7 Steps to Buying a House: An Overview of the Home Buying Process

Buying a home is a big commitment, and likely one of the biggest purchases of your life.

Whether it’s your first time buying a home or the tenth, the home buying process can feel daunting. It’s full of paperwork with complex legal jargon, and there are seemingly a million decisions to make. Plus, it can be an emotional rollercoaster: falling in love with a home only to lose out to a higher bid or having to walk away from the transaction for one reason or another.

To help reduce the stress of the home buying process for you, let’s go over the basic steps to buying a house so you know what to expect.

Step 1: Get Preapproved by a Lender 

First things first, it’s important to fully understand your financial situation before you start touring homes.

Look at your finances and goals for the next few years: Do you anticipate starting a family? Having to relocate for work? How long do you foresee yourself living in this home? Big-picture questions like these can help you decide the kind of home you need, as well as how much you’re able to spend.

Determine your budget based on your income, debts, location you’re looking in, and down payment amount. This will give you an idea of what you can actually afford for monthly payments.

Then, get preapproved for a mortgage. A preapproval letter is not a guarantee that you’ll close on a loan, but it shows sellers and real estate agents that you’re serious about buying a home and you’re able to get financing. 

Don’t hesitate to shop around for a lender, as fees and the types of loans they offer can vary widely. I HIGHLY recommend going with a local lender over an online preapproval company or a big banking branch. 

Preapproval companies are cumbersome, and it can be difficult to get a hold of someone if problems or questions arise. Lenders at big banking branches are typically only available during business hours. If something in your transaction goes haywire at 7PM on a Saturday evening, being able to get some answers right away is much more convenient than waiting until 9AM on Monday.

One lender I always recommend is Ali Massa with Results Home Mortgage:

Ali Massa + Ashley Bjornstad

Apply online: www.alimassa.com

AMassa@kindlending.com

651-728-7329

Step 2: Start Touring Homes!

Once you have a preapproval and an “ok” to shop from the lender, that’s when I come in to help. It’s time to start looking at homes! 

Before you head out to tour homes, make yourself a “wish list” of features you want in your home. Divide your list between “must haves” and “nice to haves.” This list will help you stay on track when you’re viewing homes so you don’t fall in love with a house that doesn’t meet your needs.

Make the most of your home tour: in many cases, it’s the only time you’ll see the home before you make an offer (especially in a competitive market). 

Pull out your smartphone and take some photos to help jog your memory when you’re deciding later on whether to make an offer. Take photos not only of that charming breakfast nook and those sweeping views from the deck, but also of the aging appliances or those hardwood floors that need refinishing. Having reminders of these things will help you make a more informed decision about whether to make an offer, as well as how much to offer for the home. 

The home shopping process can range, on average, from one to three months (but can sometimes take longer). How long it takes will depend on how often we tour homes, what you’re looking for, the inventory available in your price range, and so on.

Step 3: Submit an Offer

Once you’ve found a home you like that meets your needs, it’s time to make an offer. As your real estate agent, I’ll be a helpful resource here, as I can help you determine an offering price and write up the offer for you. Then, if the seller counters your offer, I’ll help you negotiate with them.

As we’re writing up your offer, we’ll also address any contingencies you want to include. 

• Do you want an inspection? 
• Do you own a home and need to sell that before you can buy? 
• Does the new home have a private well and septic system?

These things (and more) will require adding a contingency to your contract. 

Once your offer is accepted, you’ll write your first check: the earnest money payment. Earnest money is essentially a deposit you make toward the purchase of your home. In most cases, it’ll go toward your closing costs or down payment once you close.

The contingencies included in your offer will determine whether or not you’ll get your earnest money back in the event your deal falls through. For example, if the home inspection doesn’t go as well as you’d like, and there are more repairs needed than you want to deal with, a home inspection contingency will allow you to back out of the sale and retain your earnest money deposit.

Step 4: Home Inspection

Once your offer is accepted and you’ve written your earnest money check, you’ll need to schedule a home inspection.

The home inspection is not required, and some buyers do choose to skip it. However, not everyone is the handy type who can take care of most home repairs themselves. And even if you are, it’s a good idea to have a home inspection. 

A home inspection will give you an overview of any repairs that are necessary now, as well as issues you could face down the road. 

Typically, a home inspection covers all aspects of the house and its systems. However, if the house has a private well, septic system, pool, or retaining walls, you’ll want to have an additional inspection done for those items. Many buyers choose to have a radon inspection done as well.

When it comes to the home inspection, the buyer chooses the inspector, schedules the inspection, and pays for it. You can choose to attend the home inspection or not, but it’s a good opportunity to ask questions if there are any concerns you have about the home.

Once the inspection is complete, you’ll have a chance to review the inspector’s findings. If there are repairs needed, you can then choose to negotiate with the seller to have the repairs completed before closing, lower the sales price, or put money in escrow to cover the repairs. Or you can choose not to follow through on the purchase.

Step 5: Appraisal and Loan Application

Once all inspection items are negotiated, you enter the final stages of the home buying process.

Next you’ll work with your lender to complete your loan application. There’s a lot of paperwork involved in this part of the process. You’ll need to provide your lender with the documents and information they need to process your loan, including W-2 forms, pay stubs, income tax returns, bank statements, debt statements (car loan, student loan, etc), and personal identification information.

Once your application is complete, the lender will use the information you provide to determine whether or not they will give you the loan.

This is also the time when your lender will have an appraisal done. They’ll send an appraiser to take a close look at the home, as well as at comparable recently sold homes in the area to determine the market value of the property. If they land on a value that’s less than the sale price of the home, you have a few options: 

1. Renegotiate the sale price
2. Come up with the difference yourself
3. Walk away from the sale

Most lenders will also require you to have homeowners insurance in place, so now is the time to get that policy set up.

Step 6: Final Walk-Through

A day or two before closing, you’ll take a final walk through of the home with your real estate agent. 

This walk through gives you the chance to make sure everything you saw the first time touring the home is the same, and to ensure any agreed-upon repairs have been completed. You can also take this opportunity to take a few measurements and think about furniture placement or cosmetic updates you want to do right away.

Note that, while it’s common courtesy for the seller to clean the home after they move out, it’s not a requirement. In addition, minor imperfections aren’t required to be taken care of by the seller, so don’t be surprised if you see a few nail holes in the walls.

Step 7: Close on Your New Home!

A few days before closing, your lender will provide you with the closing disclosure, showing closing costs and how much total cash you’ll need to close. Read through the disclosure carefully, and if you have any questions, ask them now.

Closing typically takes place at the title company’s office. During the closing, take your time reading through the paperwork and ask questions as they arise. Home buying paperwork is full of complex legal jargon, but the title company and your real estate will make sure your questions are answered and you feel good about signing.

Once you sign on the dotted line, you’ll get the keys and you can move into your new home!

Looking to buy a home this year? I’d love to help you out! Give me a call at 612-227-5537 to talk through your wish list and start looking for homes!