10 Steps to Buying a Home
1. New Home Needs
Congratulations on your decision to purchase a new home! Your first step
toward buying your new home will be to analyze your needs. Your real estate
agent can assist in analyzing your needs so that you will be able to get
a clear picture of exactly what you want your new home to look like and
how it should function for you and your family.
First, you should write down why you are looking for a new home. For example,
are you currently renting and would like to have a home where you can
begin building equity? Maybe you recently married and have outgrown your
current residence. Or, maybe you have just gotten a promotion, which requires
you to move to a new city. These factors will all have a bearing on how
you approach your home search.
Second, establish a time frame that you would like to stay within for
buying your home. Depending on your reasons for wanting a new home and
the current state of the market in the area you are looking to buy, you
should be able to come up with a rough guideline, which you can finalize
at a later time.
Last, you most likely have a mental picture of what you would like your
house to look like and what features it should have. It's very important
to write these ideas down to avoid any ambiguity later in your home search.
You should make at least two lists: one should be a list describing your
dream home and the other should list the features of the home that are
an absolute must have in order to buy it. In a perfect world, your new
home would fulfill both lists 100 percent. It is more likely that you
will end up blending the two lists into a schedule of prioritized items
as you progress through the buying process. This is a natural and evolutionary
process as you get clearer about what you want and what is available.
2. Get Preapproved or Prequalify for a Loan
Now that you have your list of features you want in your new home, you
are ready to start looking! Well, not just yet. You are going to need
to know in what price range to look. There are two ways to go about this.
You can get prequalified or preapproved for a mortgage.
Either way, you will need to contact a mortgage company. There are some
key differences between prequalification and preapproval for a loan that
you need to be aware of. Loan prequalification is a simple process. It
takes into account very basic information regarding your financial status
and gives you an amount for which you may qualify. This can be done strictly
on a verbal level or electronically over the Internet. The prequalified
amount is based solely on the information you provide. In most markets,
prequalified buyers usually hold little clout compared to preapproved
buyers due to the fact that the information given during the prequalification
process is not thoroughly investigated and therefore may be unreliable.
Where a preapproved buyer is actually approved for a loan of a certain
amount, a prequalified buyer is only told that they might be approved
for a certain amount.
Pre-approval is a much more involved process. The lender will take all
pertinent information regarding your finances and perform an extensive
check on your current financial status. This will ultimately give you
the exact amount that you will be eligible for (depending on what type
of loan you decide to go with). Being preapproved lets the seller know
that you have gone through an extensive financial background check and
there should be no unexpected obstacles to buying the home. You can see
how being preapproved would be more attractive to a seller than just being
3. Learn the Neighborhood
Now that you have your list of needs and wants and you know how much you
can afford to spend, it's time to look at some houses! Not just yet. Step
back for a moment and consider the larger picture. People don't just buy
a house; they buy the neighborhood the house is in. Think about that...if
you found the perfect house but it was in a neighborhood that wasn't to
your liking, would you make an offer on it? Most likely the answer would
So, you will need to make another list of what type of neighborhood you
want to live in. You will most likely want to consider things like how
living in the neighborhood will affect your drive time to and from work,
what amenities are offered (swimming pool, tennis courts, park, etc.),
and, if you have children who are attending school or soon will be, what
school district you will be in and how close the schools are. You may
even want to make two lists just as you did with your home criteria.
Your real estate agent can help you consolidate the information from your
list of needs and wants for your home, your preapproval, and your list
of needs and wants for the neighborhood. From this, you can incorporate
this information into a broad search profile, which will then be narrowed
down to specific areas dictated by the market in which you will be looking.
Your agent's experience in local markets will be an invaluable resource
during this step.
4. Home search
At this point you will have a good idea of what you can afford and what
type of neighborhood you will want to live in. Taking that information
into consideration you are ready to embark on your actual home search.
If you don't know much about the city that you are moving to you will
most likely want to start your search by finding neighborhoods that meet
your criteria and then narrowing your search to particular homes in the
There are a few ways to go about this. Possibly the most efficient way
to find homes is to allow your real estate agent to keep you up-to-date
on available properties that may meet your criteria, then and allow your
agent to screen these properties for you. When your agent presents you
with a property that interests you, he or she can arrange for you to tour
the property when it is convenient for you.
You can also access local publications highlighting available real estate
in the area, contact local Neighborhood Associations, visit the local
Chamber of Commerce, look on the Internet, and even drive through neighborhoods
that you feel would meet your needs. Driving around a particular area
looking for a home that is for sale is good because you can actually see
the house, but it can be very time consuming and very "hit or miss."
5. Make Offer
Now that you and your real estate agent have found the home you would
like to purchase, it's time to make an offer. Taking into account the
recent sales of homes in that neighborhood which are similar in size,
quality, conveniences, and amenities, what are you willing to pay for
the home? Your real estate agent will consult with you and advise you
on how to create an offer that will have the best chance of being accepted.
