Home Buying Process Step-by-Step
Buying a home is an exciting journey, but it can also be stressful thinking about all of the steps in the process. We’re here to help you ensure your home buying process runs smoothly by providing you a step-by-step guide to buying a home.
Review Your Finances
Before you start house hunting and dreaming of paint colors, you need to have a clear view of your full financial picture. This includes examining your budget, checking your credit, and making sure you have enough funds saved up to cover a down payment and closing costs. You can request a free copy of your full credit report from AnnualCreditReport.com so you can make sure you won’t encounter any surprises that may impact your ability to be approved for a mortgage loan. Checking your credit report allows you to catch any errors like incorrect balances, closed accounts that are still showing as open, or accounts you don’t recognize. Removing or correcting any errors from your report can work wonders for your credit, and you want to make sure your credit is in the best shape possible before applying for a mortgage loan.
Your home buying budget will need to include enough savings to cover your down payment as well as closing costs. The amount you’ll need for your down payment will depend on your mortgage loan type. Some loans such as those intended for first-time buyers only require a down payment as small as 3-5%. Generally, the down payment requirement for most other mortgage loans is at least 20% of the home’s purchase price.
Choose Your Lender
Buying a home is a big journey, and you want to choose a financial partner who will be there for you every step of the way. Working with a lender you trust will put your mind at ease that you’ll be able to find the mortgage loan that suits your needs. For example, military members may feel more assured working alongside a lender with experience assisting active duty military, veterans, and their families. At Robins Financial, we are committed to serving those who serve by providing VA Loans to eligible veterans, service members, and surviving spouses. Our loan officers will guide and counsel you on the various loan types and programs available to you and help you select the best fit for your budget and your needs.
Get Pre-Approved
A pre-approval provides you with the maximum amount you will be able to borrow for a mortgage loan, based on a review of your finances. This shows sellers and real estate agents that you are a serious buyer, and lets your agent know your limit. Keep in mind, however, this number only factors in the monthly costs of principal and interest on the loan, property taxes and insurance, and any homeowner’s association fees. Utilities and other costs are not factored in to the lender, but they should be for you. It’s important to consider the total cost and how that fits in to your monthly budget.
Once you are pre-approved, bear in mind that it is unwise to open any new type of credit account until your mortgage loan is closed. Lenders continue to monitor your credit throughout the loan process, and inquiries on your credit can jeopardize your final loan approval.
Choose Your Real Estate Agent
Like with your lender, it’s also important to have a real estate agent you feel comfortable with working alongside you throughout your home search. Having an experienced agent you trust is critical when it comes to finding your needs and wants in a home. Your agent will ensure that you are aware when any properties become available that match what you are looking you’re your ideal agent should have experience assisting homebuyers like you and be familiar with your local market. Especially in the current housing market when there are more buyers seeking than there are homes available, having a knowledgeable agent by your side can greatly reduce your stress in the home search.
Find Your Home
You can also drive through areas and neighborhoods you’re interested in and see what’s available, and take note of which properties you like so you can look up more information. You can ask your real estate agent to pull information for you as well. You’ll work with your real estate agent to identify your needs and wants in the home, which should include location, type of home, number of bedrooms and bathrooms, square footage and/or acreage, the condition and age of the home, as well as any special features. You will also identify which items are must-haves and which are negotiable. Your agent will provide a list of homes that meet most if not all of your criteria. Pay close attention when you go to look at homes with your agent, and take note of which properties you like the best and what you like about them. Once you’ve narrowed down your search to your top choice(s), be sure to visit the home a few more times, ideally during different times of day or under various weather conditions, so you can be sure of your decision. Even just driving past the home during different times of day and on weekends will help you get a true feel for the area. Buying a home is a permanent purchase with no returns, so you want to be absolutely sure this is the home you want before moving forward in the process.
Make an Offer
Once you’ve decided on your home, your agent will help you put in an offer on the home. The offer package will include your offer amount, pre-approval letter, proof of down payment funds, and any terms or contingencies (such as appraisal, financing, and home inspection) and the dates to have those items completed by. If you have a home to sell before buying this one, those details would also be incorporated into this offer. If your offer is accepted, you’ll sign a purchase agreement stating the price of the home and the closing date, and you’ll put down the earnest money (this is basically a good faith deposit, typically 1-2% of the purchase price).
Get a Home Inspection
Home inspections generally need to be completed 10-14 days after signing the purchase agreement. Even if a home inspection is not a requirement for your home purchase, it is still always a good idea to get a home inspection before buying any property. Your home inspector should be familiar with the area and knowledgeable of both past and present building codes. They will look for any problems in the home that are not up to current code. This includes the systems like electrical, heating, and air, as well as appliances, the home’s foundation and structure, and the roof. Your real estate agent or lender will likely be able to refer to a home inspector or provide a few recommendations.
Finance the Loan
You will now work with your lender to submit all necessary documentation for your loan. You may need to update information previously provided, including bank statements, tax returns, and proof of income or pay stubs. All information will be submitted for final review. It can take 30 days or more to finalize the loan, depending on the complexity of your loan and current market conditions. It’s imperative to keep your credit in good standing as you wait for closing (don’t run up furniture or appliance purchases on your credit card, don’t close any accounts or take out any new loans, and avoid changing jobs if possible).
Closing
You’re almost there! Time to do a final walkthrough with your real estate agent and review your home inspection checklist to ensure any issues have been addressed. Your lender will provide a Closing Disclosure which outlines all costs associated with your new home purchase as well as the final monthly payment information. The Closing Disclosure must be provided 3 days prior to closing and you must acknowledge receipt of it.
On the day of the closing, you will be joined by your real estate agent, the seller and the seller’s agent, and sometimes a closing agent. You will review the documents carefully and sign your name several times. Then you will pay your closing costs and down payment, along with prorated property tax, homeowner’s insurance, and homeowner’s association fees (if applicable).
Finally, you will be handed your keys and officially become a homeowner!
Move In!
You made it! The home is yours! The only thing left is to make it feel like yours. It’s wise to research moving and utility companies ahead of your closing date, so you can have those things lined up and ready for when you move in. That way you can settle in comfortable and start making the home your own from day one as a homeowner!
If you’re ready to apply for a mortgage loan, let our team help you get the loan you need. Visit our Mortgage Loan Center to learn more about the mortgage process, use our Home Buying Calculators to get a picture of what your home loan will look like, and check out our Buying a Home video series on YouTube for more information about home buying. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.