Aug 15, 2019
Buying a home can be overwhelming. For many of us, it can be one of the biggest financial decisions we’ll ever make. This makes the process potentially stressful, on top of the pressure to find the home of your dreams.
It can be challenging to balance what you like, need and want with what you can afford. It means taking into account different tastes, style, needs of a partner or children, and evaluating all the tradeoffs involved with choosing the best home for everyone.
To help you wrap your head around the homebuying process, we’ve simplified the entire journey to give you a better idea of what to expect when you buy. By following these 8 steps to buy a house, you should be able to navigate the homebuying process with more confidence, direction and clarity.
What does your dream home look like?
Before you get into the nitty-gritty of calculating your budget and applying for mortgage loans, start with the preliminary step of exploring your possibilities and considering your priorities. To help you narrow down the qualities you are looking for, we’ve put together a list of questions to ask yourself and your partner ( if you are buying a home as a couple).
Questions to Help Define Your New Dream Home:
Other Questions to Consider:
How much house can you afford? This is where you start to answer this question. In future steps, you’ll be making decisions on things like mortgage loans and down payments where you’ll be able to nail down a more specific budget. For now, you just need to get a general notion of what you can afford to spend every month. As a starting point, consider how much you’re currently spending on rent or housing.
As a general rule, lenders often recommend that you look for a home that costs no more than 3-5 times your annual household income. This assumes that you plan to make a 20% down payment and have a moderate amount of other debt.
If you don’t have a great credit score, you may have to budget more than 20% as a down-payment. This is also the time to look into whether you qualify for any special grants or programs for first-time home buyers, veterans or other groups.
There are so many different types of loan products available — adjustable vs. fixed rate mortgages, 30 vs 20 vs 15 year terms, etc. Do your preliminary research now and get down to the details in the next step when you speak to your mortgage broker to determine more exactly what kind of home you can afford.
Specifically, how much house can you afford? This is the time to refine your budget assumptions by firming up the details with a professional.
Your mortgage broker will help you take your monthly budget and translate that to a purchase price.
They’ll do this by taking into account factors like property taxes and home insurance as well as your own personal financial information, such as your income, debts, savings and investments. They’ll assess how different factors such as interest rates and the amount you put down can impact your purchasing power.
Once your information has been reviewed, you will get feedback on what kinds of mortgage loans are available to you, so you can better calculate a price range for the home you can afford.
Note: There is a difference between getting prequalified vs. preapproved for a loan. Prequalification is a preliminary step that is based on the information you provide your mortgage broker, without verification. This may or may not involve a credit check, depending on their policies.
Preapproval is a more involved process, which includes submitting paperwork to substantiate your financial situation. Whether you’re getting prequalified or preapproved at this stage, your credit is only good for 60-90 days.
In summary, the goal for this step is to talk to your mortgage broker, get an idea of the price range you can qualify for, and then get either preapproved or at least, prequalified.
The next step is to start searching make a short list of potential homes. At this stage, you’ve assessed your priorities as a homeowner and have the information needed to come up with a budget for your home. Next, It’s important to consider both the upfront and long-term costs of home ownership.
Use these short and long term factors to help establish a price range. Then, use this price range, along with other factors you’re considering, to refine your search.
Note: you may need to experiment with changing other factors such as the “number of bedrooms”, “square footage” or “location” to see what impact these changes will have on your search results.
Ultimately, the end result is a short list of specific homes that meet sufficient “Dream Home” criteria and fit in your budget range.
It’s time to schedule some house tours!
Until now, you might have attended open houses on your own, but now it's time to start actively touring. To get started booking home tours, you can:
With the first option, you will need to find an Agent and coordinate with his or her schedule to tour your shortlist of homes.
If you book tours online through SimpleShowing, you can book tours anytime on your schedule and a licensed agent will meet you at the desired location when it is convenient for you.
For either option, this will be the time where you will likely engage with a licensed real estate agent who can give you access to the properties and help you make an offer when you've found a home you love!
Some other benefits of working with an agent include:
In preparation for attending the home showings, you may want to pull out the answers to the questions from step 1. This way you can see how each home measures up to the characteristics you initially defined. You might also want to keep a record of all the homes you’ve visited and things you love about them as well. This will be increasingly helpful as you visit more homes because they may start to run together and you might now remember which homes had which characteristics.
Another pro-tip: take a tape measure, camera and writing utensil. Measure and take notes, photos and even videos of key parts of the house to capture all of the priority information about each home you visited. You’ll be glad you did this when it’s time to finally make a decision on your favorite house.
You’ve made a decision on the best home, given your needs, preferences and budget. Now, the time has come to make an offer! This is where your agent becomes especially handy in helping you figure out all the different elements that go into your offer including:
Other Factors to Consider When Making an Offer:
Keep in mind that there are a variety of elements that can impact the strength of your offer. For the seller, it may not be all about who offers the highest price.
Factors that can impact the competitiveness of your offer include:
For example, if a seller needs to close on a home in 30 days and a buyer makes an offer stipulating that they can close in 21 days, then that makes their offer more competitive.
Your agent will help you figure this out, so you can understand the pros and cons of different decisions you can make when writing your offer.
Your agent acts between you and the seller to feel out what’s most acceptable to the seller, what’s important to them and most importantly — what’s important to you.
Note: While most contracts are fairly straightforward, remember that real estate agents are not attorneys and cannot give legal advice. If you have specific questions or special circumstances, consider consulting an attorney. Ask your agent for a referral to an attorney who specializes in real estate transactions if needed.
You’ve made your offer and it’s been accepted by the seller. Finally, it’s time to get ready for closing. There are two parts of this step: things you need to do and things that are going to get done on your behalf.
Things you need to do:
Things done on your behalf:
Once you’ve completed all the paperwork and gone through the steps above, it’s closing time! It usually takes about 35-45 days to go through this process, after which you can move in on the day you close.
The closing itself typically takes place at an attorney’s office or closing agent’s office, where you’ll sign all the paperwork and finally pick up the keys to your new home.
This will also be when you receive your $5,000 average refund check if you purchase your home with a SimpleShowing Agent.