Steps to buying a home
Set Your Criteria
Once you have decided to purchase a home and after you have been pre-approved, one of the most important steps is defining what you want in a home. Many buyers waste precious time looking through homes that they will not even consider, missing out on a home they would have loved. To avoid the risk of missing the right home, buyers should create a list of what they want in a home. This list should include:
- Number of bedrooms
- Number of bathrooms
- Master bathroom
- Size of yard
- Total square feet in the home
- Style of home (rambler/ranch, 2-story, multi-level, etc.)
- Updated kitchen
- Size of garage
- Neighborhood
- Schools
It is important to remember that very few homes, if any, will meet each of the criteria you set. The list you create is simply a method to narrow down the list of homes you look at. Depending on the market, your agent will instruct you as to whether you need to expand or narrow your search criteria to include or reduce the number of homes you should consider.
Pre-Approval Process
The first step in purchasing a home is finding out how much home you will qualify for. This step is often overlooked until it is too late. This causes heart ache and regret once a buyer finds out they cannot afford the home they have come to love. Pre-approval also speeds up the process when an offer is made and accepted.
Becoming pre-approved is easy. If you do not already have a relationship with a mortgage broker, your real estate agent can refer you to a mortgage broker to begin the process. You also have the option of become pre-qualified. Receiving a pre-qualification letter is even easier, but not as reliable. As a general rule, pre-approved buyers are preferred by sellers over those who are pre-qualified because your pre-approved status lets the seller know:
- Your financial background will not be a road block in the purchase
- At least one lender will work with you in the purchase
- You are serious about the offer you submitted
Searching for Your Home
You have taken care of the business side. Now it is time to enjoy the search. If you have not already found a process to search for homes, your real estate agent can alert you to a home sales outlet. Some methods include newspapers, magazines, and numerous websites. Remember that the Multiple Listings Service (MLS) is the best search engine for homes and your real estate agent will constantly be on the look for homes that match your criteria on the MLS. The MLS should cover your search, but if you would like to expand you search then simply ask your agent to look at additional sites for the home that fits you.
Once you have found a home that peeks you interest, your real estate agent will set an appointment to take you through. Your agent should accompany you through each home you wish to view. You should feel free to walk through as many homes as you would like, but remember that each showing should be a stepping stone toward the one you fall in love with.
Submit an Offer
After you have found the home that fits your needs, the next step is to submit an offer. Your real estate agent will go over this in detail to make sure you understand exactly what you are signing. The offer is spelled out in the Real Estate Purchase Contract or REPC. The REPC will include:
- The amount of earnest money you put down
- The purchase price
- Deadlines (inspection, appraisal, loan denial, settlement, etc.)
- Warranties on the home
- Signature lines along with Acceptance, Counter, Rejection
- Any contingencies you may have
Negotiating the Details
Once the offer has been submitted, the majority of sellers will respond with a counter-offer. This begins the process of coming to an agreement or a meeting of the minds. This process can last several days. Your real estate agent will walk you through this entire process. It is important to remember that everything is negotiable. The most common items negotiated are:
- Purchase Price
- Earnest Money
- Settlement Deadline
- Warranties
- Contingencies
After you and the seller have agreed upon the above items and have an "accepted" offer, there may still be some negotiating to be hammered out. These final stages of negotiating generally come with the inspection deadline and appraisal deadline. You, the buyer, will have the option to have an inspection. If certain items of the home are deemed as unsatisfactory, the buyer can attempt to have the seller remedy these items. Likewise, if the appraisal comes up short of the agreed upon price, the buyer has the option to renegotiate the purchase price.
It is important to remember that once an offer is "accepted," the seller is under no obligation to negotiate further, unless the home does not meet the specific warranties set forth in the REPC. If a seller will not negotiate any further, the buyer will have the option of backing out of the contract as long as the buyer does so by the deadline set forth in the REPC.
Closing the Deal
Settlement and closing are the final steps to purchasing your new home. Your real estate team, which includes your real estate agent, your mortgage broker, and the title company, will plan settlement directly with you to make sure this process goes smoothly. Numerous documents need to be signed before you take possession of the home. This process generally will take about an hour.
At settlement, the buyer is expected to pay closing costs. Closing costs generally consist of title insurance, title fees, lending fees, and any down payment you are putting toward you new home.
Once you have signed the appropriate documents and submitted the closing costs to the title company, you are simply waiting for the loan to fund and the documents to be recorded at the county. The time between signing and funding/recording will normally last 24 to 48 hours, at which time the purchase has closed.