While the homebuying process can be daunting at first, there’s actually a very solid timeline that describes how to buy a home. Every transaction is different and it’s possible that your particular transaction won’t exactly follow this mold; your agent will be able to guide you through in the right order.
How To Buy A Home: The Initial Search
For the majority of homebuyers, the initial home search begins on the Internet. Knowledge is power in real estate, and it’s important to be as knowledgeable as possible about the homes and neighborhoods you’re interested in. Find a site with a great search feature, start scouting agents to see who you’d like to work with, and start researching the process to determine your best course of action.
Since you’re reading this page, you’re already ahead of the game.
* A note about internet search sites: there are literally millions of sites on the internet that will let you search for homes. Some search sites offer estimated values that are derived from tax records, comparable sales, and historical averages. They do not take into account cosmetic quality, location, or the human factor. The value estimates these sites offer are often wildly different from the actual market value. When it comes to pricing a property, there is no substitute for the human mind and a computer cannot tell you how to buy a home. An experienced agent can help you determine the best way to price a home.
How To Buy A Home: Mortgage Prequalification
While overall price is certainly a factor in determining how to buy a home, it’s not necessarily as important as the payment. It used to be very easy to get approved for a mortgage; due to our current economic climate, banks have tightened up their standards and are starting to pay more attention to affordability than ever before.
Getting prequalified for a mortgage is one of the most important things a buyer can do prior to entering the real estate market. Go to a local bank, call a licensed mortgage broker, or have your agent put you in contact with a good and reputable lender before you start looking at houses. This simple step can help prevent major financing problems down the road, as well as give you valuable information about local rates and estimated mortgage expenses.
Here’s an easy mortgage calculator to help you determine what kind of price point you’d like to find.
How To Buy A Home: Look At Homes
Once you’ve been prequalified for a mortgage, the next step is to start looking at homes. Using an Internet MLS search, identify several target properties and drive around the areas the homes are in. Remember to look for things that aren’t important now but might be in the future – if you don’t have kids but might one day, for example, focus on neighborhoods in a good school district.
By now you should have found an agent that you trust to help teach you how to buy a home. Tell your agent about the homes you like, and be sure to tell him or her why you like them – there’s an excellent chance the agent knows about some homes or places you haven’t found.
Take good notes about every house you visit, snap photos of homes you go through for later reference, and ask lots of questions. Go out with your agent several times and get a good grasp on the market. Down the road, you’ll be glad you did.
How To Buy A Home: Making The Offer
Once you’ve found a home that you want to purchase, it’s time to start doing your due diligence. Knowing as much as possible about your purchase before you make an offer will give you leverage with the seller, answer any lingering questions, and provide peace of mind.
Pricing the home is key. In doing your research to this point, you should have a good idea of what the seller expects his or her house to sell for. Have your agent help you determine a fair asking price and make sure you get an estimate of your closing costs. Flexibility is also very important; real estate transactions are often very emotional affairs, and a little give can go a long way.
If you decide you’d like an attorney to review your offer, don’t let anyone talk you out of it. Many real estate contracts are standard fare and a good agent will have no problem helping you draft an acceptable contract but it’s always a good idea to get an objective legal opinion.
Apply For The Mortgage
There are three stages to the mortgage approval process: prequalification, preapproval, and the actual approval of the loan. An actual approval usually can’t be obtained until the lender has had a chance to review the contract, appraise the property, and do credit and background checks on the borrower. This process can take a long time, and it’s important to formally apply for the mortgage immediately after getting an executed contract. Help your lender help you – answer any questions they have promptly and in full, be communicative, and provide documentation in a timely manner.
Inspections and Appraisals
When you’re buying a home, you should always get a home inspection from a licensed home inspector. This inspection will cover most of the major systems of the home, including the roof, electrical system, HVAC, and plumbing, as well as many of the small items you might or might not think to inspect.
It’s also a good idea to get a pest inspection to look for rodents and wood destroying organisms, such as termites; these are usually inexpensive inspections that can provide excellent insight into the home’s condition. Other inspections include the water source (e.g., a private well), a septic tank inspection, and a detailed roof inspection.
In Florida, state law requires lenders to provide discounts on homes with hurricane-resistant features. Many of these features are required by building codes to be included in new construction. You can take advantage of these discounts by ordering a wind mitigation inspection, which requires licensed inspectors to fill out a standardized form for use by your insurance company. These savings can typically run into hundreds of dollars annually.
Your lender will also order an appraisal during this period. A licensed real estate appraiser will visit the home and compare it to other recent sales, using industry accepted methods to determine a fair market price. If the property you’re interested in purchasing appraises for less than the contract price, you may be able to renegotiate your contract and get the home for less. Talk to your agent if this happens to you.
At the very end of the transaction process, and if everything goes according to plan, you’ll be able to attend a real estate closing. At the closing, you’ll need to bring funds to close – you’ll know how much by having your agent review the HUD-1 settlement statement with you – and you’ll receive keys to your new property.
Before you attend, make sure you’re able to do a final walkthrough of the property with the agent. It’s sometimes helpful if the seller is there as well; often the seller will be the best person available to answer questions or show you how things work. You also want to make sure that the property is still in materially comparable condition to when you made the initial offer.
After closing, the house is yours and you can move right in. Make sure to change the locks – this step is often overlooked, but it’s impossible after closing to know who still might have keys.
If you have any other questions or need more information about how to buy a home, please don’t hesitate to contact an agent.