7 Steps To Buying A Home

There are roughly seven steps to buying a house, and they need to be followed mostly in order.

The caveat? Starting with the fourth step can be a lot of fun and motivate you to do the rest.

Spend a weekend or two going to open houses. Take a look at what homeownership can offer, and if condominiums are more your style, check them out.

Learn what amenities come with different buildings and what the neighbors are like. Once you see what homeownership offers, you’ll be excited to complete the process of buying a house.

1. Decide it’s the right time to buy.

This is mostly a financial question. Check your credit score if you haven’t lately. Your debt-to-income ratio is another financial number that determines whether you are ready to be a homeowner. You can’t start any sooner than right now to fix these numbers if that's needed.

2. Get pre-approved.

It surprises some people that it's recommended to speak with a loan officer before talking to a real estate agent.

If you’re not yet pre-approved, an agent will ask you to get pre-approved before showing you any homes.

The good news: you’ll probably learn you can qualify for a lot less than the 20% down payment you hear so much about; 3% and zero down are common. Buying a house works best when you talk to professionals early and often.

See Also: First-Time Homeowner Mistakes — And How to Avoid Them

3. Find a real estate agent.

Time after time, surveys show that most agents are referred by family and friends. But you can certainly hunt for one online or just stop by a few offices to chat. Interview agents until you find one you are comfortable with.

In the early stages, an agent needs to know how much house you are pre-approved for. You definitely want an agent who closely listens to your wants and needs.

They'll explain the local market and make affordable recommendations. Your agent is your go-to-person throughout the entire process. They help you write and negotiate offers and help arrange inspections. They need to follow through all the way to the closing table and beyond.

4. Look at plenty of houses before deciding.

Don’t get overly excited about the first few homes you look at. The proper way to buy a house involves a broad look at the market. It includes everything from what you barely qualify for to homes you easily qualify for. The market is constantly changing. If one is bought out from under you, more will soon be on the market. What’s important is finding the best home for you.

5. Make your offer.

This is often the most nerve-racking and critical part of how to buy a house. But it’s easier than you might think. The price you offer will almost certainly be within a limited range. Prices are heavily influenced by what are called “comparable sales.”

These are similar houses in the same neighborhood that have recently sold. Your agent can share “comparables” to help you write your offer. You want to pay more attention to “sold houses” rather than the “asking price” of houses that have not yet sold.

What is often more important in your offer are "contingencies": almost every offer has an inspection contingency, and many have a financing contingency. You may have other contingencies specific to your circumstances.

6. Get inspections.

A professional home inspection should be one of your contingencies. This is an inspection for problems such as a bad roof or a heating system about to fail. It is a systems and mechanical inspection and is not the same as an appraisal.

The appraisal only assures the lender that the home is worth at least as much as the mortgage. Another common inspection is a title report. This is a paperwork-only inspection examining the legal ownership that searches for legal claims against the home. Other inspections might be a land survey or an expert inspection for something like termite or flood damage.

7. Close the deal.

This is also called “escrow.” It’s the last step in how to buy a house. An escrow holder makes sure that all the documents, money and other necessary information is ready before you close.

Escrow protects the buyer, seller and lender by having an independent party finalize the deal.

The best and final step for how to buy a house is when you to move into the home of your dreams!