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Buying a home is both exciting and intimidating. There is much more that goes into it than just finding the right home. At times it can feel slow, then like everything is happening all at once. There are several people involved in the process, and huge financial decisions to be made. And if you’re like most people it’s not something you do often.
This complete guide to buying a home talks through the process of starting your home search and the four stages that lead to move-in day. It will also help guide you through each stage so you can make all the right decisions along the way. Further, we’ve included tips and examples to make the information more relatable to your purchase.
This guide to buying a home covers:
Need a quick overview? Here’s a 7 step overview of the home buying process.
Starting the Home Buying Process
Before we walk through the entire process of buying a home, we need to make sure we start from the right place.
NOTE: If this is your first time buying a home, you’ll want to decide if you should rent or buy. Since you’re reading this guide, we’ll assume you’ve decided to buy.
There are actually two options for starting your home search.
1. Talk with mortgage lenders to get pre-qualified or pre-approved. This will allow you to know your price range for your home search.
You’ll also want to consider questions like “How much can I afford?” which we will cover in detail a little later.
2. Work with a real estate agent that’s right for you. Why? Because your real estate agent should have a network of recommendations, including lenders.
The lenders your agent recommends should be experienced in working with buyers similar to you. This is especially beneficial for:
- First Time Home Buyers
- Veterans and Active Military
- If you plan to buy a property that needs updated or renovation
- Flipping a home
Ultimately, where you start comes down to if you want recommendations for a lender. Recommendations can be beneficial if any of the above apply to you since there are loan options that not all lenders may be able to assist with.
Whichever option you chose, we recommend you interview lenders before deciding whom to work with.
While we’ll discuss mortgages more in our Ultimate Guide for Mortgages, here is the short explanation:
So, what is a mortgage?
Simply put, a mortgage is a loan to purchase a home. For example:
Let’s say you’re buying a house for $100,000.
You don’t have $100,000 in your bank account. But, you do have enough to put $20,000 towards the house. $20,000 would be your down payment.
This means you need an additional $80,000 to purchase the home. So you get a mortgage from a lender, such as the bank, for $80,000 and purchase the home (congrats!).
However, the lender still needs to be paid back. Unless you have a really generous lender, there will be some terms to your loan. These include things like frequency (monthly), duration (30 years), and interest rate (5% for example).
Fortunately, this allows you to spread out your payments over time rather than paying back all $80,000 at once. Unfortunately, this means you’ll pay interest which means the true cost of your loan is more than $80,000.
There are things you can do, such as paying off your loan early, but we HIGHLY recommend you read more about mortgages.
Finding YOUR Real Estate Agent
There’s a reason this section’s title says “your” instead of “a”.
No surprise to you, there are a lot of real estate agents. You’ve seen the mailers, signs, and possibly even know a few. However, not all real estate agents are the same.
Think of an agent like your doctor. Doctors specialize. You wouldn’t go to a cardiologist for a dermatological issue. (Unless your doctor told you to; we’re not doctors)
The same principle applies to buying a home.
Every single home purchase needs a specialist. Let’s look at a couple examples:
Jane is a veteran. Jane works with a local agent who specializes in working with former and active military. As a result, she is introduced to a mortgage lender who frequently works with VA loans. Her real estate agent knows how VA loans work, and advises her on how to make her offer as appealing as possible. This helps Jane buy the home even though there were other offers.
Jim is buying a home for the second time. He currently lives in a condo downtown, but wants to buy a single family home in the suburbs 20 minutes away. It’s nearby, and Jim could use the same agent he worked with before. However, he is buying a different type of home and the real estate market can change even 20 minutes away. Working with the same agent as before might not be the best option for him.
We want you to work with the right real estate agent. That’s why matching you with the right agent to help you buy your home is at the heart of our business. And there’s no cost to you.
Even if you don’t use our service, it’s still important to work with the right real estate agent. Like your mortgage lender, we recommend interviewing agents. Learn their specialty, experience, and if they seem like someone you want advising you.
Buying a home is a deeply personal decision, and a large financial investment at the same time. You need to have the right agent on your side.
Stage 1: Deciding Which Home Features Are Important
We know you’re excited to start looking at homes online, and may have already started. Think of this as creating a guide for yourself to help you narrow your search.
How long do you plan on living here?
This an important consideration because, well, life happens.
Perhaps you’re relocating for work. If you know you’ll only be there for a few years, does your home need to be your dream home?
Maybe you’re getting married and buying a home together. Do you plan on being there a couple years or more than 10? If it’s longer term, and you plan on having children in a few years, then you’ll need to begin considering things such as schools.
This is also a good time to think about what you will do with your home when you move again. Should you sell your home, or rent it out? This alone is too much information to be covered in this article, but it’s a factor you should definitely discuss with your real estate agent.
Next, decide which property type(s) you are most interested in. There are pros and cons to each property type. The most common property types are:
- Single Family Home/Detached Home: This is likely what comes to your mind when you think “house” (or a know-it-all TV doctor). You may need to narrow it down further from here, as there are several different styles of homes.
