A Step-By-Step Guide to Buying a House
Buying a house is a complex and often lengthy process – but if you can get your head around the basics of how it works, you’re less likely to be taken by surprise along the way and your home-buying experience will undoubtedly be easier.
Whether you’re buying a house for the first time or the fifth, the process can be lengthy, but it doesn’t have to be overwhelming. When you begin, it can feel as though a zillion tasks are standing in your way of moving into your new home. But the home buying journey can be broken down into simple and easy steps.
Instead of giving into your fear of the unknown get in the way of purchasing a new home, read this step-by-step guide and you’ll learn what it takes to buy your first home, from beginning to end. Whether it’s your first time in the real estate market or you’re an experienced homeowner who wants to brush up on your skills, this list has you covered.
How To Buy A House In 14 Easy Steps
It’s stressful to view purchasing a new home as one gigantic undertaking. But it doesn’t have to be like that. You can make the home buying process far more manageable by taking it one step at a time.
Here are the fifteen basic steps to buying a house, with tips for ensuring that the process is smooth:
1. Know When to Buy a House
First, how do you know it’s the right time to buy a house? Before you even think about starting the steps of the home-buying process, there are a few things you should do:
2. Evaluate your finances
Make sure you have a consistent income and a good chunk of cash for a substantial down payment. (We’ll talk more about this later.) Buying a house before you’re ready can lead to financial disaster.
3. Think about your life stage
It doesn’t make sense to buy a house if you may move next year. The process of buying and selling a house is expensive, so make sure you feel confident you’ll be in that area for the next five to seven years. This is one of the reasons we recommend waiting at least a year after getting married to buy a house.
4. Start gathering a down payment
The very first next step would be to save for an adequate down payment by determining your home buying budget. There are two key factors in figuring out how much home you can afford: your monthly mortgage payment and your down payment.
It’s important to have a ballpark idea of this first, since the higher the down payment, the less you’ll need to pay each month in your mortgage, interest, and mortgage insurance. The ideal down payment is 20% of the home’s purchase price. Not only will putting 20% down make your monthly payment substantially smaller, but it’ll also ensure that you don’t have to pay for private mortgage insurance (PMI).
Of course, 20% can seem like a lofty goal, which is why there are many programs – particularly for first-time homebuyers – that require a much smaller down payment. We can connect you to a Falaya premier lender partner or talk to your personal mortgage lender about your options to find the program that’s right for you and your financial situation. If you’re using gift money for your down payment, make sure you understand all the ins and outs.
If you’re planning to fund your down payment yourself, it’s time to start saving. Here are a few ideas to help you get started on building up that nest egg:
Make automatic transfers
If you’re just saving what’s left at the end of every month, you’re not likely to build up the amount of money you need quickly. Instead, you should pay yourself first, as it’s a lot harder to spend money that’s not in your bank account. One of the easiest ways to save is to talk to your bank about automatically moving money from your checking account to special down payment savings account so you’re never tempted to spend those funds.
Rework your budget
Small expenditures can add up fast. It’s easy to spend all the money you make in any given month and not even know where it went. That’s why having a budget can help keep yourself in check. For example, if you’ve already spent the funds you allocated for dining out, then it’s time to start cooking at home.
If you’re trying to save for a down payment for a home, you might want to take an even sharper pencil to your budget. Once you’ve figured out ways to save, you can allocate those extra dollars to your down payment savings account.
Remove a big-ticket item
Sure, committing to brown-bagging your lunch and forgoing coffees out can help rack up those extra funds. But when saving for a down payment, you sometimes need to take a step that’s even more drastic.
You might decide to temporarily move to much smaller quarters to slash your housing expense, skip your annual vacation or commit to being a one-car family to build up your savings. Making lifestyle changes can help boost your savings substantially and get you to your goal faster.
Remember the goal
Austerity isn’t much fun, but it can feel a lot less painful if you constantly remember why you’re committing to being more frugal. Post pictures of your dream home around your current dwelling and workplace as a reminder of what you’re working towards.
Every time you make a sacrifice to fund that down payment, give yourself a pat on the back and remember that it’ll all be worth it when you’re a bona fide homeowner.
5. Keep Your Credit Score and History in Check
It’s important, even for those people who aren’t buying a house, to be aware of their credit score and history. Credit scores and history play a huge role in the ability to secure financing to buy a house.
