You're Only 11 Steps Away From Buying a Home
A Step By Step Look at Home Buying
The specific way you progress through a home buying transaction varies depending on the real estate laws and customs where you live, but there are many home buying steps that are standard, even though they might not be accomplished in the same order in every location.
You’ll feel more confident about your home buying journey when you understand what is required of you and every other person who is involved in the transaction. This guide takes you through it, and shows you that you’re only 11 steps away from buying a home.
Step 1, Get Your Finances in Order
Your credit reports are an ongoing look at how you manage your finances. You must know exactly what your credit reports say about your financial history before you apply for a mortgage, because the reports play an important role in the mortgage approval process and in determining the interest rate and other loan terms that a lender offers you.
If you haven’t looked at your credit reports, you might be surprised at their contents, because errors are common.
Step 2, Get Familiar with the Mortgage Industry
Finding the right loan and lender is crucial to your home buying success.
It’s up to you to determine which lender is best for your needs, and it’s always a good idea to have at least a bit of background about the loan process before you speak to a lender.
Step 3, Get Pre-Approved for a Mortgage
Do you know how much house you can afford? Probably not! Unless, you’ve spoken with a lender!
Pre-approval helps you in other ways. Consider this scenario. A home seller gets two similar offers. One is accompanied by a letter from the buyer’s bank that states she is pre- approved for a mortgage in the amount of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?
Step 4, Determine Your Wants and Needs
Buying a home isn’t as difficult as you might think, even if you’re short on funds, but the process will go a lot smoother if you get familiar with your real estate market and narrow down your wants and needs before you start looking at houses.
Are you a good detective? That’s what you’ll need to be to find and buy a home you love. The home buying process is a journey that requires you to pay attention to small details, ask questions, take notes and stay current with the real estate market in your area.
Grab a piece of paper and divide it into three columns. If you’ll have a co-owner, have that person make a list too, but don’t share ideas just yet.
List Must-Have Features
- If the house must be located in a specific neighborhood or school district.
- If the house must have 3 bedrooms, a 2 car garage, a large kitchen, a view.
- If there must be no restrictions against a home-based business.
- If the home must be one level, with few or no steps.
- List every feature you feel is a must.
List Features You Would Like:
- A basement or a deck.
- Whirlpool tubs, walk-in closets.
- A certain type of architecture.
- Gas heat.
- Central air conditioning.
- List all features that are important to you–but that you might be flexible about.
List Features You Do NOT Want:
- A home located next to a highway or in a congested area.
- Certain types of architecture.
- Homes that need a great deal of work.
- List all features you absolutely cannot accept. Review your list. If your co-owner made a list, compare them to see if your priorities match. If they don’t, you’ll need to compromise, revising your lists so that both of you are happy. Making a list is a good exercise because it forces you to think about your wants and needs, but I can almost guarantee you that the list will change and evolve when you actually begin to look at houses. Even home buyers with an unlimited budget rarely find the “perfect” home.
Before You Start Looking
Before you head out to look at properties, get your finances in order. If you haven’t reviewed your credit records, do it immediately. It isn’t unusual for records to contain errors–and they can’t be fixed overnight.
Get as many credit report problems corrected before you talk to a mortgage broker or lender. Here are some tutorials to help you check and correct your credit reports.
Step 5, Learn to Work with Real Estate Agents
Real estate agents represent buyers, sellers, or both–and in some states they can work as neutral facilitators for either party. It’s essential to understand agent duties and loyalties before you make that first phone call.
Does Your Real Estate Agent Work for You?
Agent Loyalties and Disclosures
You’re buying a home. Does your real estate agent truly work for you?
In the past, home buyers often assumed their real estate agent worked in their behalf. After all, the agent showed them lots of properties, called regularly to tell them about new listings, wrote the offer to purchase, and answered questions about mortgages and other issues related to the sale. Buyers felt free to give confidential information to an agent, unaware that it was the agent’s duty to pass the information on to the seller.
Today, many states have enacted laws to help protect and educate buyers. Most real estate agents are required to disclose whom they work for. The disclosure may take place at your first face-to-face meeting, during a phone call, or by e-mail, but it should always be made before a real estate agent asks for specific information about your needs.
Disclosure Terms Seller’s Agent
An agent working for the real estate firm the seller has employed to sell property.
In a Multiple Listing situation, all offices work to sell each other’s listings, so even if another firm holds the actual contract, all real estate agents are sub agents for the seller.
- A seller’s agent may ask you to sign a statement that verifies she disclosed her agency status to you. It is not a contract, simply a disclosure.
