Buying a home is the largest purchase you'll likely make in your lifetime, so it's not surprising that buying a home, especially for the first time, can be both exciting and a bit baffling . But knowing what you're likely to encounter can reduce some of the anxiety.
Here are the typical steps to take you from credit approval to closing when buying a home :
1. Get your financial house in order. You've finally saved enough for your down payment and closing costs. Great! But before you even sit down with a lender, get your finances in order. Pull your credit report to check for errors and file a dispute if necessary. Gather tax returns and pay stubs.
2. Gain pre-approval. Sit down with a lender, who will let you know how much house you can afford. Before you start looking for homes, ask your lender for a pre-approval letter. This is different from a pre-qualification. You will need to be pre-approved before contacting an agent, seeing homes and making an offer. Speak with more than one lender to ensure you are getting the best loan terms.
3. Select a real estate agent. Buyers often make the mistake of simply calling the agent's name they see on a listing. But the listing agent is not working for you; they are working for the seller. Since commissions are paid by the seller, it's a no-brainer for buyers to engage the help of a knowledgeable real estate agent who will advocate for them throughout the process.
4. Learn about the market. Your agent will be an invaluable resource for information on neighborhoods and market values of homes you're interested in. Learn what you can realistically expect with your budget.
5. Start the house hunt. This is the step you've been waiting for, but don't get overwhelmed. There are a lot of property sites online, but allow your agent to verify the information, which is sometimes inaccurate. Have your priority list in hand.
6. Make an offer. Once you've found your dream home, your agent can guide you through the offer process and communicate with the seller's agent. He or she will also represent you through any negotiations. Your agent can advise on including contingencies, such as a home inspection and appraising at or above purchase price. The seller may accept, reject or counter your offer. It's easy to feel discouraged if your offer is not accepted, but this is common when inventories are tight. Your agent can provide advice on writing a strong offer in competitive markets.
7. Email your lender the contract. As soon as you have a signed contract, email a copy to your lender so he or she can get started on your application to the underwriter. Most of the process is handled by your lender, but be ready to provide more information when asked.
8. Obtain a home inspection. Your agent can schedule the inspection once you have an accepted offer. Make an effort to be there. It's fine to ask questions, but don't overly interfere. You will receive a report and have the opportunity to request repairs from the seller, which your agent can help negotiate. If serious issues are discovered, you can withdraw your offer without penalty. Plan to do a last walkthrough once repairs are complete, prior to closing. Ask your agent for advice on the need for other inspections, such as termite, roof or chimney, which will involve other professionals.
9. Have an appraisal and title search. Arranged by your lender, the appraisal will provide a third-party estimate of the home's value. This assures you and the lender that the purchase price is fair. If the appraisal comes in low, you can walk away as long as you included that as a contingency. Another option is to "close the gap," either by putting cash in the deal or asking the seller to reduce the purchase price to that of the appraised value. In addition to ordering an appraisal, the lender will arrange for a title company to handle the legal paperwork, conduct a title search to identify any encumbrances and ensure the seller is the home's rightful owner.
10. Head to closing. Whew! You made it! At closing, you will sign all paperwork necessary to complete the purchase, including loan documents. In most cases, you will also take possession of your new property at this time.