1. Get pre-approved
Your first step in the home buying process should be to set a budget; this includes taking a look at how much you’d like to spend per month and how much cash you have to put towards a down payment and closing costs. A mortgage professional can help you decide which financing programs may be the right fit for you but ultimately, they’ll provide you with the most important tool you’ll need to purchase your home – a pre-approval letter.
In order to be competitive in the market you’ll need to go on showings prepared to write an offer that same day, and a pre-approval must accompany the offer. Even if you’re purchasing a property in all cash, you should expect the seller to ask for proof of funds from your bank.
When it comes to choosing a lender, your best strategy is to meet more than one and stay local. If a serious problem with your transaction arises, you’ll be glad to be able to walk into a brick and mortar building and speak with a professional face to face. Besides, you never know who has the best programs until you apply.
2. Find an agent
If you don’t already personally know a licensed Realtor that you’d like to work with, asking friends and family for a recommendation is a really good first step. Be sure to dig deeper on those recommendations and ask how they would rate them on things like communication, negotiation, professionalism, timeliness, and follow up. Everyone communities differently and your expectations may be much different than your friend’s who just loved their Realtor, so probing for more details can’t hurt.
Once you’ve narrowed it down to one or two agents, do your own homework. Look them up online and decide if you like what you see. The way they represent themselves as a real estate professional is a reflection on how they’ll represent you as a buyer; don’t overlook this step.
Once you’ve decided on a top choice, ask them for an initial meeting and testimonials from their past clients, if these aren’t already available to you on their website. This combination should give you all the clarity you need to make the right choice.
3. Tour homes
Pat attention to school districts, proximity to work, and neighborhood activity as these are common deciding factors in the home buying process. There are certain questions that your agent cannot answer due to ethics laws; for example, your agent cannot tell you if the neighborhood has a certain percentage of people of a specific faith, ethnicity, etc. The term for this is steering and it’s a slippery slope, so rely on county information or neighbors to answers these questions for you.
When scheduling showings, be mindful that some sellers require a one-hour notice and others require 24 hours, for varying reasons. Be prepared to see other buyers looking at the same property at the same time if it’s in a popular neighborhood or price point. Some sellers allow for overlapping showings, but most of the time this is information you’ll know ahead of time.
4. Submit an offer
Your agent will prepare and talk you through the terms of your offer. The typical purchase agreement is multiple pages long, includes lots of jargon, and will seem a bit overwhelming but with an experienced and patient agent, you’ll come out on the other side feeling confident. Remember, it’s up to you what the terms of the offer are; your agent’s job is to guide and educate you to make the best decision for you – not dictate what your terms are. Earnest money will need to accompany your offer. Typically this is about 1% of the purchase price but can be used as a tool in multiple offers. If you find yourself in multiple offers and you have the cash on hand to increase the amount of earnest money, it’s a good idea to speak with your agent about doing so, as this creates more confidence in your financial heath from the seller.
5. Home inspection
Home inspections are one of the many moving parts that may or may not be included in your offer. It’s a situational decision that’s best talked through with your agent. They are typically highly recommended but completely optional.
Not all home inspectors are created equal and licensing requirements are lax so you should rely on referrals and recommendations from your friends, family, and agent. It’s best if you can gather at least two different inspectors for you to research and choose from. When researching inspectors ask them how their reports are laid out. Check boxes vs. narrations are two defining factors when it comes to inspection report styles. Check box formats tend to be easier to read and more comprehensive, in my opinion. Also ask them if they walk you through the house to show you how to work mechanicals, panel locations, and main waterline shut offs. Inspections typically cost anywhere from $295-350 and the price and length of the inspection depends solely on which inspector you’ve chosen.
Your final walk-through will likely occur the night prior to or the morning of closing day and it’s your last chance to make sure the personal property you included in the purchase agreement is still there and the property you agreed to purchase is still in the same condition it was when you agreed to buy it.
7. Closing day
You’ve made it through to the last step of this brief overview and while many things were happening behind the scenes with your agent, your lender, and your title company, hopefully you’ve been packing up and holding off on big purchases until after closing day.
Bring your government I.D. to the title office along with your payment. You do have to pay for the house today; this may be in the form of wire transfer or cashiers check depending on your situation. Your lender and closer will coordinate and guide you through this. Although your lender and agent are not required to attend closing with you, it’s important that they are there. It’s a stressful and sometimes emotional day that is made better with the guidance and comfort from the professionals who helped get you to this point.
This is a basic framework for the home buying process. Buying a home is one of the largest and most complicated transactions you’ll make in your adult life and hiring the right agent to guide you through this complex process is one step in the right direction.