- Condominium (aka Condo)
- Townhome (or Townhouse)
These are just the most common; the above is not a complete list.
This affects more than how your home looks. Regular home maintenance, energy efficiency, and future renovations can all be affected by the exterior of your home.
When buying a home, you’ll need to decide if you want to buy a home that is brand new or currently owned. There are pros and cons to each.
- New: The home may be recently built but not yet lived in, or it may be built to your specifications. If you decide to have your home built to your specifications, you’ll want to make sure you choose the right builder.
- Owned: The condition of a lived-in home can vary greatly, and you’ll need to decide how much (if any) work you want to put into it. These can be broken down into four categories:
- Move-in Ready: Maybe later you’ll want to renovate or update, but there’s no rush.
- Needs Minor Updates: You’ll typically find these homes to be a little lower in price compared to a home that is fully updated. This can be a great option if you want to add your own touch to your home. You may be able to include some of the cost to renovate in your mortgage.
- “Fixer Upper”: There are several terms used to describe this: “handyman special”, “investor’s delight”, “open canvas”. You’ll likely find these to be more economical, and you will need to put some work in. You’ll need to decide if renovations will be DIY or done by a professional.
- “As-Is”: Technically, this isn’t a separate category, but it does deserve to be included. An “as-is” home means that the seller is not likely to make any changes prior to closing. The term as-is can apply to homes in any condition.
Interior & Amenities
How many bedrooms do you need? Do you want a pool? How about a basement or garage?
This list can get extensive, and expensive, quickly.
We recommend that you take the time to decide on “Needs” vs “Wants”.
This list should include everything that your new home needs to have. It’s important to think about this from a time perspective as discussed earlier. Consider your life as a whole when making this list.
Do you have a family member who in a few years may need to live with you? If so, you’ll want to consider that now rather than not having room and needing to move again to accommodate him/her.
Does your dog love to run around and hate spending too much time inside? Maybe a fenced-in back yard or nearby dog park is a must for you.
Only you can decide if something is a necessity. To help get you started, here is a short list of things that could be on your “need” list. It’s recommended that you include your reason why it is needed as we have. This will help you remember when you’re caught up in the excitement of looking at homes why something is on your “need” list, and whether or not you really can negotiate on it.
Let’s look at some examples:
Four bedrooms. One for us, two for the kids, and one as a guest room since friends and family visit often.
Two car garage. So both vehicles can be inside during the winter and one doesn’t block the other in the driveway.
ABC school district. We really want the kids to attend XYZ School.
Fenced-in back yard. Space for the kids and dogs to play.
Home office. I work from home two days a week and need a dedicated space to work.
Break out the vision board, it’s time to make a list of all your wants!
Once you’ve created your list, it’s good to review your list and reorder them in order of importance. Let’s look at an example:
Two car garage, with half used for storage. This could be considered a “want” rather than “need” if storage could also be satisfied with an attic or basement.
Remember, there is no right or wrong answer. However, these items should not be deal breakers. Prioritize your needs over your wants.
Stage 2: Home Search and Neighborhood Research
You’ve probably started this part online long before reading this, and that’s fine.
A word of caution when looking at homes online.
We don’t recommend using the Zillow or Trulia as your main search because they are not directly connected to the MLS. This means that the status of a home may not be as accurate on other sites. It should also be noted that when these sites offer an estimate on the home value, it is only an estimate which at times can be off by tens of thousands of dollars (or more).
It can be great to have your friends and family helping with your home search, which you can do using our social home search. Our search is also connected to the MLS. This allows for more accurate listings.
There are several factors to consider when doing neighborhood research. You decide what is important to you, but some things to consider are:
- Crime Statistics
- School Ratings
- Transportation and Commute Times
- Market Trends
Crimereports.com is a free resource that easily maps any nearby crime. Type in the address you’d like to search and crimes are presented and broken down into three categories (violent, property, and quality of life).
They’ve partnered with more than 1,000 law enforcement agencies for their statisitics.
Family Watchdog is a free resource for identifying nearby registered sex offenders.
There are various resources that provide statistics on school ratings. Some home search websites offer school ratings.
Unfortunately, these ratings can be more subjective than statistic.
We recommend you not only research individual schools online, but also talk with the schools. Ultimately, you can learn more about the school by visiting it and talking with faculty and parents.
This is the same that we recommend for buying a home. You can research homes online, but we still recommend visiting the home before deciding to purchase.
Transportation and commute times
Google Maps is your friend here.
You can easily see commute times, routes, and construction. Here are some other tips that can help you get the most out of Google Maps.
The Time Travel tip at 5:50 is a great way to see how an area has developed and changed over time. We’ve set the video to start at this point.
Google Maps: Time Travel Feature
Again, online research is great, but in person is better.
We recommend commuting from work to a home or area you are interested in residing to experience the commute and see if you’ll be happy with it.
How easy is it to get around for daily life?
Using our home search, you can find scores at the bottom of every listing once you click on the home. These will give you a “walk score” “transit score” and “bike score”, to easily identify how easy it is to get around.
