Updated: Nov 10, 2021
Buying a home always felt like a dream rather than a reality to me. As a repeat renter, at the end of each lease I always knew I wanted to buy a home instead of starting a new lease. Although it was easy for me to scroll through Zillow listings and marvel at the granite countertops in the kitchen and the wide-open backyards, I knew in my mind that those things would never be feasible for me – or were they?
As a 21-year-old that had just graduated college I falsely told myself that I would never get preapproved to purchase a home. Believe it or not, there are a lot of ways to purchase a home and there are many benefits for purchasing a new home as a First Time Homebuyer. Although I didn’t end up purchasing my first home until I was 23, going through the homebuying process taught me so many things.
Here is my 15-Step Guide map for Buying a Home!
Step 1: Think Ahead
This step is very important. Planning is critical when it comes to purchasing a new home because there are a lot of intricate parts and details involved. The best thing to do when you decide you want to buy a home is to ask yourself the following questions:
- When do you want to buy a home?
- When do you want to buy the home?
- What do you need in the home?
- What do you want in the home?
- How much of a monthly mortgage payment can you afford?
- Do you have enough money for a down payment?
- How many people will live with you?
- What are would you like to live in?
While some of these questions are obvious, asking these to yourself will help you plan what you really want, why you want it, and compare it to what you can afford and/or need.
Step 2: Stay Organized
When people are asked to describe their home buying process, they typically use adjectives such as long, confusing, overwhelming, and difficult. While it is true that making such a large purchase will be overwhelming and it may take a while, that doesn’t necessarily mean the process needs to feel that way.
To ensure that you are able to streamline your mortgage application process it is important that you keep a few things organized. Here is a list of the most important items to keep track of:
- Credit Scores and Reports
- W2’s for the last 3-5 years
- Tax Returns for the last 3-5 years
- Steady Employment for the last 2+ years
- 2-3 forms of Identification
- 12-24 Months of Bank Statements
- 12-24 Months of Statements for all Assets (Retirement Accounts, Investment Accounts, etc.)
Step 3: Find a Lender
Once you have planned what you want and have all your documents organized it is time to find a lender. Many different sites offer search engines to find a lender near you. Here are a few to try:
Other ways to find a lender is to ask family and friends for suggestions or to apply through your bank.
Step 4: Get Preapproved
After you have selected a lender and submitted your mortgage application, your documents will begin going through the approval process. The approval process typically takes anywhere from 3 business days to two weeks depending on the information in your package. During this time, the lender typically checks your credit score and conduct employment verifications.
Once your credit, employment, and income have all been reviewed and verified then the lender will touch base to let you know whether you are approved or not. If you are approved, they will let you know what your maximum home purchase price is.
Step 5: Find a Relator
Once you have your preapproval, the next important step is to select your relator. Selecting the right relator is very important. Not only will they help you find a home, but they will serve as your guide and liaison during the process. Often times After you have selected a relator, they will typically request a brief meeting or phone call with you to figure out what you are looking for. During the initial meeting they will ask whether you have a lender, if you are preapproved, what your ideal purchase price is, how many rooms you want, any key features your looking for, location, etc.
After they have gathered that information then they will get to work with hopes of pulling the best listings for you to visit. Once they have pulled listings, they will share them with you and you will advise whether you are interested in visiting them. If you are interested in looking at the properties in person, then the relator will schedule those visits for you.
Step 6: View Listings
Congratulations! You have made it to the fun part of the process – looking at homes! Now that you have selected homes to view with your relator it is time to go see them in person. When you get to the home, you will often need your relator to put in a code to unlock the lockbox on the door. Inside the lockbox there will be a key to open the home.
Once the home is unlocked you are free to roam as you see fit. Take your time, pay attention to the little things, ask your relator any questions you may have, vocalize anything concerning to you, and take pictures and/or videos. Doing all of these things will help you really drill down whether this home is the home for you.
Step 7: Make an Offer
After you have taken the time to visit homes with your relator you will likely find one that you are extremely interested in – perhaps even one that you love! While this is an exciting time, it can often become an overwhelming time as well. Once you have selected the home you like most, it is time to submit an offer to the seller. To make sure that you are submitting the most competitive offer be sure to do your own research and lean on your relator.
Your relator should be prepared to provide you with comparable homes in the same area as the home you are interested in to let you know what they are worth and what they sold for recently. Your relator will also be prepared to help you understand any clauses, regulations, acts, etc.