Yes, a mortgage lender will review your credit score and history, but even before you connect with a local real estate agent or mortgage lender, you should have a solid understanding of your credit picture. Generally speaking, most mortgage lenders will require a minimum credit score of 620-640, depending on the type of mortgage the borrower is attempting to secure.
There are several websites and resources out there that can help consumers monitor their credit score and history. One of the best resources, which happens to be free, is Credit Karma. Credit Karma allows consumers to monitor their credit score, the number of recent credit inquiries, the number of total credit accounts, and other important information related to their overall credit picture.
Why is your credit score and history important when buying a house? First and foremost, credit scores affect mortgage eligibility. If a buyer has poor credit that is lower than the mortgage guidelines, they won’t be able to secure a mortgage.
Credit scores and history can also make an impact on the mortgage interest rate a buyer is able to secure. A buyer who has an 800 credit score is likely to get a better mortgage interest rate than a buyer who has a 640 credit score.
Bottom line, being aware of your credit score and history is important, even if buying a house isn’t a priority at the current moment!
6. Get Preapproved For A Mortgage
Once you’ve determined how much money you can realistically save for a down payment and have done some due diligence on home prices in your area, it’s time to start thinking about financing. Many homebuyers don’t start seeking a mortgage until they’ve found their dream home, but that can be a mistake.
In most cases, the amount of money your mortgage lender is willing to give you will dictate which houses you consider in the first place. After all, there’s no reason to look at homes that are outside your price range. And who knows, you might find that you qualify for more money than you were expecting.
Besides setting budget parameters, having a Pre-Approval will instantly set you apart as a serious home buyer and make your offer one that the seller is more likely to consider. Keep in mind that a seller doesn’t want to go through the entire process only to find out the potential buyer doesn’t have the funds necessary to close on the house.
Getting preapproved for a mortgage means that you can go the distance. This step will be especially important if you find yourself in a bidding war and have to provide a more attractive offer to compete with other buyers.
7. Find a real estate agent
Want a trusty home-buying guide by your side? Most first-timers will want a great real estate agent—specifically a buyer’s agent, who will help them find the right houses, negotiate a great real estate deal, and explain all of the nuances of home buying along the way.
The best part? The agent’s services are free to first-time homebuyers (because the seller pays the sales commission). Book a free first-time buyers consultation with a Falaya agent today.
8. Consider the housing market
Anytime an expensive purchase is made, learning about the product or item is an absolute must. Buying a house is one of the most expensive purchases you’ll ever make. It makes perfect sense that you should learn about the market before jumping in.
Understanding what your money can purchase, how competitive a market is, how much homes sell for in the area, and about the different neighborhoods are just a few things you should want to learn relating to your local market. Since real estate markets are different from one another, even if they’re close in proximity, you need to learn about each market you’re interested in. Book a free first-time buyer’s consultation with an Unlock’d agent, and they will help you along the way.
Many buyers don’t know where to start to learn about the local real estate market. It can actually be pretty simple if you’ve hired a Falaya rock star buyers agent. A top real estate agent will be able to provide information or places where you can get the information you’re looking for on the local real estate market.
Below are a few of the most important pieces of information you should learn about the markets you’re interested in.
- What is the current state of the market? Is it a buyers market or seller’s market?
- What is the absorption rate in the local market?
- What are the real estate property tax rates for the local market?
Again, anytime you’re buying something as expensive as a house, you need to learn about the product as much as possible. Learning about the local real estate market goes a long way to ensuring you’re comfortable and confident with the house you’re going to buy.
9. Determine What You Want In A House
You’ve finalized your housing budget and received your Pre-Approval. Now comes the fun part – looking at homes for sale.
The number and variety of available homes in most areas are vast, which is why the process can seem overwhelming. A great place to start is by writing down all the features of the home that are most important to you and have your partner make a list of their priorities as well.
Divide the various amenities and factors into two categories: “non-negotiable” and “important to have.” Compare lists with your partner and have a conversation about the various items and the reasoning behind your rankings. Once you’ve discussed it, you can create a master list together.
This process gives you the foundation you need to start searching for homes, allowing you to see whether further compromises might need to be made. Remember, you’ll likely need to make tradeoffs, but it’s important to find a house that checks as many boxes as possible.