You can also view what is nearby, along with a map, for Groceries, Shopping, Schools, Parks, Errands, Dining, and more.
Scores are on a scale of 0-100. The higher the score, the more walk/transit/bike friendly the location is.
Do homes in your new neighborhood tend to increase in value?
How do the property taxes change?
Is the local community being developed, and are there any future projects planned?
These are questions you’ll want to discuss with your real estate agent. Even if you don’t have a plan to sell anytime soon, or ever, you’re resale value should always be a consideration.
Asking the right questions before you buy can help ensure your home is an investment.
Open houses & Home Tours
Open houses are typically held on weekends.
The easiest way to know which open houses to visit? Our home search highlights open houses and when they are being held.
While using our home search, upcoming open houses will have a red banner at the top of the image with the date and time. You can also search for open houses in the search by clicking More > Listing Filters > Upcoming Open Houses.
Your agent can also help you plan out your open house visits, as well as schedule home tours outside of open houses. If you know a day or weekend you plan to visit open houses, it’s good to check for upcoming open houses the day before or morning of. There may be a new open house to visit, or one may have been canceled if an offer was accepted.
Stage 3: Making an offer
This is where your buyer agent really earns their money.
An offer letter is sent to the seller telling them:
- How much you’re willing to pay (Price)
- What your offer is contingent on (Contingencies)
- When you want to buy the home (Closing Date)
Above is not a complete list, but it does give an idea of what to expect when you make an offer.
However, if A sent you a counter-offer, the offer you submitted no longer exist and you may submit an offer to B. You do risk losing A if negotiations with B take too long. Your buyer agent will be a great adviser for this
When you submit an offer to purchase a home, you are saying how much you are willing to pay for it. You will also include a letter from your lender saying you are pre-qualified or pre-approved for that exact dollar amount. (You may be approved for more, but why tell the seller that?)
You’ll likely include an earnest money check or deposit. This is a check that is held by escrow to show the buyer you are serious. Earnest money may or may not be refundable.
Think of these as hurdles that must be cleared for the purchase to occur.
The most common are Home Inspection and Financing, For example, a home inspection contingency would allow you to have a home inspector look through the entire home to find any defects or need repairs. Once you have this information, you may decide to renegotiate to have the seller make some repairs or realize it is too much work and cancel your offer.
The fewer contingencies you have, the more serious you are to the seller. However, you want to protect yourself with contingencies as well. Your buyer agent will advise you on how which (if any) contingencies should be left out to make your offer competitive in the current market.
When do you want to become the owner of the home?
This is when you would list as the closing date. The sooner the date, the more serious you come across to the seller. Remember, you need to allow time for any contingencies (hurdles) to be cleared.
Your agent should advise you on a timeline for a closing date.
You may not get an answer, but if you do and find out time is a factor, it could save you money. You could also ask your buyer agent to ask the listing agent. An answer is not guaranteed, but it doesn't hurt to ask.
Your lender will give you an estimate of your closing costs, but remember that it is only an estimate.
Closing costs are typically 2-5% of the purchase price of the home.
Some of the costs are commonly paid by the seller, but this can change on a state by state basis. Your buyer agent will advise you on this.
It is important to realize that everything is negotiable when buying a home. This includes closing costs. You may offer to pay a closing fee usually paid by the seller to make your offer more appealing.
Appraisers, Inspectors, Oh My!
Until now, you’ve really only had to deal with your buyer agent and mortgage lender, and in some states a real estate attorney.
Once you get to the point of making an offer, more people come into play. From here on, the following people will also be involved:
- Home Inspector
- Home Appraiser
- Title Agents
- Escrow (which may also be the Title company)
- Insurance Agent(s)
Stage 4: Closing Time
Prior To Signing
You’ll want to do a walkthrough to make sure that your new home is in the condition you’re expecting.
Are all the appliances that are supposed to be there still there?
Did a tree fall and damage the roof since the last time you saw the home?
These might sound extreme, but they can (and do), happen. You don’t want to skip this just to find your new home has a tree laying where your bed was supposed to go.
Your buyer agent or real estate attorney will tell you what to bring to closing.
In almost all cases, you’ll need to bring your ID and checkbook (or a certified check). The check will be to cover any final closing costs. Even if there aren’t any you’re aware of, it is better to have it and not need it.
ARRIVE EARLY. If you are late to closing, the seller could decide that you have broken your contract to purchase and walk away. This could lose your earnest money deposit and your new home. Again, be early.
By the time you arrive to sign the paperwork, you should have already reviewed all documents that are to be signed. You’ll be walked through all the documents you are signing, but any negotiations at this point are extremely unlikely. You’re mostly here to sign paperwork, any necessary checks, and receive the keys to your new home.
Conclusion: Buying a Home is a Process
Buying a home is exciting, and a long process. However, the reward is well worth the effort.
Working with the right buyer agent will help, and you’ll need to properly prepare, too . Your friends, family, and agent can all provide you input. We at Homeplete are part of your team, too, with all of our free services at your disposal.
Deciding on the right home is ultimately up to you; Homeplete is here to help you with that decision.