As always, if you have any questions related to the offer before, during, or after submission it is important that you openly communicate with your realtor.
Step 8: Patiently Wait
Once you submit your offer the seller has the power. Depending on the market, you may have to wait a few hours, a few days, or even a few weeks to hear something back. The best thing to do is to keep looking at other houses and keep your mind open.
Step 9: Negotiations & Final Contract
Congratulations! The seller finally responded to your offer. Perhaps they accepted it, maybe the declined it, or most likely they asked you to make some changes. Don’t be discouraged if the seller comes back with questions or requests. Negotiations are common and very important from the perspective of both buyer and seller. Again, to ensure that you are making the best decisions be sure to consult with your family, relator, and legal authorities if needed. Before entering into any legally binding contract such as a home purchase it is important for you to read and understand everything.
After you have finished negotiations, both parties will sign the purchase contract/agreement and the next phase of the process will begin.
Step 10: Appraisal.
Once the purchase contract has been fully executed it will be sent to your lender. Your lender will then order an appraisal of the property. The appraisal is very important because it will tell the you how much the property is worth, and it will tell your lender whether or not they should lend you the amount of money you are attempting to purchase the home at.
If the market is very challenging and home prices are driven higher than they appraise for, buyers can run into problems securing a loan for the total purchase price of the home. If the market is stable, then buyers are less likely to run into problems with the appraisal.
Step 11: Inspections
If all has gone well with the appraisal process, you are one step closer to purchasing your new home! Depending on the contract clauses you agreed to when signing the purchase agreement, you may be entitled or required to have a few home inspections done. Often it is important to have an inspector come out to check the home to ensure that it is structurally sound. They will often also check for mold, insects, termites, and other important items. Sometimes, you may be advised to purchase additional inspections such as a well water test, septic test, chimney inspection, and so on. While it is easy to forego an inspection here and there to save some money now, you will likely cough that money back up later an unexpected expense.
When choosing an inspector, I suggest asking your relator, friends, family, and lender for suggestions, Most of these people have worked with inspectors in the past and will be able to recommend the best one for your situation. Not only will they likely be good at what they do, but you are more likely to trust them as well.
Step 12: Underwriting
Once the appraisal and inspection are complete your lender will submit your complete package for underwriting. During this process the underwriter will triple check all information submitted in your application and throughout the purchase process to ensure accuracy and compliance. This process can take as little as a few days or multiple weeks to complete. The best thing to do is to wait patiently, keep an open mind, and lean on your lender and relator for support.
Step 13: Closing Disclosure
Wonderful news! Your underwriting is complete and your now “cleared to close”! Congratulations! Now is the time you can officially start getting your hopes up and visualizing yourself in the new home. At this time, you should receive a final closing disclosure document that details your monthly principal, interest, and escrow amounts. Additionally, this document should detail your interest rate, loan length, and the amount of cash you will need to close. The amount of money that is needed to close will need to be brought to the table when you go to sign all the purchase documents and obtain your title.
Step 14: Final Walk Through
The day of closing, it is important that you visit the home one last time with your relator. While it is easy to get caught up in the excitement and rush over to the title agency to sign your paperwork, this step is very important. Before you sign anything, it is critical that you are aware of the current condition of the home. Since the last time you visited the home, perhaps other visited it or people moved out. During those visits it is possible that something could have happened to the home or perhaps some damage has taken place. Before you sign anything you need to make sure you are aware of the most up to date version of the home.
Step 15: Closing
Congratulations and welcome to closing! Typically closing takes place in person at the title company assigned to your purchase. During the closing session you, your realtor, the title agent, the sellers agent, and perhaps your lender will be in attendance. The title agent will review all of the home purchase documents with you to ensure you understand them, and you will be asked to sign. Once all the paperwork has been signed, you will need to submit your cash to close payment to the title agent. After all the paperwork has been collected, digitally copied, and your payment has been made you will be given your keys.
Congratulations, you are now a homeowner!
So, as you can see the home buying process is quite a lengthy one. Sometimes there are more or less steps involved depending on the type of home, the type of seller, or the type of buyer – but for the most part these 15 steps will always occur.
I hope this information was helpful and that you can apply it your home buying plans! Although the process can seem daunting, with the appropriate planning and the right team it can be fun and painless.
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