A Step-By-Step Look at Buying a House

How you progress through a home purchase transaction can vary slightly depending on the real estate laws and customs where you live, but many steps are standard. You will feel more confident in your home buying journey when you understand the chain of events and what is required of you, as well as everyone else involved in the transaction.


Get your finances in order

Your credit reports are an ongoing record of how you’ve managed your finances. You should know exactly what they say about your financial history before applying for a mortgage. These reports and your credit score play an important role in the loan approval process and also determine your interest rate and other loan terms that lenders will offer you.

You might be surprised what you find when you review your credit reports, because mistakes aren’t uncommon. You may also have forgotten or not realized the impact of mistakes you’ve made in the past. Ideally, you don’t want any late payments to show up there. A late payment is bad, but more than that will kill you.

You are entitled to one free credit report per year, so get it and check it and check your score too. Do this early in the process to give yourself time to fix any issues and increase your score if necessary.

Familiarize Yourself With the Mortgage Industry

Finding the right loan and lender is crucial to the success of your home purchase. It’s up to you to determine which lender is best for your specific needs, and it’s always a good idea to understand the loan process before speaking with a lender. Learn how the debt/income ratio works and why it matters. Learn about discount points and decide if you really need them. Will you have to carry mortgage insurance?

Get pre-approved for a mortgage

Do you know how much home you can afford? Probably not, unless you’ve spoken to a lender and been pre-approved for a loan. Pre-approval helps you in other ways as well. Consider this scenario: A real estate salesperson receives two similar offers. One is accompanied by a letter from the buyer’s bank which states that it has been pre-approved for a mortgage at the value of the offer. The other has no supporting documents. Which offer do you think the seller will consider first?

Determine Your Wants and Needs

Buying a home isn’t as difficult as you might think, even if you’re short on cash, but the process will go much more smoothly if you’re familiar with the real estate market . Narrow down your wants and needs before you start looking at homes and differentiate between the two. You have some wiggle room with wants, but not so much with your needs.

Be sure to consider reselling it somewhere in the future. Evaluate the likelihood that each property you look at will maintain its value, or – better yet – appreciate it.

Learn to Work with Realtors Real

estate agents represent buyers, sellers, or both, and can act as neutral facilitators for either party in some states. It is essential to understand the agent’s duties and loyalties and your responsibilities to your agent before making the first phone call.

Start looking for a home

You will be inundated with possibilities, especially at the beginning of your home search. Your agent will send listings to your mobile. You will likely pick up “Home for Sale” magazines and read classified ads in your local newspapers. You will likely spend an inordinate amount of time surfing the internet looking for homes. You can even plan afternoon walks to view the neighborhoods.

These are great ways to see what’s available… and at what price. Keep an eye out for executions. Find out why a particular home has been on the market for too long. There may be a big problem or a small problem that you can live with.

Handling Pre-Offer Tasks

Deciding whether you want to buy a home involves taking a good look at its structure and features, but there are many other topics that are just as important to your purchase. You might consider doing a home inspection to eliminate hidden problems, or even talking to neighbors to get first-hand opinions about the neighborhood.

Making an Offer

There is no set of instructions that can cover all the differences in real estate laws and customs that exist in the United States, so the mechanics of making an offer and your specific contingencies depend largely on your location. However, there are some home buying tips that can help you fine-tune your offer, no matter where you live.

Find out what comes with the house. Home appliances? Bondage?

Ask your realtor about seller disclosures. What sellers are required to report to you in your state? Lead paint or asbestos?

The answers to these types of questions will help you decide how much you want the property and, by extension, how much money you want to offer.

Home Inspections and Other Tests

If you didn’t do a home inspection at the beginning, you’ll want to do it now. Home inspections are performed prior to signing the final purchase agreement in some states, but may take place after finalizing an offer in others. It is critical to decide which inspections and tests you want to perform. Talk to your real estate agent or other consultant to find out when inspections should be performed and if additional types of testing are important or appropriate for your specific area.

Avoiding and Fixing Last Minute Problems

Everyone involved in your real estate transaction should check its progress daily as your closing date approaches. Staying on top of things means you’ll know right away if there’s a problem that needs to be addressed.

 Common issues can arise with the assessment — it’s not as much or it’s a lot more than anticipated, causing a wrinkle in the process. Make sure you understand the contingencies available to you, events that may allow you to legally walk away from the business if necessary without losing your money. 

You are on your way to closing

Closing, also called liquidation, is the event that transfers ownership of the property to you. Some common events during this time include handling title and insurance searches and doing a final inspection of the property to ensure it is still in the same condition as the first time you saw it.

The Bottom Line

These steps are a general home buying guide. You will likely encounter issues specific to your location and your transaction that can best be explained and addressed by your local real estate agent, your lender, your attorney, your closing agent, or others who are helping you complete your home purchase transaction.

Ask as many as needed to help you understand the entire home buying process. You’re making a long-term commitment and spending a lot of money, and you’ll feel much better about the transaction if you stay informed and understand what’s happening every step along the way.

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