Guest Post by: George Miller
So, you’ve decided to buy a home. You’ve gone through the numbers, considered your lifestyle preferences and discussed them with your partner, and are ready to make the big move into the next chapter of your life. First of all, congratulations! Few things are more exciting as an adult than buying a new home that meets the needs of you and your family. After all, this home could be the place where many — if not most — of your family memories are made.
Now, to the home-buying experience itself. It can be very complex and very stressful, especially if you go into it unprepared. If you’re a first-time buyer, you need to consider several factors, such as getting credit reports, managing paperwork for lenders, figuring out what kind of home you can afford, and hiring a reputable real estate agent.
No matter your level of home buying experience, however, it’s important to follow some well-established guidelines throughout the process. If certain steps are neglected, experienced buyers and first-time buyers alike are at risk of any number of bad experiences — from buyer’s remorse to a failed purchase.
Here’s the good news: Buying a home doesn’t have to be overwhelming, as anyone can prepare for the process. And doing so will help you to gain an understanding of what to expect and how to make certain decisions, which will help to minimize your anxiety throughout the process and provide you with confidence as you navigate the path to your new home.
In order to help make your experience as smooth as possible, we’ve compiled a list of the 11 most essential steps involved in buying a home. If you’re serious about preparing for the home buying process, this step-by-step guide is a great place to start!
Step 1: Research the Housing Market
Many homebuyers make the mistake of diving into the process headfirst without doing proper research and planning. This can lead to stress and anxiety, bad decisions, and an all-around negative experience. What’s more, the internet has made it easier than ever to learn about real estate matters, so take advantage of it.
Before you do anything else, research the housing market in the area you’re considering. That way, you can learn about important factors, such as the average list prices for homes, the percentage of homes that sell under the list price, and the average down payment required.
Also, research the home buying process, in general, to educate yourself on essential terms and topics. Researching will help you become more informed about the process and help you solidify an effective plan for moving forward.
Step 2: Get a Credit Report
Each year, you are entitled to one free credit report from each credit reporting bureau. These reports will not harm your credit score, but they will provide vital information concerning your credit history and credit score, and it will give you an idea of what kind of mortgage and down payment you can expect. Generally speaking, the higher your credit score, the better the rates you will qualify for. These credit reports include information from the three major credit bureaus — Equifax, Experian, and TransUnion. It’s ideal to get your reports before speaking with a lender because it will allow you time to dispute any inconsistencies in the data.
Step 3: Get Pre-Approved for a Mortgage
Your next step will be to find a licensed lender, ideally one who is local since they will have expertise in the local real estate and buying markets. During the pre-approval process, the lender will review your credit information and evaluate your financial standing. Then, they will inform you of how much they would consider lending you. Working with a lender is a must, but you can still use Acquire Home’s mortgage calculator to run a few numbers and come into it informed and prepared.
Pre-approvals come in especially handy when you are competing with other prospective buyers on a house, as the seller is oftentimes more likely to go with the buyer who has the best chance of getting a sufficient loan.
Step 4: Determine How Much You Can Afford
Next, you will want to determine what you can pay for a new home. Go through your budget, consider your expected income for the foreseeable future, research your current home’s market to estimate what you could sell it for, and factor in all the costs that come with buying the type of home you’re interested in. This will give you a better idea of what kind of home loan you need.
When shopping for a loan, be sure to consider that the loan you need will depend on what type of purchase you will be making. For example, as PennyMac explains, if you’re a first-time homebuyer with fewer funds for a down payment and you can’t get a conventional loan due to your credit history, you might want to go for an FHA loan.
Step 5: Carefully Choose a Real Estate Agent
This step could be done earlier in the process, as a real estate agent can help you with almost every aspect of buying a home. But you definitely want an agent helping you with your house hunt, along with the rest of the steps in this guide. Ask around for recommendations, check online reviews, and interview different real estate agents to find the right agent for your needs. Acquire Homes has a full team of established and experienced realtors there to walk you through every step of the homebuying process.
Step 6: Go House Hunting
Armed with knowledge of the local housing market, what you can afford, and what your needs and wants are, start searching for homes online. Your real estate agent will be able to help you sift through homes and set up tours to see them in person, but Acquire Homes also has a handy detailed search tool you can use on their site to help with the house hunting. Unless you’re fortunate enough to find the perfect home on your first round of tours, you will likely have to view many homes and refine your search before you land on a winner.
Step 7: Make a Purchase Offer
Once you find a home you can envision yourself living in, things get real. It’s time to make an offer! Your real estate agent will help you come up with an offer to present to the seller.
Your agent’s expertise will come into play here, as they will use their knowledge of the market to advise you on whether your initial offer should meet the list price or shoot for a lower amount.
In some cases, especially in a highly competitive market, your agent may suggest offering above the asking price.
Perhaps your first offer will be accepted, but you will most likely need to negotiate with the seller on the price, as well as any contingencies and/or requests.
Step 8: Arrange a Home Inspection
Home inspections are essential in the home buying process because they can reveal problems that you might not notice when viewing the property. Ideally, you will get a third party to perform a professional inspection of the home to point out any legitimate issues. These issues could include anything from a bad paint job to an aging roof to a compromised foundation.
Step 9: Negotiate Repairs with the Seller
After the inspection is performed, you will need to negotiate with the seller on which repairs should be addressed and how they should be handled. Generally speaking, you don’t want to nitpick a buyer by requesting a bunch of cosmetic repairs, but you do want to make sure most major repairs are taken care of, such as structural, plumbing, and electrical concerns. This is, of course, unless you agree to buy the home as-is.
Here are the most common ways buyers and sellers agree to deal with repairs:
- The seller provides repair credits that the buyer can use upon ownership of the home.
- The seller lowers the sale price of the home and/or pays some of the closing costs to cover for the cost of repairs.
- The seller has the repairs performed prior to closing.
Step 10: Do a Final Walkthrough
Once you’ve negotiated repairs with the seller, you will want to do one last walkthrough of the home before closing the deal. This gives you an opportunity to make sure the property is in the same condition as when the purchase offer was made and to validate that any agreed-upon repairs were made. During this stage, it’s common to test for things like electrical, plumbing, and HVAC issues. If you have any concerns, it’s important to discuss them with your lawyer or agent to determine how to move forward.
Step 11: Close the Deal
If you’re happy with your final walkthrough, it’s time to close! Closing day will involve reading and signing a ton of paperwork. This process will go a lot smoother if you are prepared, so familiarize yourself with what kind of documents you can expect to sign and what identification you will need to provide. Once the signings are done, you will get the keys to your new home!
The Bottom Line
While the home buying process can be complex and stressful, you can make it much easier on yourself if you prepare for the process. Each situation is unique, but these steps can serve as a general guide for what to expect when buying a home and help you make good decisions along the way. Remember to keep learning about real estate, and consider hiring a good agent to walk with you through the entire process. Most importantly, enjoy the journey of finding and purchasing your new home!