The process of buying a home is a bit like the beginnings of a new relationship: scary and exciting with a whole lot of optimism thrown in.
Thankfully, there are steps to take that should make the process of purchasing a home go quite smoothly. At the bottom of the page you’ll find a handy checklist of these steps to use during the home buying process.
Prepare for the Purchase
You don’t really know how much you can afford to spend on a home until you see a lender, so any house hunting before this is simply wasted time and energy.
So, what is the first step? Start saving your money for the down payment and closing costs. Depending on the loan you apply for, you’ll need anywhere from 3.5 percent of the sales price of the home to 35 percent if you are financing a luxury home. Closing costs vary, and with some loans, such as FHA, the seller has to kick down some money to help.
Pull your credit reports from all three credit-reporting agencies and check them for accuracy. Dispute erroneous information to get it off your report before you apply for a loan.
Finding the ideal lender for you takes some footwork. Check out various lenders’ websites to find who is offering the best rates. The rate a lender is offering isn’t the only thing to rely on, but choosing a few with the best rates is a good first step. If you’ll be pursuing an FHA-backed loan, ensure that the lenders are FHA-approved by checking the U.S. Department of Housing and Urban Development’s (HUD) website.
Get Clear on What You Want
Once you know how much you can afford to spend on a home, your wants and needs list will be easier to compile. Determine what you need in a home: square footage, number of bedrooms and bathrooms, proximity to schools, doctors or public transportation.
Then, go a little nuts on the “wants” list. These are items you’d really like to have in a home but can live without. These items may include a swimming pool, tennis court or a super-deluxe glass fireplace.
Determine the type of neighborhood you want to live in as well. Do kids drive you nuts? Is having a park nearby important? Conjure up your dream neighborhood, and let your agent determine if there is one in your price range.
Here are some considerations when trying to determine your ideal neighborhood:
- Crime: You will need to investigate neighborhood crime rates on your own as laws prevent your real estate agent from discussing this with you. Call the local police department for neighborhood crime statistics. You’ll also find information online with the FBI’s Sex Offender Registry.
- Property values: Look for a neighborhood where property values are rising. You’ll usually find these types of neighborhoods on the fringes of more expensive communities, according to the National Association of Realtors®.
- Easy ingress and egress: The ease of entering and leaving a neighborhood is especially important to commuters.
- Future plans: Many homebuyers underestimate the impact of an area’s future plans on their property values. The best way to find out what the city has in mind for an area is by visiting the city planner’s office.
- Noise level: Cruise the neighborhood in question at different times on both weekends and weekdays to assess noise levels.
- Lifestyle: For young, single professionals, a home in the urban core may be ideal. Folks with kids may want to look at neighborhoods with cul-de-sacs so the little ones are safe from traffic.
- Neighbors: Because the condition of your neighbor’s homes will affect the value of yours, take a good look at the other houses on the block. Foreclosures will also drag down the value of neighboring homes.
Finally - It's Time to Hunt for the House
After choosing a real estate agent, it’s time for house hunting. Be forewarned: Your wants and needs lists may change several times during the process of looking at homes. That’s ok - just be sure to keep your agent in the loop so she doesn’t show you homes that don’t fit your criteria.
When you find “the one,” it’s time to make an offer. Have your agent check comparable sales in the area to ensure that the asking price reflects the current market value for the area, and make your offer accordingly. Remember: Everything is negotiable, so if you want the seller’s living room set, ask for it.
Making the Offer
Pay special attention to your agent as she describes the process and assists you with filling out the contract. The most important parts of the contract are items known as “contingencies,” which are best described as: “If this happens by this date, I’ll go through with purchasing your home.” If the specific events do not occur by the date specified, you can walk away and with the assurance of a refund of your earnest money deposit.
Common contingencies include the sale of your current home, final loan approval, an acceptable home inspection and a clean title search. Contingencies have time limits, so keep an eye on them during the course of the transaction. If you miss a deadline for the removal of a contingency, you forfeit your right to enforce the contingency.
You will have one final chance to view the home before you close escrow. Known as the final walk-through, it typically takes place the day before the close.
While the closing process varies according to region, all closings accomplish the same thing: the transfer of the home’s ownership from the seller to the buyer, a lot of document signing, and the disbursement of escrow funds.
You will have an opportunity to review the settlement sheet and have any questions or concerns addressed. Then you will sign your loan documents and, if you haven’t already done so, provide proof of homeowner’s insurance. If all is in order, the closing agent will ask you and the seller for cashier’s checks to cover all balances due (closing costs, repair costs agreed to in the contract, etc.).
Any money due you at the close of escrow will typically be disbursed when the closing agent records the mortgage and deed at the county recorder’s office.
Checklist for Buying a Home
- Save your money.
- Obtain copies of your credit reports.
- Fix any dings on your credit record in an attempt to boost your score.
- Don’t make any large purchases or move money from one account to another until after you purchase the home.
- Shop for a lender.
- Obtain a mortgage preapproval letter from the lender.
- Find an agent/attorney, whichever is customary in your region.
Creating Your Wish List
- Determine exactly how much you can afford to spend on a home.
- Ask your real estate agent to point you to some neighborhoods with homes priced within your budget.
- Determine what drives you crazy about your current home.
- Get clear on your needs in a home and neighborhood.
- Decide on your “want-but-can-live-without” items.
Investigate Your Agent's List of Neighborhoods
- City planning
- Noise level
- Does it fit your lifestyle?
- Do the neighbors take care of their homes?
- Proximity to schools
- Proximity to city and area amenities
Making the Offer
- Obtain comparative market analysis from your agent.
- Make the offer, basing the price on the results of the CMA and any obvious repairs that need to be made.
- Decide on which concessions to request.
- Determine the length of time you’ll need to meet contingencies.
- Negotiate with the seller if he or she counters your offer to purchase.
- Inspect the home personally for red flags.
- Hire a home inspector.
- Negotiate with the seller for repairs of any items that failed the home inspection.
- Meet all time limits for contingency removal.
- Schedule a moving company.
- Apply for homeowner’s insurance.
- Interview with the board for approval if the homeowners association requires it.
- Review closing paperwork.
- Perform the final walk-through.
- Transfer utilities to your name.
- Gather all the documents you need to bring to the closing (your agent will help you with this).
- Attend the closing.