1. Get pre-approved
Before visiting a single home or open house, home shoppers can get pre-approved for a home loan. During this stage in the process, a lender will pull a borrower’s credit and verify their financial information. A pre-approval letter details how much house you can afford. This step is important, as a pre-approval can signal to sellers that you’re a serious buyer.
2. Use a Real Estate Agent to Find a Home
A buyer’s agent will represent your best interests and should be familiar with the geographic area you’re focused on. A good real estate agent may be a member of the National Association of Realtors, understand the housing market, and have expertise on home prices. They may be able to find you homes before they’re on the market.
3. Research Your Mortgage Options
All mortgages are not alike. In fact, they are very different. Some are conventional loans with a 20% down payment; others have down payments as low as 3%. Because there are so many different types of mortgages, it’s important to shop around to find the best deal, which will differ depending on your financial situation.
4. Make an Offer
Once you’ve found your dream home, it’s time to negotiate an offer. Buyers can negotiate on everything from the purchase price to contingencies, or other requirements that need to be met for the sale to happen, including a home inspection, an appraisal, a financial contingency in case a lender refuses to finance a loan, and a title search. You’ll find all the details in a Purchase and Sale Agreement, but please note, different states have different names for this kind of document.
The Purchase and Sale Agreement is a binding legal document that states the final price of the home and the terms of the purchase as negotiated between buyers and sellers.
5. Schedule a Home Inspection
When a home is under contract, a buyer is in the due diligence period. During this time, a buyer can make sure everything about the house is as it seems. One way to do this is with a home inspection, where a certified inspector will complete a comprehensive assessment of the property and identify any issues. You can also purchase additional home inspections for things like mold and pests.
6. Schedule a Home Appraisal
When a home is appraised, the appraiser comes to the home to consider all factors that could impact the property’s value and conducts research on comparable properties in the local area. The appraiser will use this information to come up with an estimate of the home’s current market value. If the appraiser finds the home is worth less than its asking price, it may impact the loan terms.
7. Buy Home Insurance
Lenders require borrowers to purchase homeowner’s insurance prior to closing the loan. Homeowner’s insurance protects the property and belongings. It also gives a homeowner liability coverage in case someone suffers from an accident in your new home.
8. Closing the Deal
Your research has paid off in the home buying journey if you’ve made it this far. The seller, the buyer, and their representatives will sign all necessary documents to finalize the purchase of your new home. Buyers will want to carefully review each document to make sure everything is as expected. Once all is signed, the lender will distribute the funds and the deed of ownership will be transferred. Congrats, you just bought a house!