A Step By Step Look at Buying a House
The specific way you progress through a home buying transaction varies depending on the real estate laws and customs where you live. But you will discover many steps to buying a house 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've got only 11 steps to buying a house.
Step 1 to Buying a House: Get Your Finances in Order
Your credit reports are an ongoing record of 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. Ideally, you don't want any late payments. One late pay is bad; four will kill you.
Step 2 to Buying a House: 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 talk to a lender. Consider asking your agent for a referral.
- What's the Difference Between a Mortgage Broker and a Bank Loan Officer?
- Understanding Your Debt to Income Ratio
- Should You Choose an Adjustable Rate Mortgage?
- FHA Loan Basics
- VA Home Loan Facts
- Bi-Weekly Mortgage Payment Plans
- Should You Really Buy Discount Points?
- Facts About Private Mortgage Insurance
- Will You Have a Mortgage or a Deed of Trust? Why Does it Matter?
- Watch Out for Loan Fraud
Step 3 to Buying a House: Get Pre-Approved for a Mortgage
Do you know how much house you can afford? Probably not, unless you've talked 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 to Buying a House: 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.
Step 5 to Buying a House: 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. Ask your agent to explain fiduciary.
Step 6 to Buying a House: Start Searching for a Home
Your agent will send listings to your cellphone. You'll also pick up House For Sale magazines and read classified ads in your local newspapers. You'll probably spend an inordinate amount of 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. Here are some tools to help you narrow your home buying search.
Step 7 to Buying a House: 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. Here are a few topics you should explore before you make an offer.
Step 8 to Buying a House: 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.
Step 9 to Buying a House: 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 to Buying a House: 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 to Buying a House: 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 learn, a few more things to do, and you're there!
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.
Edited by Elizabeth Weintraub, Home Buying / Selling Expert
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.