10 Steps to Buying a House

Even under the best of circumstances, purchasing a home can be stressful, and in a market where competition is strong, it may feel positively overwhelming. The general purchasing procedure is still the same, even though some of the specifics may appear different at this time. By knowing the essential processes, you may achieve your objectives and realize your dreams.

When making a purchase, there are a few things you should be aware of. The typical time frame for purchasing a home is six months. The average buyer in 2021 said they had been looking for a home for two to less than three months. Then add 30 to 45 days for the closing.

Where to begin the home-buying process

When purchasing a home, some of the first things to think about are your budget, your ideal neighborhood, and the aspects that are most important to you personally. Here are some questions for you to consider:

• How much house can I afford?
• Am I going to take out a loan?
• How much do I have saved for a down payment?
• Can I afford my desired neighborhood?
• Are home values increasing or decreasing in the neighborhood?
• How long will my commute take?
• Is the school district a fit for my family?
• Is it within walking distance to amenities and activities?
• Once you have the answers to these questions nailed down, you can start your home search.

10 most significant things to do when purchasing a home are listed below.

Step 1: Verify your credit rating

You should carefully examine your personal credit report before allowing a lender to evaluate your credit score.

A credit report: what is it? Three significant credit reporting agencies—TransUnion, Equifax, and Experian—provide information for credit reports. This report is what determines your Vantage score as well as your FICO score.

All three reporting organizations provide free reports to you, at least once a year. Before you apply for credit, dispute any inaccuracies you discover in your report right away so they can be fixed.

What does FICO stand for? Lenders use your FICO score to assess your creditworthiness. Fair Isaac & Co. calculated this, and the result falls between 350 and 850.

A Vantage Score: What Is It? When you check your credit score on consumer-facing credit check websites, you will see your Vantage Score. The Vantage Score and FICO score may differ from one another. Your Vantage Score is not used by lenders to assess your creditworthiness.

Typically, you can get approved for an FHA loan if your credit score is 580 or above.
Your interest rate will be lowered in proportion to your credit score. Although qualifying requirements vary by lender, generally speaking, a credit score of 720 or over will earn you a good interest rate on a conventional loan. Typically, you can get approved for an FHA loan if your credit score is 580 or above.

Prior to applying, you should endeavor to raise your credit score and be aware of the following things that could affect it:

• Payment history
• Total debt
• Length of credit history
• New credit
• Type of credit

Step 2: Determine the amount of home you can afford

Your lender will let you know the maximum amount you can borrow once you’ve been pre-approved (we’ll go into more detail about the pre-approval process later). To obtain a broad idea of what you can afford, however, you do not need to wait for the pre-approval. The Zillow Home Affordability Calculator, which takes into account your annual income, monthly debts, and estimated down payment amount, among other parameters, will assist you in determining the appropriate price range.

Set your wish list’s priorities according to your budget.

Once you have an approximate spending limit in mind, identify the essential characteristics for your property. Your future home’s size, location, and amenities will probably depend on your budget. Here are some wish list items to think about:

• Number of bedrooms and bathrooms
• Square footage
• Outdoor space
• Preferred location
• Type of home
• Layout, features and finishes
• School district
• Pet-friendliness
• Work commute

Step 3: Locate an agent in real estate

Having an experienced real estate agent by their side to help them navigate the process is generally beneficial to buyers. In 2021, the Zillow Group Consumer Housing Trends Report 2021 states that 82% of purchasers engaged an agent at some point during their home hunt. Generally, the buyer’s agent commission is covered by the seller, therefore utilizing an agent is an affordable choice for buyers.

Here are some instances in which a buyer’s agent may be useful:

• Market insights recognizes patterns in home values, recent construction, buyer desire, and the general status of the market.
• Offer price establishes the value of a house and suggests a reasonable starting offer.
• Knowing when to push for a cheaper price and how to bargain for repairs and contingencies
• Possesses firsthand knowledge of the community and surrounding schools
• Expert recommendations offers suggestions for a reliable contractor, lawyer, lender, or other suppliers.

Naturally, you want to be sure the agent you choose is the proper one. According to a 2022 24% of recent house buyers stated they wished they had chosen a different real estate agent.

Step 4: Apply for preapproval

Getting pre-approved by a lender will provide you with an official determination of your house purchase budget, unless you are purchasing the property outright. According to a 2022 Zillow study, 86% of sellers would rather have a buyer who is pre-approved for a mortgage than one who is pre-qualified.

A lender will compute your debt-to-income ratio and evaluate your entire financial situation by looking at your:

• Income statements, such as tax returns, rental income, W2s, and 1099s
• Assets include retirement accounts and bank statements.
• Debts, encompassing regular costs such as credit card payments, student loans, and various mortgages
• Documentation of insolvencies and repossessions
• Rent for the present, alimony, child support, and any presents for the down payment

A pre-approval letter will be sent to you once you’ve been pre-approved. It is useful not only for formally stating your borrowing limit but also for submitting an offer. A letter of pre-approval lets a seller know you’re serious about purchasing their house. This is particularly crucial in a competitive market where you will probably be up against other bids.

It should be noted that you are not required to finance your loan through the same lender that provided your pre-approval. In reality, before you really open your mortgage, it’s best to compare interest rates and costs and obtain estimates from several lenders.

Some buyers can save tens of thousands of dollars over the course of their loan if they shop around for the best rate. A typical U.S. home’s monthly payment could increase by more than $200 with just one percentage point of higher interest, or roughly $75,000 over the course of a 30-year mortgage. The online mortgage marketplace offered by Zillow allows buyers to compare several lenders.

Remember that before to closing, your debt-to-income ratio will be reviewed once more. Taking on additional debt may reduce the total amount of loans that you are eligible for when financing.

