To many people, buying a first home is an important milestone in their journey into adulthood. However, it can also be daunting if you don’t know what to expect, as it can be a very long and complicated process. This process can take from a few weeks to several months, depending on factors like if a mortgage is needed or other potential delays. If you buy a home, the first and the most important step is to find a buyer’s agent, who can represent your interests as well as guide you through the home-buying process. Luckily, you don’t need to pay for your agent, as they will be paid a commission by the seller at closing.
1. Get a Pre-Approval Letter
Once you’ve found a home you really like, the first thing to do is get a pre-approval letter from a lender. This is only necessary, however, if you need a mortgage to buy a home. To apply for a pre-approval letter from a bank or mortgage company, you need to submit your financial documents, like W-2, pay stubs, credit score, bank statements, etc. A pre-approval letter is useful when making an offer to the seller, as it shows you are serious about buying their home and therefore makes your offer more competitive.
2. Make an Offer
Once you find your dream home and have the pre-approval letter ready, you can ask your agent to make an offer to the seller’s agent. After that, the seller will either accept your offer or give you a counteroffer. You can accept or continue to go back and forth until both sides reach an agreement on the price of the house, along with any conditions. There is also a possibility that the seller may reject the offer, but you can make another offer if you really like the house.
3. Make an Escrow Deposit
If the offer is accepted by the seller, you’ll need to make a deposit, which is usually in the form of a certified check to be mailed to the office of the seller’s lawyer. This deposit will be initially moved into an escrow account, which is a temporary account to hold your deposit until the time of closing, when that money will be applied as part of your closing cost. This deposit demonstrates to the seller that you are serious about buying the house, so the seller will feel comfortable taking the house off of the market, that is, with the expectation that you will buy it if no serious defects are noticed during the home inspection. But if you back out without discovering serious defects to the property, you will lose the deposit.
4. Schedule an Inspection
The next step is to hire a professional home inspector to examine the overall condition of the home you’re preparing to buy. The home inspection is very important, as it will help you identify areas where repairs are needed, and the inspector will send you an inspection report listing all defect areas afterwards. For identified defects, you can either request that the seller fix them before closing or ask for credits from the seller to do the repair yourself. If serious defects are discovered, you may be able to withdraw your offer and get your deposit back at this stage.
5. Mortgage Approval Process
In this process, you will need to submit to your mortgage company your financial documents, like W-2, pay stubs, credit score, and bank statements, as well as proof of enough money for down payments in your account. Once all information is collected, your case will be sent to an underwriter for review. If your mortgage application is approved, you will need to sign an agreement that entails the interest rate of your loan, how much money the lender is willing to fund you, your monthly payment, etc. This process is the most time-consuming part of buying a house, as it can take up to two months if you need a mortgage.
6. Get Homeowners Insurance
Before closing, your mortgage company will require you to get homeowners insurance for the property you are preparing to buy. You need to contact an insurance company and make a payment yourself, then send a copy to the mortgage company. The effective date of the insurance is typically the closing date.
7. Walk-through
You should walk through the home with your real estate agent before closing and make sure all agreed repairs are being made. This is the final check before closing to make sure everything is all good.
8. Closing
During closing, your major responsibilities are to sign all legal documents and to pay your down payment and the closing costs with a certified check. Typically, you should expect a closing cost of 3% of the purchase price.
Congratulations! Now you know what to expect in the home-buying process, and you are one step closer to becoming a proud homeowner.