- Buyers should not disclose confidential information to a seller’s agent.
Buyer’s Agent
A real estate agent who has signed an agreement to work in the best interests of a buyer.
- The agreement is a contract, and by signing it you are (usually) committing to work exclusively with that agent.
- Agreements can remain in force for any period of time you both agree to, even as little as one day.
- A Buyer Agency Agreement doesn’t necessarily mean you must pay a fee to the agent. They are usually paid a portion of the seller’s commission fees at closing. However, a contract may state you will pay the agent a fee if you purchase a For Sale By Owner home, so discuss that scenario with your agent before signing. Dual Agent Dual agency occurs when a Buyer’s Agent shows the client a listing held by her own real estate firm.
- It’s more difficult to handle dual agency, since the agent has responsibilities to both parties.
- Dual agency must typically be disclosed to the buyer and seller in advance, and both must agree to it in writing.
- Agent’s duty is to get the best possible price and terms for the buyers.
- Agent must disclose all material facts about property (bad roof, plumbing problems, etc.)
- Agent should disclose personal facts that indicate sellers will accept a reduced price (such as impending divorce, foreclosure, etc.) Buyer agency isn’t the best choice for every situation, but if you are comfortable with an agent, employing the agent to work for you can save you time and money. Real Estate Seller’s Agent
- Agent’s duty is to get the price and sales terms sought by the seller.
- Agent must disclose the same material facts required of a buyer’s agent.
- Agent cannot disclose personal information about sellers without their permission. Real Estate Dual Agent
- A dual agent cannot disclose personal information about either party.
- The dual agent must show care for the interests of both the home buyer and the home seller.
Step 6, Start Searching for a Home
Your agent will give you multiple listing sheets to study. I’m sure you’ll also look on Zillow and Realtor.com and any other site you can think of and spend time surfing the Internet for homes. You might even plan afternoon drives to preview neighborhoods. Those are all excellent ways to see what’s available. The best way may be is to allow your agent to set you up on a home search email where an email can be sent out as soon as a home comes up on the market in your search criteria.
Shouldn’t I look for For Sale By Owners?
You should definitely look at them and if you like them make sure you do things in the proper manner. There are many laws governing home purchase and sales these days. Make sure all the disclosures are made to you and you know of any latent defects.
Step 7, Handle Pre-Offer Tasks
Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase.
You should think of these things before purchasing or ask a Real Estate Consultant.
- How’s the Resale Potential?
- Contract Contingency Basics
- What Kind of House Is It? Site Built, Modular, Manufactured
- Do Others Have a Right to Use the Property?
- Can You Live with the Deed Restrictions?
- Is the Reported Square Footage Accurate?
- Is the Heating System Efficient?
Step 8, Make an Offer
There’s no one set of instructions that can cover all the differences in real estate laws and customs that exist throughout the United States, so the mechanics of making an offer and its specific contingencies depend greatly on your location. However, there are some home buying tips that can help you fine-tune your offer, no matter where you live.
What Comes With the House? Contract Considerations
- What Should the Seller Disclose?
- Determine if Lead Paint Disclosures Are Required
- Decide How Much to Offer
- Asking for Possession Before Closing
- Special Considerations for; For Sale By Owner Purchases
Step 9, Home Inspections and Other Tests
In some states, home inspections are accomplished before the final purchase contract is signed. In other states, inspections take place after an offer is finalized. No matter when you do them, it’s critical to decide which inspections and tests you want to perform.
Talk with your real estate agent or other advisor to find out when inspections should be handled and if additional types of testing are important for your specific area.
Step 10, Avoiding and Correcting Last Minute Problems
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with. Here’s a bit of information that focuses on a few common problems that home buyers must deal with before they close on a house.
Step 11, You’re on the Way to Closing
Most of your home buying problems are behind you now and you’re on your way to closing, also called settlement, the event that transfers ownership of the property to you. Just a few more things to do, and you’re there!
Closing Thoughts
The steps outlined in this article are a general home buying guide. You will encounter issues specific to your location and your transaction, issues that can best be explained and handled by your local real estate agent, your lender, your attorney, your closing agent, or others who are helping you complete the home buying transaction.
Never hesitate to ask questions. Ask as many questions as necessary to help you understand the entire home buying process. You are making a long term commitment and spending a major amount of money–you’ll feel much better about the transaction if you stay informed and understand what’s happening every step along the way.
If you are already in the process of your purchase, you may want to read on Ten Things Home Buyers Should Avoid Doing Before Closing on a Home