Buying a home, whether as a first-time buyer or not, is an exciting, emotional, and exhausting experience. For first-time homebuyers, the process can even be overwhelming without the proper guidance. We are here to help. Below we lay out how the home buying process works, from start to finish.
Step 1: Preliminary Research
An often overlooked step, preliminary research is vital to learn and narrow down what type of home you are looking for. The wish list you create will be a great help when communicating with your agent later in the process. Checking out what homes are selling for in your desired neighborhood will also set you up for success in step 2, establish a budget.
Step 2: Establish a Budget
Use a mortgage calculator, like this one here, to determine what your mortgage payment could potentially be for one of the homes you found in your preliminary research. This will give you an idea of how much house you can afford. Be sure to take into consideration utilities and insurance costs when creating your budget. This is also a great opportunity to get your finances in order for step 3, get pre-approved.
Step 3: Get Pre-Approved
To get pre-approved for a mortgage you first need to get some paperwork ready including pay stubs, W-2s, bank account statements, tax returns for the past two years, credit card statements, and the contact information for your landlords for the last two years. Your first stop should be to your current bank, but be sure to check out competitor banks too. Shopping around can lead to better rates. When you do reach pre-approved status, keep in mind that the number you are approved for should be considered the maximum and not be what you actually spend.
Step 4: Find an Agent
A good real estate agent will provide you with guidance throughout the home buying process. Hiring a qualified agent that has your best interests at heart will help simplify the process for you and make sure you are getting the most for your money.
Step 5: Look at Homes
It may be difficult, but being patient during this stage is essential. Your agent will use your wish list and show you a variety of homes with features they feel you may like. By giving your agent detailed feedback on these homes, you allow them to really narrow down the perfect homes to show you next. Finding your dream home should not be rushed and this process can sometimes take months. That is why patience is key here. Sharing your home search with friends and family can help too! You may even find out about your perfect home before it officially hits the market.
Step 6: Make an Offer
Once you have found “the one”, you will want to put in an offer as quickly as possible. Your agent will guide you on a reasonable first offer that will be based on current market conditions. Don’t forget to take closing costs, typically 2-5% of the home’s price, into consideration when making your offer.
Step 7: Negotiate
This step is where you will be thankful to have a real estate agent. Your agent will be your advocate here and will work to get you the most for your money while also being fair to the seller. Prepare to go back and forth with the seller at least a few times on both price and the selling conditions.
Step 8: Offer Accepted
Congratulations! With an accepted agreement, you will make a deposit to an escrow account as a sign of good faith. Escrow essentially works as a mediator between two parties to minimize risk while the transaction is completed. It is typically a 30 day period where the seller will take the house off the market under a contractual expectation that you will purchase the property, provided no serious problems are uncovered during the inspection.
Step 9: Complete a Home Inspection
Having a professional inspector review the property for quality, safety, and general condition is a step you don’t want to skip. You don’t want unexpected expenses to pop up in the near future. If the inspection does, in fact, reveal undisclosed defects, you may be able to negotiate further to have the seller either pay for the repairs or discount the selling price. You may even have the option to withdraw your offer and get your deposit back.
Step 10: Closing
With successful negotiations and a clean inspection report, you are now ready to close! At the closing, you will sign all the necessary documents and then be handed the keys to your new home.