In fact, once you start touring homes, you’ll likely need to compromise in some area – almost every buyer does. You might decide that you absolutely need three bedrooms, but you’re willing to look at neighborhoods a little farther out than you had wanted.
On the other hand, your top criteria might be the school district, and you might decide that your family can make sacrifices in the number of bedrooms. It’s all about your needs; the priorities are different for everyone.
10. Begin Shopping Online For Houses
The next step in the process of buying a house is one of the most exciting. Once you’ve completed the above steps, you’re now ready to begin shopping and visiting houses that are for sale. The internet has made it extremely easy to shop for houses.
While the internet has made it easy, it also provides a lot of information that is unreliable. While shopping for houses for sale, it’s extremely important you’re using the right resources and websites.
Some of the most popular real estate websites include Zillow and Trulia, but it’s important to realize the information on these websites is often inaccurate. The house values on Zillow have been known to be off as much as 20% or more, so be cautious when reviewing real estate information!
The best resource to utilize when shopping for houses is your Falaya real estate agent. The agent will be able to set up a customized website that is tied directly into the local multiple listing service (MLS) or they’ll have an accurate house search on their website. For example, buyers who’re looking for homes for sale in our service areas are able to use the Unlock’d website, which has a home search feature which is updated from the local MLS every 15 minutes.
As you’re shopping for homes and deciding which homes you want to visit, always keep in mind what you actually need in a home and what you’d like in a home. If you need a home that has at least 4 bedrooms, viewing homes with 3 bedrooms doesn’t make much sense.
11. Make An Offer
Once you’ve decided on “the one,” it’s time to make an offer. This step is where having a real estate agent truly comes in handy. Agents’ knowledge of the market can help you make an offer that the seller will view as serious and appealing. After all, buying a home is a stressful process, and you don’t want to lose out on the perfect home because of a technicality.
Your official offer will likely include the following:
- The price you’re offering.
- The date you intend to close.
- Your Pre-Approval letter, which will help show that you’re serious about purchasing the home.
- Any contingencies that you need to close, such as a relatively clean inspection or the sale of your current home.
- Your earnest money deposit, which solidifies your intention to purchase the house.
12. Complete Inspections That Apply
The immediate step after making an offer and having it accepted is to complete any inspections that the offer was contingent upon. If one of the contingencies was a home inspection, there’s a certain number of days you’ll have to complete the home inspection after acceptance of the offer. It is extremely important to know these deadlines. Book your inspection as soon as the contract is signed to ensure you can execute all of the items needed. When buying a house, there are dozens of reasons why having a home inspection is a good idea.
At this time, if your offer was contingent upon any other inspections, you must complete within the specified amount of days otherwise you potentially could lose out on your perfect house. Other popular inspections to consider when buying a home include a chimney inspection, radon test, pest inspection, electrical, plumbing and structural inspection.
13. Head to closing
Closing, which in different parts of the country is also known as settlement or escrow, brings together a variety of parties who are part of the real estate transaction, including the buyer, seller, mortgage representative, and others.
Closing is the day you officially get the keys to your new home—and pay all the various parties involved. That will include your down payment for your loan, plus closing costs, the extra fees you pay to process your loan.
Closing costs can be sizable, averaging anywhere from 2% to 7% of the home price. Be sure to check out our other article all about the closing process for more information!
14. Move in!
Now that you’re the proud owner of a new house, it’s time to move in. To be honest, moving is not a fun activity that people look forward to. Moving can be much easier though if you prepare properly and follow the best tips for moving. If you’re moving and have children, keep in mind, the tips for moving with kids are different than moving without. The same can be said if you have to move with your furry friends as well.
Once you get settled into your new house, there are a handful of tasks that you should consider completing. Below are some of the best post-closing tasks to think about.
- Change the locks
- Change address with United States Postal Service
- Inform employers, schools, and other important establishments of your new address
- Meet The Neighbors
The Bottom Line On Buying A House
You can take the stress out of the home buying process by following these simple steps described above. Remember, you must start by saving for a down payment and getting your mortgage preapproval letter. These steps will help you figure out the size and type of house that you can afford, which will allow you to start thinking about your priorities.
Once you hire a real estate agent, the rest of the process will fall into place. Your real estate agent will find properties based on your priorities, arrange tours, help you write a strong offer, and guide you through closing.
If you’re ready to get started, you can begin perusing the houses for sale listed on Falaya.