11 Steps To Buying A Home
A Step By Step Look at Home Buying
Some real estate laws and customs differ depending on where you live, but there are many home buying steps that are standard, even though they might not be accomplished in the same order in every location. Here are the 11 steps to buying a home:
Step 1: Get Your Credit/Finances in Order
Step 2: Get Familiar with the Mortgage Industry
Step 3: Get Pre-Approved for a Mortgage
Step 4: Determine Your Wants and Needs
Grab a piece of paper and divide it into three columns. If you’ll have a co-owner, have that person make a list too, but don’t share ideas just yet.
Column 1 – List Must-Have Features:
- If the house must be located in a specific neighborhood or school district.
- If the house must have 3 bedrooms, a 2 car garage, a large kitchen, a view.
- If there must be no restrictions against a home-based business.
- If the home must be one level, with few or no steps.
- List every feature you feel is a must.
Column 2 – List Features You Would Like:
- A basement or a deck.
- Whirlpool tubs, walk-in closets.
- A certain type of architecture.
- Gas heat.
- Central air conditioning.
- List all features that are important to you–but that you might be flexible about.
Column 3, List Features You Do NOT Want:
- A home located next to a highway or in a congested area.
- Certain types of architecture.
- Homes that need a great deal of work.
- List all features you absolutely cannot accept.
Review your list. If your co-owner made a list, compare them to see if your priorities match. If they don’t, you’ll need to compromise, revising your lists so that both of you are happy.
Making a list is a good exercise because it forces you to think about your wants and needs, but I can almost guarantee you that the list will change and evolve when you actually begin to look at houses. Even home buyers with an unlimited budget rarely find the “perfect” home.
Step 5: Select a Qualified Real Estate Agents
Basically, there are many agents, all adhere to the professional standards or code of ethics established by the National Association of Realtors, but here are some reasons of what you should look for in an agent and why you should do business with me
- Find an agent that you feel comfortable within their personality, professionalism, and ability to serve or assist you in your home buying/selling process – like me!
- Find an agent who has a good website that provides you with ample educational resources, information about the area, offers me services and has a good MLS search and information on listings I am interested in.
- Find an agent who will offer you prompt professional service.
- Find an agent who is knowledgeable and will help guide you through the real estate process.
- Ask me for referrals. Don’t do business with me because I have a nice website, let my previous customers tell you how I serviced them.
- Make an appointment and interview me, ask me about my marketing tactics, placement in MLS, services offered, commission rate, etc.
- Get a feel for my knowledge and experience of the industry and the area and more
Step 6: Start Searching for a Home
You can also pick up House For Sale magazines and read classified ads in your local newspapers, surf the Internet for homes, we plan afternoon drives to preview neighborhoods.
Step 7: Handle Pre-Offer Tasks
Step 8: Make an Offer
- Lowballing it: Be realistic, some sellers take a low-ball offer as a personal insult and may not be as anxious to deal with you on your next offer. That’s fine if low is all you’ll go, or if the property is truly overpriced, but it can create problems with future negotiations.
- Being generous: Come in too high and you may not find the seller’s low point.
- Helpful Advice from your Agent: One area I can help you is to provide you with enough information and advice to assist you in determining the best price to offer. I can run comparables for you and will be involved in offer strategies.
- Finding Sales Information – Courthouse/Local Tax
- Collector Website: Ask the staff to explain how to decipher deeds or other records that indicate sales prices, find out the selling history of properties in the area, and often get sketches and facts about a home’s structural components.
- Asking prices: Advertising gives you a feel for average asking prices, but your focus should be on sales prices. You’ll find them recorded as explained above or on multiple listing recaps of sold properties.
- Should You Have an Appraisal? Order an appraisal before making the offer, but make sure the results will not be shared with others (and keep in mind that opinions from different appraisers can vary).
- What about tax values? Tax valuations are not a good measure of a property’s market value. Your community might have a general guideline, such as tax value = 80% of market value, but the figures are not usually reliable. Ask your local tax assessor for details about your specific area. Take a look at a home’s tax value, but never assume it matches the market value of the property.
Other factors that affect the price
- How long has the house been on the market? If only a short time the sellers might not too motivated.
- How does the house compare with others for sale in the same neighborhood?
- Is the house in need of repairs or massive updates?
- Updating items such as insulated windows, plumbing, and electrical systems, kitchens, and baths can be costly.
- How much time is left on the roof?
What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Analyze each home’s condition and compare it to others on the market, but your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you’ve been searching for a home for a while, you will probably know the answer to that question the minute you walk in the door.
Step 9: Home Inspections and Other Tests
Talk with your real estate agent or other advisors to find out when inspections should be handled and if additional types of testing are important for your specific area.
