If you want to buy a home, knowing what to expect makes everything easier.
Buying a home is unlike any other type of purchase. After all, you don’t typically drive up to a home for sale, ask how much it costs, and pull out your debit card to buy it. The homebuying process begins with shopping for a mortgage and ends with closing on the home—with a bunch of steps in between. It can seem pretty complicated, but if you know what to expect, the whole process goes much more smoothly.
The length of a homebuying process is different for everyone and can take anywhere from six months to two-and-a-half years before actually moving into your new home. The average buyer spends 4-to-5 months in the consideration phase, 30 – 90 days shopping, less than a week to make an offer and negotiate, and about 30 days to close. The length depends on well you prepare, and if you have the right help along the way. If you’re new to homebuying, consider following our step-by-step guide which breaks down the overall process of buying a house.
How to Buy a House in 10 Steps
- Shop for a mortgage.
- Hire a real estate agent.
- Make a list of needs and wants.
- Search online house listings.
- Visit open houses.
- Make an offer and negotiate.
- Get your loan approved.
- Hire a housing inspector.
- Wait for the appraisal.
- Buy a house after closing.
1. Shop for a mortgage.
Shop for your mortgage first so you’ll know how much house you can afford. Plus, once you’re pre-approved, sellers will know you’re serious and ready to buy. Comparison shopping for a mortgage is important. Although you can get a mortgage just by going to your primary financial institution or the first online place you see, it pays to shop around. Before you apply, have ready copies of your bank statements, pay stubs, and your W-2 forms and tax returns for the past two years.
2. Hire a real estate agent.
Trust us—you want to hire a real estate agent. There’s no benefit to going without one because buyers don’t pay an agent’s commission—sellers do. Plus, you have a lot to gain. Agents have expertise in the buying process, neighborhoods, the market, and negotiation. You’ll get through the home buying process more quickly with an agent, too. But just how does one find such a trusted agent? Getting referrals from friends and family is a great place to start. If you don’t know anyone who has purchased a home in your area, online reviews can help you identify the best agent for you. And a face-to-face meeting is the best way to finalize your decision.
3. Make a list of needs and wants.
You’ll be a more efficient shopper if you know what you’re looking for. How many bedrooms and bathrooms will you need? How much property do you want? Think about location, too. Do you want to live close to work? Extended family? Downtown? The type of neighborhood factors in as well. Do you want a family-friendly neighborhood with good schools? Do you long to walk to shops and restaurants? Split your list into must-have features and nice-to-have features. Once you have an idea of what you want, you can easily trim your list to include only the homes that are a good fit for you.
4. Search online house listings.
Be prepared to be overwhelmed with data as you enter this stage. You will likely look at dozens—or even hundreds—of homes online. Your needs and wants list will help you narrow down your options, as well as help you determine if your budget and your home dreams align. To start, make a short list of properties that fit your needs.
5. Visit open houses.
With your agent in tow, visit as many properties as you can. Even if you fall in love with the first house you see, commit to seeing as many on your list as possible. Comparison shopping is important, and you’ll learn more about the market with every one you walk through. And you might just fall more in love with another home.
6. Make an offer and negotiate.
Your real estate agent can guide you on what sort of offer to make based on many factors, such as the home’s asking price, the market, and on how much you want the house. If you’re in a competitive market, some agents will recommend writing a personal note to the seller. If they are in a position to choose amongst several buyers, they may pick someone with a lower bid who seems to love their house as much as they do. The seller might approve your initial offer, or they may engage in negotiations.
7. Get your loan approved.
If your offer is accepted, it’s time to get official. Being pre-approved for a mortgage means you’re likely to get the mortgage. Go back to your lender, and let them know you’re ready to move forward with the process. Your lender will order an appraisal and have you sign some more paperwork. Your loan application will then enter the underwriting stage before it’s approved.
8. Hire a housing inspector.
Some homes can be money pits. Do your due diligence by hiring a housing inspector who can let you know what issues the house has. Every house will have some, but not all problems are deal breakers. Your inspector can’t tell you whether to buy or not, but the inspector’s report will help you decide what to do. Enlist the help of your real estate agent or a trusted homeowner to help guide you.
9. Wait for the appraisal.
A bank won’t finance a home for more than it’s worth, so getting your loan depends on the appraisal. An appraisal is an expert determination of a property’s value. If the appraisal comes in at or more than the price you offered to pay, it’s time to celebrate. But if the appraisal comes in lower than your offer, you may need to come up with extra cash, renegotiate the price, or say goodbye to that particular home. Note: This is where having a financing contingency comes in handy.
10. Pay closing costs.
You’ve reached the finish line. Well, after you pay closing costs, that is. Closing costs typically represent 2 percent to 5 percent of the home’s purchase price. These costs generally include attorney fees, appraisal fees, your down payment, homeowner’s insurance, and property taxes. You’ll pay these during a meeting—your closing—where you’ll sign all the paperwork and walk away with the keys.
Now pat yourself on the back—you’re a homeowner.