Steps to Buying a Home
/1. Find a Real Estate Agent to Represent You
It can be intimidating to know where to begin when thinking about buying a home. The first step is to find a good real estate agent! If you think you might like to work with me, please give me a call or send me an e-mail. I can come and meet with you and we can get to know one another, and see if we would be a good fit. You can also meet real estate agents, and get a feel for working with them, at open houses. Or, you can ask around for referrals. If you don’t live in the DC metro area, feel free to contact me and tell me what you’re looking for in an agent, and I’ll do my best to connect you with a good one in your area.
2. Get Pre-Approved for a Loan
Your real estate agent can recommend to you good loan officers that you can contact about getting pre-approved for a loan. In order to get pre-approved for a loan, you’ll need to provide the loan officer with various financial information so they can see how much money you are qualified to borrow. They’ll want to see pay stubs, W-2s, bank account statements, etc. They will be looking at your credit score, your debt-to-income ratio, what funds you might have for a down payment, etc. to decide you if can qualify for a loan. There are many programs available to help people buy a home, so don’t assume you won’t be able to qualify for a loan. Once you qualify, you’ll know how much you can afford to spend on a home, and you’re ready to get out there and start looking!
3. Find a Home you Want
Once you’re pre-qualified for a home, you can start house hunting! Think about how many bedrooms and bathrooms you want and need, and where you might want to live. Think about what you want to spend (it might very well be less than what a bank or mortgage broker says they will loan you). Then, get out there and start looking. Keep an open mind, and be prepared for the possibility that you’ll change your mind about what you want in a house and where you want to be. Sometimes you have to see several homes to better narrow down what you want. I recommend not seeing more than 4 or 5 homes at a time, so that you can keep them straight in your head and not get overtired. I also recommend thinking critically about each home as you finish looking at it. What did you like about it? What didn’t you like? How would you rate it on a scale of 1 – 5? I’ve had buyers buy the first house they looked at, and I’ve had buyers who have looked for years without buying anything. But in general, once you’ve seenaround 15 homes, you should have a good idea of what’s out there in your price range, and know when you’ve seen something you really like. Then it’s time to…
4. Write an Offer
We are currently (as of my writing this in March 2017) in a seller’s market. That means if you find a home you really like, chances are there are several other buyers who feel the same way about the home. So, by having the pre-approval letter already, you can write an offer on a home you like right away. Your realtor can look at comparable homes and help you figure out whether the home is over or underpriced. They can help you structure your offer in such a way as to be competitive with other offers as possible. And they can help you decide what contingencies you should place into the contract (like home inspection, financing, and appraisal contingencies). They also help sell your offer to the selling agent and the sellers.
5. Work through the Contingencies
Usually when you buy a home, your agent will put into the contract that you will do a home inspection within a few days of the sellers accepting your offer. This is a blog topic on its own, but basically you want an inspector to check and make sure there are no major issues with the home you’re buying. If issues do come up, you can either ask the seller to fix them, or cancel the contract. If you’re getting a loan, you’ll also need time built into the contract to make sure your loan is secured, and time to get the home appraised and make sure the home is worth the money you have offered for it (the appraisal is done by a professional appraiser). If it’s a detached home (not a condominium), you should also get a termite inspection. In general you need at least 30 days from the time a contract is accepted until you can close on and move into a house, because you need to have time for these contingencies.
6. The Walk-through
Within a few days of settlement, you’ll walk through your new home with your agent and make sure everything looks the same as it did before (generally at the time you did the home inspection, though it’s flexible as to what “before” you are specifying). You want to make sure the seller didn’t take anything that was supposed to stay with the house, that everything is still in working order, and that it is cleared out and “broom clean.” This is just an extra step to make sure no adjustments need to be made before settlement.
7. Settlement
This is the day you officially get the keys to your new home! Most settlement companies now expect the money for the home and your closing costs (closing costs include taxes, title, deed, and loan charges, generally about 2 to 3% of the price of the home) to be wired to them the day before the settlement. They will tell you exactly how much you owe (cost of the home plus closing costs) about 3 business days before you go to settlement. So, at the settlement itself, you are just signing all of the relevant paperwork—there’s a lot!—and getting the keys for your new home. Often, in these days of e-mail and texting, it’s the first time you will meet the sellers of the home, though sometimes they’ve arranged to settle at a different time or do their signing through the mail, if they’ve already moved away. In any case, this is an exciting day! Plan to spend about an hour at settlement. Then, you officially own the home and you can move in whenever you like!