13 Steps to Buying a House
Figure out your budget
The first step to home buying is to figure out your top end for your budget. This will guide the rest of the process. Make sure your credit score is good or great and you can even shop around for pre-qualification from banks that will give you a top end number you're likely to qualify for. Remember that you may not want to use the pre-qualification amount as your top end. Only you know your budget and may want to make adjustments to how much you're willing to spend.
Pro Tip: Some find it helpful to live as if their housing costs were the new mortgage payment, by putting the difference in savings. This helps you know if it's comfortable in your budget and gives you extra savings for increasing your credit and purchase expenditures.
For more information on the topic:
How to increase your credit score
Find the right Realtor
Buying a home is a big investment. A Buyer's Agent will represent your interests in the sale. If they are a certified Realtor, they have legal and ethical obligations to make sure you're protected during the process. The right Realtor will also be your guide on the journey to home buying. They can help you decide what is important, show houses on the market, and help you avoid costly mistakes.
Pro Tip: Your agent is there for your needs, but is paid by the seller unless you specifically negotiate something different. There's no reason to not have a buyer's agent!
Decide what you need vs what you want
Determining what features you want or need in a property is more complicated than it sounds. If you're buying for a family, it will need everyone's input and opinion. It's also a good idea to get your Realtor involved. They have training to help guide the conversation to make sure that you're looking for the right properties. Pay attention to houses that you visit and talk to your friends as well. If you're planning to stay in the property for years, you'll want to think about how a feature will be appreciated (or not) in the future.
Pro Tip: While it's often fun to list off everything you'd ever want in a property, that exact property doesn't likely exist. Go through the list and narrow it down by moving items into "need" "want" and "would be a nice bonus" categories to give your Realtor more information to guide your search.
Look for homes
Your agent will search for homes based on your list of wants and needs. You are welcome to join that in looking for houses too, using apps like Realtor and Zillow. Drive by houses you're interested in to make sure that the commute and neighborhood are what you want. Your agent will send you properties that you might be interested in and schedule showings to walk through homes that you want to see in person. You can also attend open house events.
Pro Tip: Don't immediately nix a property based on the pictures alone. Some listings have pictures that don't show off the house and other properties just need easy cosmetic fixes like paint or carpet to make them diamonds. Showings let you walk through the layout and see the "bones" of the house to determine if it's right for your family.
For more information on the topic:
Things to look for in a house showing
Make an offer
Probably the most exciting step in the process, your Realtor will help you write an official offer for the property you're interested in. This is a legally binding document that opens negotiations with the seller. Your agent will run a cost analysis and make sure that you know what a fair price for the property is based on the current market, neighborhood, and home's features.
Pro Tip: Pretty much nothing's off limits, but lean on your agent to help you decide what's a reasonable offer. Low ball offers may mean the seller refuses to counter and you lose out on the property.
Negotiate and settle on a contract
Once the offers and counter offers are complete and both sides agree to the terms of the contract, the property will be listed under contract. Properties under contract cannot be sold to someone else, even if they offer more money. The contract can only be dissolved or renegotiated in a few cases, like a home inspection turning up a major problem.
Pro Tip: Share personal information about yourself and your family to give the seller a reason to care about you.
For additional reading:
How to negotiate to buy a house
Things other than price you can negotiate
Open an escrow account and make a deposit
An escrow account is an account that your Realtor will set up to hold the money that changes hands before closing. This is the time to make an earnest money deposit on the home and other fees may be put in at this point. The title search will also be ordered at this point. Your agent can guide you on what amounts are required and what amounts are typical for the area.
Pro Tip: Make sure the offer contract states that you will get your deposit back in full if the contract contingencies aren't met and you have to step away from the sale. Never make a check out directly to the seller.
Lock in your lender details
It's time to lock in the lender, rate, amount, etc. This is a process and usually takes a few weeks to complete. It's important to get back to your banker with any requested information as fast as possible so that you won't slow down the process and miss your closing date.
Pro Tip: Do not alter your financial status during this time by making major purchases, opening new credit cards, or making large unexpected donations or gifts.
Order an appraisal
Your bank will randomly select an appraiser for your area. This person will make notes about the house, land, and extra buildings then report to the bank its worth. That is typically the maximum amount for a mortgage on the property. If the appraisal is lower than the agreed upon contract price, talk to your Realtor about options to renegotiate or make a cash settlement for the difference at closing.
Pro Tip: The bank's appraisal has almost all of the details that your insurer will need to insure the property. You can send a copy to your insurance agent to speed the process along.
Approve seller disclosures and home inspection
One of the contingencies on your contract is most likely that no major issues will be uncovered in the disclosures or home inspection. Your Realtor can help you choose a reputable and thorough home inspection company. Any major issues mean that you can renegotiate the contract, or choose to walk away. You should get your earnest money back if you do, but you will not be reimbursed for fees like the title search, appraisal, and home inspection. For minor issues, your Realtor will ask you to determine what you want addressed before closing and give the list to the sellers.
Pro Tip: You can be at the house while the inspector is there. Take that opportunity to talk to them and ask questions about how unfamiliar things in the house work, like water filters that will need changing or turning on a gas fireplace without a thermostat.
Do a final walk through
Usually scheduled a day or two before closing, this is the buyer's final inspection of the house. During the walk through you should make sure all of the repairs are done that were requested and the house is in expected move in shape. The property should be clean and free of the seller's items so you can see everything. You're checking to see if the property is in the same condition you thought it was when you put the contract on it. If you see a major issue during the final walk through, address it with your Realtor before closing.
Pro Tip: Do not skip final walk through. Bring your camera, contract, and notepad to keep a list of anything you may need to remember later.
For additional reading:
How to do a final walk through
Your Realtor can help you find a lawyer to facilitate closing. The lawyer and your banker will instruct you on how to deposit your escrow funds.
Pro Tip: Depositing the funds is often done 24-48 hours before actual closing and done by wire transfer. Talk to your banker about this to make sure everything is in line to meet the slightly earlier deadline.
The day has finally come to take legal possession of the house. During closing, you'll sign and initial several copies of multipage documents. At the end, you'll be the owner of your dream house and the keys will be yours!
Pro Tip: Make sure the sellers remember to give you the garage door openers and security code access numbers as well.