The 9-Step Process of Buying a House: Big Moments Made Easy
September 6, 2019
For many of us, buying a house is a big step to take in life. But why do people talk about the process of buying a house as if it’s super complicated, especially the first time around?
Well, they aren’t totally wrong; there’s a lot that needs to happen before anyone can successfully close on his or her new home.
Nevertheless, taking this process step by step often makes it a whole lot easier. Keep on reading for your simple 9-step overview of how to buy a house.
1. Make Sure the Time Is Right
As exciting as buying a house can be, you’ve got to make sure you’re buying one at the right time.
Knowing when that is will depend on certain factors:
- Are you ready to be a home-owner? Buying a house is a big step toward what’s next. But it’s also a big responsibility. Not only will you be in charge of any repairs your home might need, but you’ll also be living in one place for a long time paying off your mortgage.
- Are you financially prepared? Buying a house is an investment—and buying a house at the wrong time can lead to your financial ruin. Soon-to-be home-owners should make sure they have a steady income, a healthy credit score, and enough money on hand to make a substantial down payment. Think of it this way: the best time to buy a house is when you can afford it.
- Are you following market trends? Buying a house that goes up in value as opposed to down will depend on trends in the housing market. Analyzing the rises and falls of mortgage interest rates and home sales will help you know, at least in terms of numbers, when you can get a good deal. If you need some guidance here, ask more questions to a real estate agent.
2. Figure Out What You Want
Now that you’ve committed to buying a house, it’s time to get an idea of the kind of house you’d like to buy.
Spend a good chunk of time thinking about what features or amenities you’d like your new home to have. Feel free to be as specific or as broad as you’d like while considering these housing elements.
A good tip for this particular step is to distinguish between your “wants” and your “needs.” Your wants should include those aspects of a home that you would like but can do without; contrarily, your needs should be those aspects of a home that you may or may not like but absolutely must have.
3. Start Saving Up
Before you even think about house hunting, you’ve got to make sure your finances are in order.
But how much should you save? The answer to that question depends on three housing costs:
- Your down payment – this is how much you’ll initially put down for a house before paying off your mortgage in installments
- Your closing costs and prepaids – these are fees you, along with your seller, will pay to complete the process of buying a house
- Your moving and home repair costs – these are expenses you’ll pay not only to successfully move in to your new home but also to renovate or refurbish it as you please
For down payments, a common recommendation is to pay 20% of a house’s purchase price (although most home buyers tend to put down less). As for closing costs and prepaids, expect to pay 2 to 7% of this same purchase price. Moving and home repair costs will vary depending on the services you employ.
4. Get Pre-Approval for a Mortgage
Buying a home is expensive. That’s why people often have a mortgage to help them buy one.
A mortgage is a type of loan offered by lenders that lets you purchase and eventually pay off your home.
Getting pre-approved for one is highly advantageous. Pre-approval, as opposed to pre-qualification, means that a lender has looked over your credit report and has labeled you as a good candidate for a mortgage.
Although pre-approval can take a while, it’s worth it in the end. Pre-approval letters have many home-buying benefits, including more time to find the right home and increased negotiating power when closing a sale.
5. Find a Real-Estate Agent
Even if you think you’re a home-buying expert, getting some guidance from a real-estate agent is the way to go.
These buyer’s agents can lead you through all the steps involved in buying a house. They can help you find homes based on your wants and needs (and sometimes before they’re even listed) and talk with sellers for you to guarantee you’ll get the best purchase price possible.
When looking for an agent, try and find someone who has plenty of experience and strong communication skills.
6. Hunt for Your House
Out of all of these steps, this one is the most fun.
Although there are no hard and fast rules to how you should start house hunting, it’s common nowadays for people to start their search online before taking on open houses and scheduled visits.
Communicate with your real-estate agent about your wants and needs, so that he or she will know what to factor in when looking for houses to show you.
No matter when you start house hunting, know that it might take some time. Whether you need a few weeks or even a few months, enjoy your search as long as it lasts!
7. Put an Offer Out There
When you think you’ve found a future home that meets your preferences, it’s time to make an offer.
Work with your real estate agent to come up with an offer that, at least on your end, works well for you. Ask yours about seller disclosures, property-specific inquiries, or other questions about the buying process.
All that’s left is to negotiate the terms of your real estate transaction as it will appear in your purchase agreement. Negotiating this with the seller may get intense, so always keep a level head and make compromises when and where necessary.
8. Conduct Final Inspections
Although you haven’t officially closed the sale yet, by this step you will have become the contractual owner of your new house.
Before all is said and done, you should initiate these 2 types of inspections:
- A Professional Home Inspection – this is an inspection that home experts make by examining your house for any signs of structural or superficial damage that may need repairing
- An Appraisal – this is an inspection requested by lenders to assess the value of your property
Having either of these done on your home will ensure that you’re paying the right amount for what you’re getting. If you sense that there’s a discrepancy in the price you’ve agreed to, always speak up!
9. Close the Sale
This step speaks for itself: at the end of this process, all that’s left to do is close—and by close, we mean fill out a lot of paperwork.
A good tip here is to read through a copy of your closing documents ahead of time. Keeping these documents neatly organized will be a great help later on.
Once you’ve signed, it’s all done: you’re now officially a homeowner.
The Next Step?
Mortgages are for your home, but what about a loan that’s just for you? Apply for a personal loan with Illinois Lending whenever your personal finances need a boost.