Step 5: Begin your house hunt

An excellent place to start your property hunt is online, where you may look through available properties. Ninety-five percent of buyers start their house search online. Start your search for homes in your desired neighborhood, then refine your results based on pricing and must-haves. Your agent can also arrange showings and forward listings to you.

Try to be adaptable; as your house hunt progresses, you’ll probably need to change your criteria. For instance, you may determine that having your ideal neighborhood means sacrificing an additional bedroom. Experiment with search settings to see what you could get with your money if you made slight adjustments to your wish list.

Things to consider when seeing residences

When you begin making in-person house visits, pay close attention to the home’s “health” so that, should you choose to submit an offer, you’ll be aware of any potential obstacles. In the end, the inspector will provide you with an official report on the quality and condition of the house, but during your tour, be aware of the following:

• Cracks and structural flaws
• Water pressure (activate shower heads and faucets)
• Problems with electricity (check the light switches)
• Door and window functionality and heat retention
• Roof and external attributes
• Traffic or neighbor noise

Step 6: Present a proposal

After you’ve located the ideal house, you should base your offer on your agent’s comparative market analysis (CMA). The market value of a house is determined by the CMA using similar recent sales in the same neighborhood.

Your realtor should assist you in establishing a reasonable offer price and determining whether to give some wiggle space, depending on the condition of your local real estate market, using the CMA as your starting point.

In addition to the CMA, the following additional factors should be considered before placing an offer:

Disclosures: There are difficulties with recognized structural flaws, work that is not authorized, natural disasters, and flood threats. Make sure your agent requests disclosure documentation from sellers as most states require them.

Closing date: If you are purchasing a home with a mortgage, the closing process will take place 30 to 45 days following the execution of the contract. You can ask for a later closing date when you submit an offer to accommodate your moving schedule, but the seller might refuse.

Contingencies: A contingency is an agreement that specifies what needs to happen in order for the sale to proceed, either between the buyer and the seller or the lender and the buyer. Certain contingencies are essential, such as the appraisal contingency that your lender will need to make sure they aren’t spending too much for your loan. You decide whether to have an inspection contingency, but it’s strongly advised. 88% of successful purchasers obtained their property without forgoing the inspection.

Earnest money: When you make an offer on a property, you can include an earnest money deposit as a way to demonstrate your seriousness about the purchase. The earnest money just becomes a component of your down payment if you close on the house. You lose the deposit if you back out of the deal (barring an emergency).

It’s crucial to remember that not all offers are accepted. Although it can be disheartening, try not to lose hope if your initial offer on a house is rejected. Actually, before closing on a property, 59% of purchasers who made one offer ended up making many.

Step 7: Arrange for the examination

88 percent of purchasers performed an examination of the house they were purchasing. Performing a home inspection and putting in an inspection contingency are the greatest strategies to be sure there are no serious underlying problems with the house you are purchasing.

The inspection is usually arranged within a week following the contract’s signature. Attending the inspection is advised since it’s a great chance to learn more about the inner workings of the house. Your agent will typically be present as well. You’ll have time to talk with your agent about the formal inspection report and determine how to react to the seller after receiving it.

If significant, non-cosmetic problems are discovered, you can resume talks and ask the seller to either pay to resolve the problem before closing or give you a credit so you can resolve it after closing.

Step 8: Obtain financing

To formally submit the mortgage application, you still need to complete a few steps even if you have been pre-approved. If all goes according to plan, once you’ve finished the following procedures, you should get the “clear to close,” which indicates that the lender has accepted your purchase.

Application for Loan

Some of the paperwork you’ll need for your application is already in the possession of the lender that handled your pre-approval, should you choose to submit an official loan application through them. It’s likely that you’ll have to submit current financial statements. Throughout this procedure, answering requests promptly is the most crucial thing you can do. For instance, send your W2 as soon as the lender requests it to prevent your closing from being delayed. The list of papers required by the lender to finish your application will be provided to you if you choose to proceed with them.

Evaluation

You won’t have much to do in this situation because your lender will employ the appraiser. To arrange for the appraisal, your real estate agent should coordinate with the appraiser, seller’s agent, and both. Upon completion of the appraisal, copies of the appraisal report will be sent to you and your agent so you can review the comps that were used in the calculations and view the appraised fair market value.

In the event that the appraisal and your offer price match, you should be able to close.

Better still if the appraisal turns out to be higher than your asking price! This indicates that not only are you free to close, but you’re also getting instant equity because you’re buying the house for less than market value.

In the event that the appraisal is low, your lender will not approve the entire loan amount since they believe you overpaid for the property. Either try to renegotiate the offer price with the seller, or make up the difference in cash between the appraised value and the offer price. You can try to get a new appraisal from your lender if you think the one that was provided was inaccurate.

Step 9: Get a coverage for homes insurance

Before closing, you’ll need documentation of a homeowners insurance policy, so if you currently own a house, ask your current agent to assist you in obtaining a new policy. If you are not a house owner, compare policies until you find one that suits your needs. You can work with your lender to arrange up a policy that you can pay for each month using your escrow account.

Step 10: Shut up and go

A lot of purchasers decide to schedule their last walkthrough for the morning or day before closing. Its goal is to confirm that the seller executed any agreed-upon renovations (if any) and that the home looks exactly as it did when you made your offer.

You should budget at least a couple hours at the title firm on closing day to sign documents. Additionally, you should be ready to bring money to meet your closing costs, which usually amount to three to five percent of the transaction price.

You’ll get your keys after the sale is officially recorded and the signature is finished. You own the house!

It’s now time to set up the new house’s services, including internet, cable, and electricity. Verify the terms of the contract with your real estate agent if you’re purchasing a condo with a homeowners association that pays for some utility expenses.

Finally, prepare to move into your new house and settle in.