Seven Steps to Buying a House
Perhaps you’ve reached that point in your life when you’re ready to purchase your first home, or maybe you’ve entered a new stage of your life and need to get a bigger house or downsize to a smaller one.
Whatever the case, you’re about to start the home-buying process. Whether it’s the first time, or it’s been a while and you need a refresher, here are the seven steps in buying a house.
1. Determine How Much House You Can Afford
This is your best first step to keep you and your real estate agent from looking at houses that are far beyond your financial reach. People are often unsure of the specific state of their finances and have just a general or vague idea based on their income and some of their expenses. Create a spreadsheet or use financial software to nail down the details of your financial position. Then, determine how much money you have to put down as a deposit on a house, and what you can afford monthly towards a mortgage, insurance, real estate taxes, and more.
2. Decide if you want to use a Real Estate Agent
You can certainly navigate the home buying process on your own, but unless you have experience in the industry, you may want a professional at your side. A real estate agent or realtor can act as your partner as you go through each step in buying a house. If you do hire a realtor, ask friends for referrals and check online ratings and reviews. You also want to make sure your agent knows the area that you’re looking to buy in and is backed by an agency or local network.
3. Get Prequalified for a Mortgage
It is important that you get prequalified for a mortgage early in your home buying process. You could also do this before you sign with a realtor, as long as you get prequalified before looking at homes. Multiple buyers are sometimes interested in the same house at the same time. Prequalification gives you an idea of the amount of money a lender will let you borrow for your home, based on your overall financial picture and credit score, and increases the likelihood of the seller taking your offer seriously.
4. Find the house you want to call home
For most people going through the home-buying process, house hunting is the best part. Your realtor will show you houses based on criteria you’ve given them, but you can also do your own online research and drive around neighborhoods on your own. Head out on weekend excursions to visit homes with “open house” signs and get an idea of what’s available on the market. You may have a list of things you’d like in your dream house, but you should prepare to be flexible if you find a house you like but it doesn’t have everything on your list. Some items, like central air conditioning or a basement, might be deal-breakers, but you may decide that others, such as a fireplace or wrap-around porch, are not must-haves. It may even be a good idea to buy a house for much less than your prequalified loan amount, then add the items you want after closing.
5. Make an Offer
This is the moment—you’ve found the house you want, and your realtor puts in an offer for it on your behalf. Although this step in the home-buying process can go smoothly, there’s a good chance that the sellers will counteroffer or turn your offer down entirely—especially if you submit an offer that’s far below their asking price. Before submitting your offer, do some research online to estimate the actual value of the home.
6. Get an Inspection Done
Once the seller accepts your offer, it’s essential to get a detailed inspection of your potential new home before you close on your loan. Ask your realtor, friends, and family for licensed home inspector recommendations, and be sure to check online reviews and ask for referrals.
Check each inspector’s certifications and make sure they’re insured (in case they get injured while conducting your inspection). It’s a good idea to determine whether they’re familiar with the area—especially when it comes to problems related to local pests, weather, soil conditions, and even possibly shady home builders. This is an essential step in buying a house, so make sure you have an expert conducting your inspection.
7. Close on Your House
This is it! The last step in the home-buying process is the closing, and if it’s successful, you’ll walk away from closing with the keys to your new home in your hands. Be prepared to pay closing costs, which may include various charges related to checking your credit, searching for the home’s title, appraising the house, processing the mortgage loan and private mortgage insurance, as well as any applicable attorney fees and real estate commission.