Your agent will ensure that you have everything down in written form...
no verbal agreements. After consulting with your agent to put your offer
in a written contract that meets all the legal requirements according
to local and national guidelines, your agent will present the seller with
a written document detailing what needs to be done by both parties to
execute the transaction. The contract should protect the best interests
of all parties involved and should be comprehensive in nature. Your agent
will also ensure your financial position as the buyer by including any
necessary contingencies, which would protect you if a particular requirement
were not met. Once the seller accepts it, it may be too late to make any
The contract, though not limited to this list, should include the following:
· A legal description of the property
· The offering price
· The down payment
· Financing arrangements
· A list of fees and who will pay them
· Amount of the deposit
· Inspection rights and possible repair allowances
· The method of conveying the title and who will handle the closing
· A list of appliances and furnishings which will stay with the
· The settlement date
· Any relevant contingencies
Remember that the legalities of this phase are very important. If you
have any questions or concerns, they need to be addressed right away.
After all, no one has ever said at their closing, "I wish I had asked
6. Negotiate an offer
Once your offer is made, you and your real estate agent may need to enter
some negotiation in order to reach an agreement. Keep in mind that almost
everything is negotiable when you are buying a house. This can give you
a great deal of leverage in the buying process -- that is, if you have
adequate information and you use it in an appropriate manner. Your agent
will have the market knowledge and negotiating expertise necessary to
make sure that your offer is accepted at the best price and terms possible
Some of the things that you may have to negotiate are:
· The price
· Closing costs
· Repairs that need to be done
· Appliances and fixtures
· Occupancy time frame
The key to successful negotiating is keeping in mind that the end result
must make both you, the buyer, and the seller happy. Otherwise, negative
feelings will persist throughout the remainder of the process and someone
may walk away feeling that they were not treated fairly.
7. Find Vendors
After your offer has been accepted, your agent will supervise the coordination
of all necessary vendors and serving as your advocate when working with
each vendor. Your agent will make sure that the vendors have access to
the property at the appropriate times to perform their procedures and
oversee the execution of those procedures on your behalf.
For instance, the property will need a thorough examination. Working
with your lender, you may need to have a formal appraisal and a survey
done for the property designated in the contract. A property inspection,
a foundation inspection, and an environmental inspection may also need
to be completed to make sure that the property is up to the standards
set forth in your written agreement. If there are issues or inconsistencies
brought to light during this time, it may delay or even nullify the contract
depending on the contingencies set forth in the contract.
Homeowner insurance is another very important item that will need to be
taken care of at this point. Insurance experts recommend that you obtain
insurance equal to the full replacement value of the home. Unless you
have insurance coverage on the home, the closing can not proceed. Having
these procedures done in a timely and professional manner is a must. Investigate
each vendor to make sure that they are reputable and have a clean operational
Your agent's experience in this area will be invaluable in making sure
that everything is completed on time and in a professional and legal manner.
8. Pre-close Preparation
As the closing date draws near, your real estate agent will contact the
escrow company or closing attorney and your lender to make sure that all
the necessary documents are being prepared, and that they are complete,
accurate, and delivered in a timely manner. Your agent will also need
to confirm that the documents will be delivered to the correct location
so they can be reviewed and that they will be ready for the appropriate
At this point, you and your agent should find out what form of payment
you will need to bring to the closing for any unpaid fees. Make sure that
your payment is made out to the appropriate party.
Ensuring that each closing document is ready and available will enable
you to have a quick, easy closing.
"Closing" refers to the meeting where ownership of the property
is legally transferred to the buyer. It is a formal meeting in which most
parties involved in the buying/selling process will attend. Closing procedures
are usually held at the title company's office or lawyer's office. Your
closing officer coordinates the document signing and the collection and
disbursement of funds. Your agent will generally be present at your closing
to read the documents on your behalf, answer any questions, or help to
resolve any last minute or unexpected details that may come up.
In order for the closing to go smoothly, each party involved should
bring the necessary documentation and be prepared to pay any related fees
(closing costs). There may be more than one form of acceptable payment
for your closing costs so ask the closing officer which form of payment
will be required and to whom it should be made out. Closing costs will
generally total an amount equal to 2 to 3 percent of the total loan value
not including down payment and the buyer's escrow account.
Sellers sometimes pay for a portion or all of the closing costs, depending
on local market conditions, terms of the purchase contract, and the seller's
cash and timing considerations. Any such concessions should be acknowledged
in writing. Most lenders will allow a credit from the seller to the buyer
for the non-recurring closing costs. However, they usually won't allow
a credit that reduces the amount of the buyer's down payment or any of
the buyer's recurring costs, such as expenses for fire insurance premiums,
PMI, or property taxes.
10. Post-close Activity
Congratulations on the purchase of your new home! Now that you have taken
ownership of the property you will need to have your local services such
as electricity, cable, and phone set up. Your real estate agent can help
you coordinate the set-up of these local services. No doubt your agent
already knows who the local vendors are for such services as water and
electricity, as well as others, so he or she can help provide you with
a list of contacts.
Also, you should already be aware of the expenses that are typically
associated with owning a home. Neighborhood Association fees, landscaping
costs, and annual taxes should be budgeted for throughout the year.