Eleven Steps to Buying a Home
If you’re buying a home, it's time to get organized! A home is one of the most expensive purchases you are likely to make in a lifetime and the homebuying process can be complicated. This is the time to decide what kind of home you want and what you need to do in order to buy it. So, take a moment to consider (and write down) the steps you’ll need to take in the months to come.
1. Research the house—researching the house is the first part of the homebuying process. It can also be the most fun. During this step, get clear on what you need and what you want. Write out all of the things that are important to you. For example, you might consider the landscape, local schools, proximity to shopping, house size, number of bedrooms/bathrooms, space for pets, and storage capacity. Prioritize the list, separate your needs from your wants, and keep the list with you as you tour homes.
2. Determine how much you can afford—yes, you want a lovely home, but you also want a home that you can comfortably afford to live in. As you consider cost, think beyond the mortgage payment. Consider all of your expenses, current and future. The home itself will include the mortgage, property taxes, and insurance at the very least. You may also need to pay for water and septic, depending on where you live. Then figure in electric, heating fuel, phone, and other utilities. And finally, factor in other expenses, like school, car payments, food, travel, clothing, and anything else you need to budget for.
3. Find a mortgage originator or broker—whether you choose an originator (who works with a financial institution) or a broker (who is employed by an independent brokerage), do a little research before you reach out. Consult your social network and the internet. Then call around to compare rates and find out about fees and other requirements. Keep asking questions until you get the information you need.
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4. Get pre-qualified/pre-approved—once you’ve settled on a lender, get pre-qualified and/or pre-approved for a loan. You’ll get pre-qualified first; for this part of the process, your lender will look at your current financial situation and determine how much you will be able to afford. Pre-qualification is not a promise of money from the bank. It is simply a tool to help you make a decision. To get pre-approved, you will have to provide more information so that the credit union or bank can tell you how much they can commit to lending you. With a pre-approval in hand, sellers will see you as a viable buyer because they know you have the backing of a financial institution.
5. Find a real estate agent—maybe you don’t need a real estate agent, but it’s wise to get one. A buyer’s agent will help you navigate the confusing landscape of homebuying, which will prevent you from doing a lot of legwork and potentially missing details and deadlines. Notice, we said “buyer’s” agent. If you are searching online and find a home you like, the agent promoted on the website is the seller’s agent, so you’ll want to find a different agent who can represent your needs. Once you’ve found an agent, get to know them and make sure you have a rapport with the agent and trust her or him before you sign a contract.
6. Submit an offer—having found the house of your dreams and acquired pre-approval, you will be in a position to make an offer. This is a tricky process, which may require a basic understanding of the market and some negotiating skills. The process begins with an offer, made by you, in writing. Your offer will include the price you’re willing to pay, the amount of the deposit, contingencies (financing and a healthy home inspection are the two most common), and other information. If you are working with a buyer’s agent, this is where they come in handy, helping you fill out the paperwork and working as a liaison between you and the sellers, through their agent. Along with the offer, you will make a payment in earnest, which is a small down payment to show that you are serious about the offer. With the offer made, the seller will respond, either by accepting the offer, rejecting it, or countering it. During this process, you will have an opportunity to withdraw the offer before it has been accepted. However, once an agreement has been reached, you will lose your payment in earnest if you withdraw the offer. The final agreement is a legal contract between buyer and seller.
7. Get an appraisal—your lender will require you to get an appraisal on the house to make sure it’s worth the price. The lender will order the appraisal, but you will pay for it. If the appraisal comes out below the amount you agreed to pay, you can fall back on the financing contingency in your agreement with the seller to get out of the contract without losing your payment in earnest. If the appraisal is on target, you can move forward with the purchase.
8. Get a home inspection—a home inspection is not always required, but most buyers get one. The inspection will give you insight into any structural, mechanical, or electrical issues the house may have. The inspector will review the whole house, from top to bottom, testing major appliances and making sure everything is in working order. The inspection often takes between two and three hours and will result in a detailed report, which will describe where the problem areas are and how urgent the issue is. The information you will receive from this report will help you put together a punch list of items you want fixed before you move forward with the purchase. It may also provide enough negative information about the home that you decide to withdraw the offer (without penalty, if the inspection is listed as a contingency on the agreement).
9. Get insurance—your lender will require that you get homeowner’s insurance. You will need to apply for this before you get the loan.
10. Get a real estate lawyer—it’s best to get a real estate lawyer at the beginning of the process, though you won’t need her or him until much later in the process. Your lawyer will do a title search on the house and will ensure that there are no liens or other restrictions on the property. She or he will also run the closing process and distribute paperwork and payments (to the landowner and both the buyer’s and seller’s agents) at the closing.
11. Get to the closing—once you’ve made it to the closing, all you have to do is sign the paperwork. You will be given time to read the documents and sign. You will also receive the keys to the house. With all of the documents signed, you will be the proud owner of a new home!
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About Mortgage Originators
VSECU's mortgage origination team includes Shari DeLatte, Elizabeth LaPerle, Mark Wright, Tammy Farnham, and Michelle Duprey. The mortgage originators help members navigate the path toward owning a home, with clear advice about mortgage options and timely support from the moment the mortgage application has been completed through closing and beyond.