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10 Steps in the Home Buying Process
Finally, The last four steps!
If you’re thinking of buying a home and you’re not sure where to start, you’re not alone. Here’s a guide with 10 simple steps to follow in the home buying process. Be sure to work with a trusted real estate professional to find out the specifics of what to do in your local area.
Steps 4-6 Can be found here: The Home Buying Process – 10 Steps for Success Part 2
Step 7: Make an Offer
Submitting an offer can be an anxiety-ridden experience, especially in a competitive market. This is where your buyer’s agent can be most helpful.
If your offer is accepted, the escrow process begins
Once your offer is accepted, the final stage begins. This means that you won’t get the keys to the house the day after you buy it. It can take 1-2 months to go from an accepted offer to walking in the door.
At the beginning of the escrow process, the buyer will deposit what’s called earnest money into the escrow account. This is a sign of good faith while the escrow agent reviews all documents related to the sale.
Step 8: Have a Home Inspection
During the escrow process, you’ll also arrange a home inspection. In some strong seller’s markets, home inspections are waived. That is a risky move that must be assessed. Sometimes a pre-inspection or home warranty can be arranged. If something in the house needs to be updated or repaired, you’ll negotiate those repairs during this time period. You’ll also arrange for an appraisal of the house and finalize your financing during this time period.
Keep in mind your lender will not finance a house for more than it’s worth, so if your home appraisal comes back as less than the agreed-upon purchase price, you’ll have even more negotiating to do with your seller. Buyers these days sometimes have to come to the table with additional cash to make up for the appraisal shortfall.
Sometimes, if buyers really want a house and the seller won’t lower the price, they’ll pay the difference between this appraisal and their offer.
How to prepare for a home inspection
An inspection should take at least a few hours. Try to be present so you can find out as much possible about the home’s condition, take your own notes and photographs, and ask about anything that concerns you.
- Protect your home with insurance
Lastly, you should get insurance on your home before moving in. In order to get the best price, obtain quotes from different insurance companies. Read the policies and what they cover before choosing one. You want to make sure it’s comprehensive enough to cover exactly what you need.
Step 9: Get a Home Appraisal
An appraisal is sometimes required by the lender. In many states, it is conducted by a licensed or certified professional. In some states, licenses may not be required. The appraiser gets paid for providing the service of valuing your home but has no skin in the game and so is considered an objective source of value.
The appraisal protects the bank by ensuring that it doesn’t lend the borrower more money than the property is worth. If the property later goes into foreclosure for any reason, the lender wants to be able to resell the property and get its money back.
An appraiser typically visits the home for between 30 and 60 minutes to measure its dimensions, examine amenities, and evaluate the overall condition, both inside and out, taking photos of the exterior, the garage, and every interior room.
They then examine the transaction records of properties similar to yours—ideally, properties in your neighborhood that have sold recently. Based on the home visit and these records, the appraiser arrives at a professional opinion of how much your property would sell for if you put it on the market. The bank uses this value —along with your income, assets, and credit history —to determine how much it will lend you and at what terms.
Step 10: Move-in!
Now that you’ve found your home, here are some tips for ensuring you continue to stay in your home for years to come.
- Have a robust emergency fund
Homeowners should have an emergency fund with at least 3-6 months of living expenses in it. This fund will give you incredible peace of mind. If you lose your job unexpectedly, you now have 3-6 months to find a new job without worrying about losing your home. You can also use this money for unexpected major repairs like replacing your hot water heater or fixing a flooded basement.
- Maintain it often
You don’t want minor issues to turn into major repairs. A leaky sink, dirty fireplace, or bad outlet are all small, inexpensive fixes; but if left unattended for too long, they can turn into expensive projects. Make sure to perform routine maintenance on your home. That includes everything from changing the air filters, to replacing smoke detector batteries, to fixing that creaky step.
This also applies to cosmetic maintenance. Keeping up with these tasks when they’re manageable prevents you from having to use your emergency fund later.
Properly maintaining your home over time makes it healthier, more affordable, and ensures that it grows in value.
- Avoid overextending yourself
Your home is one of the biggest purchases you’ll ever make. You don’t want to put a strain on your budget with a mortgage you can’t afford. And you don’t want to strain your budget now by using your home equity as a bank account.
Once you’ve been living there a few years, it’s tempting to use a home equity line of credit to upgrade your kitchen or your bathrooms. However, try to avoid overextending yourself. Don’t place buying new furniture above paying your mortgage bill.
Buying Your First Home Can Build Long-Term Wealth
Protect your investment in your home and be careful about leveraging it to borrow money.
Ultimately, if you stay focused, make prompt payments, and maintain your home, you’ll be on your way to building long-term wealth through homeownership.