Buying a home is a complicated process. There are people to hire, homes to search for, finances to sort through, and a plethora of other decision to be made. In a complicated process, one of the easiest ways to make sure a person is completing everything correctly is by having written out steps. Steps help people stay organized and on task. Buying a home is a complicated yet extremely important process, therefore it is beneficial to understand and know the steps that come with the process. The 10 most essential steps to buying a home are:
- Make sure you are ready to become a homeowner. This step has to come before the rest of the steps. A prospective homeowner needs to make sure that they are ready for homeownership. How does a person know whether or not he or she is ready to become a homeowner? First, you need to determine why you want to become a homeowner. Homeownership means settling down. It means living in the same house, same community, and same city for years. You have to be willing to commit to the place you are choosing to live. You should want to purchase a home because you want to settle down. Second, a person has to have good financial history. If a prospective homebuyer is struggling to make payments on time regularly, then he or she is not ready to take on the responsibilities of owning a home. It takes responsibility to be able to purchase a home, as you will not be approved for a mortgage without good credit. But it also takes responsibility to be able to keep a home, as there are bills to be paid and regular maintenance to be done. If you discover that you are not ready to settle down yet or are not a financially responsible individual after you have already started the home buying process, then you will have wasted time, energy, and money.
- Hire a realtor. A person looking to purchase a home should hire a realtor. The process for buying a home is not easy. It is complex, with steps that are not always predictable. Each person’s buying situation is unique. There are decisions to be made for every aspect of the process: homes, financing, insurance, inspection, closing costs, contracts, etc. With so many steps and options available, it is important to work with a professional who has years of experience in this specific field. That professional will be able to provide you with advice to make the best decision for you and your situation. Choosing the best realtor to work with is going to be important. Make sure to take the hiring process seriously by conducting interviews, asking for referrals, and discovering his or her past experience. The best realtor is going to help you find the best deal for your particular situation.
- The mortgage should be pre-approved. This step is the key to knowing how much money a prospective home buyer can spend to purchase a home. A person should not seriously start looking for a home until he or she has an educated estimate of the amount of money he or she can actually spend on a home. If you do start looking beforehand, just know that the homes you are looking at could all be dream homes until you know how much of a home you can actually afford. Aside from providing you with the amount of money you can spend on a home, a pre-approved mortgage has other benefits. To be pre-approved for a mortgage, the prospective homebuyer is going to have to give a lender his or her financial paperwork. In doing so, the lender is going to take a first glance at all of the paperwork that is needed for you to receive the actual mortgage. If the lender discovers any problems with your financial documentation, you will have time to make the necessary changes to be approved for a mortgage. In addition, a pre-approved mortgage speeds up the process of purchasing a home, since the paperwork has been processed already.
- Search for a home. The number of homes available to purchase is overwhelming. By having your mortgage pre-approved, you will be able to narrow down the number of homes based on affordability. The next step in helping you reduce the number of homes to look at is to make a priority list of what you need and want in a home. This list should include specifics not only about the actual house, but about the neighborhood as well. For example, does your neighborhood need to have schools, parks, or shopping centers? Or does your house need to have three rooms, a yard, or a basement? Take your list of needs and wants and meet with your realtor. The realtor will help you find specific neighborhoods and homes that are going to meet your requirements. You will want your realtor’s help as they are going to have the best information on different neighborhoods and homes available.
- Find a home you want to purchase. Finding a home that meets all of your requirements may be challenging. A good realtor is going to be able to help you discern which “requirements” could actually be negotiable. As your realtor helps you narrow down homes, you need to reach a point where you have only a few houses that would be worth a visit. Take the time to visit each of these homes. Maybe even visit the home twice, but do not compromise on too many of your requirements, as purchasing a home is a big commitment. One that you have to be okay with for years to come. Take the necessary time to find a home that you really love.
