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The Steps to Home Buying

  1. Be financially ready!

  • Start thinking down payment and closing cost. Down payments are typically 20% of the purchase price and closing cost can add up quickly. Even if you are using a VA loan with 0 down, you will still have to save for closing.

  • CREDIT, CREDIT, CREDIT! Most lenders typically look for a credit score of 640 or higher. If your credit isn’t great start looking for ways to help improve it before the next step.

  • Debt to income ratio. Even if you have excellent credit, your debt to income ratio will play a big part in getting approved for your loan.

2. Get Pre-approved!

  • Find a lender you trust (ask your Realtor). Shop for the best rates and the which lender is the best for your mortgage type.

  • This step will help give you a better idea on what you can afford. There are plenty of online mortgage calculators on the web, use them!

3. Look for a home

  • This is the most fun in the entire process.

  • Learn the market. Start looking for how much homes sold for in the last six months. Use homes similar to what you’re looking for. These are called comparables or comps. Your realtor should provide you with comps when you are interested in making an offer.

  • Focus on the house. Paint, carpets and the way someone has a home decorated can all be changed. Focus on the layout, space and how comfortable you will be in the home. Cosmetic issues can be changed.

4. Make an Offer

  • Contract time! When you are ready to make an offer, your Realtor will prepare a Purchase Agreement. They will enter valuable information like the block and lot number, purchase amount, things included in the sale and important dates such as a mortgage commitment date and closing.

  • Earnest Money Deposit. This is where you start using that money you saved! When you make your offer, you will put money down as a sign of “good faith”. The money is held in and escrow account until closing or termination of the contract. This typically is $500-$1000 or more depending on the purchase price.

  • Expect to negotiate. Buyers and sellers typically go back and forth and eventually meet in the middle somewhere. Don’t let your emotions take over. Understand the seller has a bottom line and that it’s probably emotional for them as well.  You are both trying to get the best deal possible.

 

5. Under Contract (Offer accepted! What now??)

  • Attorney Review. After your offer is accepted and the fully signed contract is delivered to all parties, the Attorney Review period begins. This is typically three business days. Use this time to have your contract looked over by an attorney. Either party can get out of the contract at this point without penalties.

  • Inspection period. You will have the chance to hire a home inspector to inspect the home for defects. This can include things such as the roof, foundation, HVAC, electrical systems and more. Termite inspections are often performed by a separate pest control specialist. You will have an opportunity to ask the seller to correct things. You will come to an agreement on what the seller is willing to fix or not. This is another part where you need to keep your emotions in check.

  • The other stuff. In the middle of all this you will be securing your mortgage with your lender to meet your Mortgage Commitment date. A title company will complete all the necessary steps to get you a clean title and deed for your home. You may elect to have a survey completed as well.

  • Final walk through. Before the closing you will have the opportunity to do a final walk through. This is usually done to make sure the property has been maintained and that anything that came up on your inspection is taken care of as per your request.

6. Closing! (get out your pen)

  • The HUD-1. The HUD-1 is a document that provides a detailed breakdown of all settlement cost and credits for the buyer and seller. You will be given the opportunity to see this prior to closing to check for accuracy.

  • Sign, sign, sign! During the closing expect to sign a lot! Make sure you take the time to understand what your signing. Have the Closing agent explain it to you if needed.

  • Passing of the keys! After the signing is finished, the traditional passing of the keys from the seller to the buyer happens. The home is officially yours!

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This document is not an official guide to home buying. It is simply a guide to assist in educating you prior to making one of the biggest decisions in your life. It is highly recommended you follow the guidance of a real estate professional and attorney.

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