What are the Steps in Buying a House and How Can You Financially Prepare?

Are you considering buying your first home?

Buying your first home can be an exciting and scary time.

They don’t teach you how to buy a house in school. Chances are, if you are buying a house for the first time, you don’t know much about the process.

Truthfully, it can be overwhelming to even real estate investors. Going into the process armed with some basic knowledge can go a long way.

Keep reading for more information on the steps in buying a house.

1. Research Ahead of Time

You’ll want to learn more about the trends in the housing market in the area you are shopping in.

You can do this by searching online, reading the newspaper, and looking at magazines. Watch for how long the houses for sale stay on the market and how they are priced.

Make note of price changes to see how much the houses you are interested in end up selling for.

2. Determine Your Budget

Before you start looking at houses you should sit down and evaluate what you can afford.

You’ll need to have a down payment and be able to make monthly payments. If your down payment is small, you may have to buy private mortgage insurance, which will increase your monthly payment.

If you have a moderate amount of debt already, lenders usually recommend purchasing a house that costs no more than 3-5x your annual household income.

This only applies if you can make a 20% down payment.

3. Get Pre-Approved

Before you start going to showings, you should get pre-approved by a lender.

The actual process to get pre-qualified is pretty simple. Your lender will check your credit and request basic financial information from you.

This includes proof of income, how much you have saved, and any investments you might have. Your lender will use this information to evaluate how much they are willing to lend you.

This will give you a price range when you start looking at houses. Being pre-approved also looks good to sellers if they receive multiple offers that they have to choose between.

4. Find an Agent

When it comes to buying a home, you don’t want to go at it alone.

Working with a real estate agent comes with many benefits and doesn’t cost you anything. The seller pays the real estate agent, not the buyer.

Real estate agents usually have inside information that the public doesn’t have access to. They are skilled negotiators and are familiar with the local market and the other realtors.

5. Find a Home and Make an Offer

Now that you have know what you can afford and have a real estate professional on your side, you can start looking at homes in person.

Attend open houses and ask your realtor to schedule a showing for any house you see for sale and are interested in. Your realtor will pick out homes that he or she believes will be a good fit for you.

Be sure to look at a lot of houses before making a decision. It can be hard to remember everything you see, so take pictures or a video to help you remember when narrowing down your choices.

Take your time when choosing a home. The market can be tough and you might feel pressured to go for the first home that seems decent.

If it doesn’t work for your goals and lifestyle, you aren’t going to be happy.

When you are ready to make an offer, work with your real estate agent to choose a fair offer that is based on comparable homes in the area. Your real estate agent will help you navigate the process of negotiating with the seller.

6. The Home Inspection

When you make a purchase offer on a home, it is almost always contingent on the house passing an inspection unless you bought the home as is.

The home inspection will reveal any issues with the home that need fixed. Your real estate agent will suggest home inspection companies that he or she has worked with in the past for you to choose from.

The home inspection will usually take place within a few days of your offer being accepted. If the inspection reveals major damage, you can renegotiate your offer or withdraw it completely if you and the seller cannot come to an agreement on the necessary repairs.

Right before the sale of the home closes, you will have a chance to do a final walk-through inspection. At this time, you can confirm that the home is still in the same condition and that any requested repairs were indeed completed.

7. Choose Your Loan

At this time, you will go back to your lender and inform them of your purchase agreement.

You will work with the lender to choose the type of loan that works for you. Lenders have many options are are usually great at answering questions and providing excellent customer service.

8. The Appraisal

The home will be appraised by a third party company, but arranged by your lender.

Since the company is not directly associated with the lender, it will be an independent estimate of the value of the home. This ensures that you are paying a fair price for the property.

9. The Title Company and Closing

As long as the house appraises for what you have agreed to pay for it, the process continues with the involvement of a title company.

The title company will coordinate all necessary paperwork and ensure that the seller is legally allowed to sell the property.

You will attend closing with the seller of the home and both real estate agents. Here you will sign all necessary paperwork and loan documents.

Once your loan is funded, the seller will receive a check and the sale will be closed. You can move into your home at this time unless you and the seller have agreed on a different date of possession.

More Information on the Steps in Buying a House

If you have more questions about the steps in buying a house, we recommend reaching out to a real estate agent in your area. He or she will be able to give you more information about the home buying process.

For more information on pitfalls to avoid when buying your first home, check out this post.

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