Do not get overwhelmed, homebuyer. Yes, home buying is often complicated and tedious. But do not get discouraged. Instead, focus on the end goal. You have so many resources at your disposal; this guide is one of them. Let’s take a look at the 12 steps involved in the first-time home buying process as seen by a Real Estate Agent.
Step 1: Inspect Your Finances
First and foremost, you will need to take a hard look at your finances. An excellent place to start is by requesting a credit report. There are many companies and financial institutions that can provide this service. You can also find your credit report by going to annualcreditreport.com and requesting a free copy from the three credit bureaus: TransUnion, Equifax, and Experian. You can also receive your credit score for a fee.
Once you have your report, start looking for any credit issues that can be repaired, like accounts you can close or credit cards that can be paid off. You will need a good credit score, amongst other things, to get a reasonable mortgage rate. Your credit score tells lenders how much of a risk you are. So the goal here is to lower your debt and lower your risk.
Step 2: Time To Start Saving
It’s wise to have cash reserves set aside for home buying. Many lenders will require a downpayment, a large one-time payment toward purchasing a home. They require this to mitigate the loss they might suffer in the event of default by the borrower. The amount of money you’ll need for a down payment will depend on your loan type and the amount you borrowed.
You will also be asked to pay Closing Costs, which are fees that go to your lender and other parties involved in exchange for creating your loan.
Typical Closing Costs Include:
- Loan origination fees, appraisals & reports
- Surveys & inspections
- Mortgage insurance
- Hazard insurance
- Title insurance, notary & escrow fees
- Recording fees & stamps
Step 3: Consult With A Lender
If you do these first two steps to prepare yourself and your credit, your lender will LOVE you! First, a lender will help you pinpoint how much you can afford on a house. They will look deep into your finances to determine which mortgage type is best for you and provide resources for down payment assistance programs. They’ll also want to see that your income and employment status are stable, so be prepared to give 2-years worth of work history. Finally, a lender will provide you with a mortgage pre-approval letter. This letter lets the seller know that you’re serious and fully prepared to buy their home. This puts you in a stronger position than other potential buyers.
Step 4: Start A List
Begin by paying attention to the local areas you are interested in. See what the real estate market is doing, look at neighborhoods you like, do online searches, and visit open houses. Make a list of wants and needs or any desirable areas you are interested in. Jot down any features and styles you like – this will assist your agent immensely!
Step 5: Interview Agents
A real estate agent is your representative in the home buying transaction. This process is often complicated and emotional, especially for first-time buyers, so have an agent by your side. It can calm your nerves and ensure a professional is overseeing the process. Agents will help you search for properties and book showings; they know how to navigate the real estate market, submit legally sound offers, and avoid hurdles and pitfalls- like overpaying for a property. Be sure to interview a few agents!
Consider the following before selecting an agent:
- Do you trust them to do the job well?
- Are they knowledgeable about your market?
- Do they know your area?
- Are they easy to communicate with?
Step 6: Begin The House Hunt
Your agent will provide you with many reputable resources for house searching. Every area has a local Multiple Listing Service (MLS), a database that agents use to share and input data on listings and run searches. You can certainly use sites like Zillow or HomesforSale, but do not rely on them for accurate market info as changes aren’t always reflected promptly. If you are in the Boulder and Denver, Colorado areas, you can visit my website for a housing search.
Here are some things to consider when shopping for a house:
- Square footage
- Home condition and possible repairs
- Access to public transportation
- Number of bedrooms
- Local entertainment
- Local school district ranking
- Property value trends
- Property/real estate taxes
Step 7: Making An Offer
If you can, view plenty of homes before making an offer. Nowadays, you can do much of the searching online or virtually. Then, when you find the perfect house, you’ll be ready to make an offer.
Factors to consider when making an offer:
- How long the home has been on the market
- Has the price has been reduced
- How much the home is worth
- Are multiple offers
- Other items that might be included in the sale (furniture, hot tub, etc.)
- How competitive the market is for homes in this area
- Whether the seller is offering an assumable loan or financing
Once the offer is written and presented to the other side, the seller can accept your offer, reject it, or counter it to start the negotiation process. This is where it is highly advantageous to have an agent negotiate terms and pricing that are acceptable to you. Don’t get discouraged if it takes longer than anticipated to have an offer accepted; you will need lots of patience in this market.
Step 8: Get A Home Inspection
Most property sales are contingent on the results of a home inspection, which is often paid by the buyer. The inspection typically occurs within 10 days of offer acceptance. It includes a review of the home’s exterior elements like the roof, siding, trim, windows, kitchen and bathroom fixtures and appliances, and major systems like heating and cooling, plumbing, and electrical. If any defects are discovered during the inspection, you may exercise the remedy described in your contract or negotiate with the seller to determine what repairs will be made.
Step 9: Title Search
This is a historical review performed by a title company of all legal documents relating to ownership of the property to ensure that there are no claims against the title of the property. It is also recommended that you purchase title insurance in case the records contain errors or there are mistakes in the review process.
Step 10: Get A Home Appraisal
Your lender will order an appraisal report as a standard part of the mortgage process. A home appraisal is a review that gives the property’s current value. Lenders require appraisals because they can’t lend out more money than a home is worth. So if the appraised value comes back lower than your offer, you might have trouble getting financing.
Step 11: Do A Final Walkthrough
If it’s requested in the contract, you’ll be given a chance to look at the home to make sure it’s in the same condition as when you signed the sales agreement.
Walk through the home, make sure the seller hasn’t left any belongings, and check for any repairs. You may also want to double-check your home’s systems one final time to make sure everything is in working order. If everything looks good, now you can confidently move toward closing.
Step 12: Close On Your New Home
Closing is here! Your lender is required to give you a Closing Disclosure, which describes what you need to pay at closing and summarizes your loan details. Once you’ve reviewed your Closing Disclosure, it’s time to attend your closing meeting. Bring your ID and proof of funds for your closing costs. You’ll sign many documents, including a Settlement Statement, which lists all costs associated with the home sale. At this time, you will pay your down payment and closing costs. After closing finishes, you’re officially a homeowner!
Coldwell Banker Realty, Home Buyer’s Guide
First-Time Home Buying Process | Copyright © 2022 Casa De Alma LLC