Step 10: Avoiding and Correcting Last Minute Problems
Step 11: You're on the Way to Closing
9 Things not to do
1. Don't Make a Major Purchase
2. Don't Change Jobs Unless It's Necessary
ARM’s adjust based on the combination of the index and the margin. The index is the predetermined indicator that establishes the basis for the rate adjustment. The index can be the 12 Month Treasury Average (MTA), the 1 year LIBOR rate, the 1 year Treasury Note, or Prime Rate, or several other accepted indicators. The index is the rate for the particular indicator on a particular date (usually the anniversary of the loan). The index is a number that changes daily, the margin is a static single number, usually 2.25-3.00% that is added to the index. When you add the index and the margin together, you get the new rate.
Both types of loans have their benefits and pitfalls. For example, a fixed-rate mortgage is appealing because you always know what your payment will be. On the other hand, when interest rates are high and falling, choosing the adjustable-rate mortgage may be favored because the initial interest rate will be lower than fixed and the interest rate may drop in the future, resulting in smaller monthly payments. However, with an adjustable-rate mortgage you run the risk of ending up with a higher payment should the interest rate increase during the life of the loan.
An ARM may be advisable if you intend to be in the home for a short time (the fixed rate term or less). Many people know they will be moving in 3-5 years or less and chose to take advantage of the lower rate to have a lower payment or afford more house.
If you intend to stay in the house for a long time, the fixed-rate loan and its predictability may be preferable in a rising rate environment.
3. Don't Let Your Emotions Take Over
On the other hand, don’t fall so much in love with the house that you’ll buy it no matter what needs to be done–unless you’re absolutely sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.
4. Don't Forget to Switch Utilities
Don’t forget to discontinue services at your old home.
5. Line Up Your Hazard Insurance
In some locations, additional types of insurance coverage might be necessary. Talk to your lender about insurance requirements well before the closing date.
Decide if it should be removed and replaced with paint. Don’t paint over it, because that usually enhances every seam and looks terrible.
6. Don't Become Best Friends with the Seller
Remember, this is their home. A casual statement about “ripping up that ugly carpet” might be enough to keep the seller from negotiating with you about repairs or other issues that crop up.
7. Don't Panic if the Appraisal Comes in Low
8. Don't Go It Alone
9. Don't Ignore Lender Requirements
Advice for 1st Time Home Buyers
Even for experienced home buyers, it can be a confusing process, but can be especially intimidating for the 1st Time Home Buyer, so here are some tips to help guide you through the process
Get Prepped in Home Buying Basics
Before you begin, get educated about the home buying customs where you live. Relatives or friends who live in another state might have some good general advice for you, but chances are the process is very different in their area, so avoid the mistake of relying solely on their advice to make important decisions.
So How Do You Learn the Basics?
Talk to a real estate agent for advice about the typical home-buying scenario. This does not mean you have to sign an agreement for the agent to represent you, but it is a good opportunity for you to gain some knowledge off of an expert who deals with these transactions on a continuous basis and allows you to get a feel for me as your potential agent when you are ready to make that decision.
You can also talk to a bank loan officer or mortgage broker, they look at home buying from a different perspective, but can usually give you a basic overview of the process.
Home Buying Questions to Ask
- Will the agent help you compose your offer to purchase a home? If not, who does help?
- If the agent uses fill-in-the-blank forms, ask for a blank sample copy to take home and study.
- What types of disclosures are sellers in your area required to give to buyers? Can the agent give you a sample copy of typical disclosures?
- What types of home inspections are standard in your area? Are there other inspections that the agent recommends?
- How much do the inspections usually cost? Are they regarded as a buyer expense?
- When are inspections done?
- Is a survey required for most transactions? If so, who typically pays for it, the buyer or the seller?
- Does an attorney or title company do a title search to verify that the deed is problem free? What’s the average cost for that service?
- Who acts as a settlement agent, the person who puts together final paperwork for you to sign? (attorney, title company personnel, real estate broker, other)?
- Other than loan costs, what’s the average total cost for other closing fees?
- Taxes, settlement agent fees, etc.
- How long does it usually take to close on a home once an offer is accepted?
That’s a good start. After you have the answers to those questions, you’ll have a better feeling for the basic customs in your area.
Understanding your local real estate market
It’s important to study your local real estate market before you seriously look at houses so that you can make educated decisions throughout the process.
As your agent, I can get you a report of sold comparables and we can look at what current listings are being priced at to reveal the mindset of sellers in your market.
Start browsing the real estate market in your town now, before you talk to a real estate agent or for sale by owner seller.
- Browse listings
- Pick up real estate for sale books in your area.
- Read real estate ads in the local newspapers.
- Take adventure drives and look for For Sale signs. Note: which neighborhoods you like the best.
- Make changes to your Wants & Needs list if necessary.