Buying a home is something many people dream of for years. The thought of being handed the keys, and stepping through the front door to what will become your castle, the place where perhaps you’ll raise a family, is the stuff that dreams are made of.
And then you find out just how complex that actual process of buying a home is.
No doubt, there are many steps you must take before you end up in a home. It can seem overwhelming, but it doesn’t need to be. We’ve broken the homebuying process down into eight essential steps. There are many more little to-dos within each of these steps, but if you break the whole operation down into smaller tasks and tackle them accordingly, you’ll be less stressed out.
If you have further questions, there are many people you can reach out to for help, such as an experienced lender or Realtor. You’re not alone, and you are capable of making this dream come true.
1. Do Your Research
Do your research so that you have a solid game plan before you start looking for homes. Choosing a neighborhood for its schools and amenities is important, but also one of the easiest steps. More relevant, how is the supply and demand of properties in that area, and how does that impact the cost of those homes? Perhaps the most important step before you hit the market is determining what you’re able to afford. A common benchmark is to look for homes between three and five-times your household income, if you can afford a 20 percent down payment. Always plan to leave a rainy day fund in your bank account to handle several months of costs in case of an emergency.
2. Get Pre-Approved
Odds are that you’ll need financial help to afford a home. You shouldn’t wait until after finding that home to look for this financial assistance. Find a reputable mortgage lender and get pre-approved for the money you’ll need to close on the home. Pre-approval is different than pre-certification: Certification only gets you an estimate of what the lender can offer you, while Approval provides you a stronger guarantee of what you qualify for. This impresses sellers much more.
3. Get A Real Estate Agent
You’re allowed to represent yourself in court, and you’re allowed to represent yourself when buying a home. But, just like lawyers, real estate agents bring invaluable knowledge and can be the difference in choosing the best home. They can answer all of your questions on neighborhoods, pinpoint the best homes for your needs and budget, as well as supplying negotiating skills to get you the best deal or beat out competing bidders.
Now you can begin the fun part of the process: shopping for a home. This step still requires diligence on your part, however: You should keep notes on the homes you look at, comparing costs and features later on down the line. Never be afraid to insist on a more hands-on experience: Test the plumbing, light switches, garage door, or other features that you’ll be paying for. If these give you problems, either negotiate to have them fixed by the seller or move on to another property.
5. Make An Offer
If you’re ready to make an offer, communicate with your Realtor and prepare a strategy for doing so. The supply vs. demand in different neighborhoods may impact the best way to bid for the home, and you’ll want to make sure that you don’t go outside of the budget you planned during Step 1, no matter how tantalizing the property.
6. Get A Home Inspection
A home inspection should be part of any offer on a home. This gives the buyer the chance to find hidden issues and adjust their bid without penalty. Both you and the seller will receive a report from the inspector, and you can hash out any last minute repairs that need to be made before you move forward with the purchase. You’ll also get the opportunity to do a final walkthrough.
7. Get Mortgage
This step will be much smoother if you have already been pre-approved. Your mortgage lender will help you to choose a financing option that works best for your situation. They can help you choose between fixed and adjustable rate mortgages, or conventional and FHA-backed options. They will arrange for an appraiser to examine the home and judge whether the selling price is reasonable. They will also arrange for a title company to handle legal paperwork and make sure that the seller is legally qualified to transfer ownership to you.
You made it. Once all the paperwork has come through, you can close on the home, take those keys, and start living the dream that we alluded to at the beginning of this post.