As a first-time home buyer, you are about to make one of the largest financial decisions of your life. You need to approach it with a clear head and an idea of how the process will unfold. Understanding the house buying process before you get started, will help make this experience as painless as possible.
The House Buying Process Step by Step
Enjoy our flow chart of buying a house below, perfect for first-time home buyers who want to understand the process step by step. Each of the stages are then explained after the home buying flow chart image.
Consult with a REALTOR
Don’t go through this process alone. A REALTOR can help you navigate the market, walk you through paperwork, and negotiate with sellers. They’ll be by your side through every step of the home buying process, so it’s important to find one you can trust.
Ask for recommendations from friends and family, interview as many as it takes, and always listen to your gut. It may sound silly, but if you’ve got that nagging feeling that a REALTOR isn’t right for you, pay attention.
Often, your REALTOR will have trust lenders that he or she works with. In terms of financing, there are three characteristics to look for in a mortgage lender or broker:
- Competitive Rates
- Excellent Communication
Your lender will help you determine how much house you can afford. With a pre-approval letter, offers you put on homes will carry more weight and give you an advantage over other buyers.
With your pre-approval in hand, it’s time to start the search. Make a list of what your family “must” have in a home vs. what they “want” to have. Make sure that your REALTOR understands your needs so you don’t waste time looking at homes that are out of your price range or missing crucial elements.
Any time you walk through a home, compare it to your list and try to imagine yourself living there.
Make an Offer
You’ve found the home of your dreams. Now it’s time to put an offer in. Your REALTOR will help you determine what is a fair offer based on the home’s value, location, and time spent on the market. This will likely include earnest money that will apply to your down payment and should also be contingent on having the home inspected and appraised.
Negotiate Counter Offer
The sellers may have received multiple offers. They may like you and your family, however need to get more money for their home. If you are willing to budge in price, be ready to negotiate a counter offer that it presented to you.
You like the house, they like the offer… it’s a match! Your REALTOR will notify the sellers that you accept and get the ball rolling.
Get Final Approval
Now it’s time to go back to your lender and finalize your loan. A closing date will be set and you will need final approval by that date. It’s a good idea to ask your lender how much you will need at closing as you may have to pay the first year’s homeowner’s insurance or property taxes. Avoid making any large purchases before your loan closes as it may affect your mortgage qualification.
Schedule and Attend Inspections
Once you sign the final documents, the house (including all of its problems) is officially yours. Hiring a home inspector allows you to identify any issues before you sign. Sometimes sellers will offer to fix the issues before the sale is complete, whereas others will lower the closing costs so you can do repairs on your own. Either way, this must be written in the documents in order to protect you.
Appraisal and Walk-Through
An appraisal allows you to determine the exact cost of a home before your purchase it. While this is important for your protection if you are buying a home for cash, it is required if you are taking out a loan. Your lender will want to know how much the house is worth before offering up the money to finance it.
A walk-through will help you understand the condition of the home, and start budgeting for cosmetic changes that you’d like to make. If anything seems like it needs work, your REALTOR should approach the sellers with your concerns.
Finalize Financing and Sign Docs
Before you can officially call yourself a homeowner, your lender must finalize your mortgage loan and provide financing. The documents will be prepared for the loan and the house, and you will have the opportunity to review them with your REALTOR. Be prepared… you have likely never seen this many documents in your life!
The deed will be transferred from the seller to you. Sign on the dotted line and take your keys. You just bought your first house!
Knowing the process that’s ahead of you will make buying a house much less scary. Surround yourself with the right REALTOR and lender, know what you want in your first home, do your due diligence to make sure that your home is up to par, and then enjoy the life you’ve created.