Are you ready to buy a home, but unsure where to start? Knowing what to expect when buying a home can make the process as stress-free as possible. Here are 10 milestones you can expect on the home-buying journey to your new home and resources to help you every step of the way:
1. Consider your budget.
First things first: how much can you afford to spend? Home buying is much more than just a mortgage payment, so you’ll want to consider all the potential costs and crunch the numbers to determine what’s affordable for you.
2. Find the right lender.
Shop around for a lender that offers a loan that meets your needs and who can help you through the buying process. Even before you begin house hunting, you’ll want to get pre-approved. Pre-approval means a lender has approved you for a loan at a certain amount based on your financial situation. Your lender will also work with you to determine the loan product that’s best for you based on the financial information you provide.
Your lender will provide a pre-approval letter, verifying the loan amount you’ve been approved to borrow. You’ll need to provide financial information, such as your annual income and monthly obligations, to secure a pre-approval. Your lender will work with you to determine the loan product that’s best for you based on information you provide.
Look for a local real estate agent who knows the area well to represent you and your interests. RealtyPlus®, a free nationwide real estate assistance program, is a great way to find experienced agents in your area. As you’re beginning your search, you’ll want to put together a list of your needs and wants, such as home type (condo or single family home?), proximity to schools and work (what does your ideal commute look like?), and layout (how many bedrooms? Ranch or colonial?). Your agent can use this information to narrow down your search.
4. Make an offer.
When you’ve found a home that meets your criteria, you’ll make an offer to the seller, who can accept it, reject it or counter. Negotiations are often market-specific: in a hot market, you may need to act quickly and offer the asking price (or even higher!), while some price haggling is typically involved in slower-moving markets. Your real estate agent can help you look at comparable homes to determine an appropriate offer.
5. Sign the contract.
Once you’ve agreed on a price, the seller will accept the offer by signing it. You’ll then make an earnest money deposit as a sign of good faith that you intend to purchase the property. The amount varies by state and real estate market, but averages around 1 to 2 percent of the purchase price, according to the National Association of Realtors.
6. Apply for your mortgage.
If you haven’t already, now’s the time to fill out the official loan application and decide on the type of loan that’s best for you. It will take some time for your lender to review your application as part of the underwriting process. The lender will ask for documentation about your income, employment and assets, and will usually require an appraisal to determine how much the home is worth.
Because interest rates change daily, you may elect to lock in your interest rate. If you see rates decrease after you lock but before your settlement date, you may be able to pay a fee to lower your rate. After you receive your initial disclosures, you can confirm with your lender your intent to go forward with the application.
7. Get inspections completed.
While not every buyer obtains a home inspection—which typically evaluates the home’s electrical and plumbing systems, appliances and structure—it’s generally a good idea. You’ll be responsible for hiring an inspector and asking the seller for any necessary repairs. If the inspection turns up unexpected problems, your contract may allow you to walk away from the deal.
8. Obtain title and homeowners insurance.
A title insurance company will verify that the property is free from legal claims and liens against it. You’ll need to purchase title insurance for protection against future claims. Your lender will also require you to purchase homeowners insurance to minimize loss in the event your home is damaged or destroyed.
9. Perform the final walk-through.
Typically performed a few days to a few hours before closing, the final walk-through enables you to make certain the property is in the condition in which you agreed to buy it—that any negotiated repairs have been made and nothing has happened to the house since you last saw it.
10. Close on your home.
You made it! Closing on a home completes the sale. (Learn about what to bring and expect on closing day.) Your lender will disburse the funds to the seller, and you’ll sign a variety of documents to execute the loan and take ownership of the home.Congratulations and welcome home!