- Make an offer on the home. When deciding how much to offer on a home, there are a few things that should be accounted for:
- Are you trying to purchase a home in a buyer’s or seller’s market?
If it is a seller’s market, then you are most likely going to have to pay the full price for the home. If you are buying in a buyer’s market, there is a good possibility that you can offer a price lower than the asking price.
- How low of a price do you think the seller is going to accept?
Offering an extremely low price could cause your offer to be rejected rather than negotiated.
- Will the offer you present keep the seller interested in you as a buyer? The offer has to be low enough to provide you a deal, but high enough to keep the seller interested in you. If you have the seller’s interest, then you can go back and forth with offers.
- Negotiate until you reach an agreement. If you successfully kept the sellers’ interest, then the seller most likely provided you with a counter offer, which can still be negotiated. Keep negotiating until you reach an agreement, all of your negotiations are rejected, or you no longer want the house based on the terms. If you reach an agreement, then your next step will be to pay an earnest money deposit. This deposit should not go directly to the seller, but to a third party. In your offer, you should have included specific terms that relate to you having your earnest money deposit returned. In California, a buyer is given 17 days to cancel. During those 17 days, an inspection of the home will typically take place. If, during the inspection or during those 17 days, there happens to be something that causes you to need to cancel the contract, be sure to contact your realtor right away. They will be able to advise you through the rest of the process.
- Purchase the necessary insurance for the home. Every home needs to have some type of insurance. Not having insurance on your home is a big risk, especially after the enormous investment of buying a home. Insurance needs to be done before closing. There are different types of insurances available for a home, but three main ones: homeowners insurance, flood insurance, and home warranties. Homeowners insurance is most likely going to be required by the lender. All homeowners insurance policies are typically going to cover the home in the case of theft, hail, fire, smoke, and personal liability. Flood insurance is an additional insurance that is sometimes required, depending on where the home is purchased. As floods are not covered in homeowners insurance, flood insurance is an additional cost. Lastly, there are home warranties. Home warranties are primarily going to benefit those who purchase a new home. This insurance does not have to be purchased by the buyer, but will benefit the buyer. The home builder or the seller is going to have a warranty on the home. Where, in the case of a large home malfunction (bad plumbing, structure damage, electrical wiring defect, etc.), the home builder or the seller will pay for the problem to be fixed. In order to know what is going to be best for your situation, take the time to research insurance policies. There are a wide variety of policies that can be individualized to meet your needs.
- Closing on the home. This is the last official step in purchasing a home! For the buyer, during the closing process, a last walk through the home is customary. But the main goal of the closing process is to make the purchase of the home official through the signing of paperwork. The papers are going to mainly deal with the property title, the buyer’s loan, and taxes. It is important to not feel rushed during this last step. Whether you are the buyer or the seller, take your time in going through each document that must be signed. This is the last chance you will have to back out. If all seems great, however, at the end of the closing process the buyer will have: signed dozens of papers, made his or her last payments in the home buying process (fees, closing costs, transfer taxes), the title transferred to his or her name, and the keys to his or her house! After the closing process, the house is officially yours!
- Move in! With a new home purchased, the next step to making the home your own is to move in! Homeownership does come with responsibility; therefore there are a few things you will want to take care of right away. First, make sure that you keep the documents from the closing in a safe spot as those papers are very valuable. Second, call the utility services to be sure that all of the services (water, electricity, sewage, etc) are transferred to your name. Third, take pictures or a video of the house with your possessions. If you ever need to contact your insurance provider with a problem that occurred at the house, those pictures or video are going to be extremely valuable. And lastly, love and cherish your home! It will most likely be the largest purchase of your life, treat it that way!
These 10 steps should make purchasing a home much easier for you, providing you with direction and explanations of what the process is going to look like. One invaluable resource that cannot be written down in a 10-step format is going to be the friends and family around you. Ask them about their experiences and for advice. These people know you and will be able to help you as you step into the unknown, but exciting process of purchasing a home.