected to bring with you to the closing table. Any larger sums of money need to be wired directly to the title company, so make sure you have any instructions to complete that as well.
Be sure to verify any directions/instructions you receive electronically to wire sums of money with the person who sent directions directly. Fraud exists among this step of the process and it's always better to take the extra step to protect yourself. Expect to spend an hour or two at the closing signing paperwork and completing the documents needed by the title company to transfer ownership. Once you've completed paperwork and financing has been secured, you will get keys to your new home!
How long does it take to buy a house from start to finish?
The time you spend preparing for and searching for homes changes from person to person. Some people know in the first few viewings that they have found their dream home and are ready to move forward. Others search a little longer before they are ready to jump. Neither approach to finding a new home is more or less important, because when you know, you'll know.
If you are financing your home you can expect the process from the time you write your offer until the day you close to average around six weeks. The factors that fluctuate this are usually out of your control as a buyer, such as how long it takes the appraiser to write up his report or how long the underwriting turn around time is during the season you buy in.
The only factors you can control are documents and items requested from you to furnish to move the process along and making sure you complete your portion of the inspections/appraisals on time as to not hold up the deal. Your agent should be able to give you an average time-frame from start to finish in the current market climate.
How much do you have to put down on a house?
The rule of thumb used to be 20 percent, but it really depends on the type of loan you take out (for example, VA loans require 0 percent down), if you negotiate any seller credits during your purchase or if you are paying any loan interest up front. Your credit score may also play a factor (depending on the loan) on the interest rate you'll receive which could fluctuate your payment and/or cash to close.
Most purchase deals involve upfront expenses of the home inspection, appraisal, insurance premiums and county/village inspection that may apply to the buyer that are to be paid before your closing. Consider these expenses when you are calculating your savings and whether you have enough to buy or need time to save a little more.
Finding the perfect home is easier with the help of professionals so make sure to start assembling your dream team of helpers to make your home purchase process simple as pie.
Nicole Pecoraro is a Realtor, divorced mom of three and an ally to the transgender community. As a single mom who achieved her graduate degree alongside growing her family, she understands the importance of finding a work/life balance. You can find her on her blog (momtransparenting.com) where she focuses on family, parenting, divorce and everything in between.