Step 1. Determine Needs/Wants
Ask yourself why you need to buy a house. Is it that you do not want to rent anymore for first home buyer or you want to move up to a bigger house due to growing family size or move to a neighbor with better public school? Or you simply have some funds to invest?
Try your best to separate needs and wants. Prioritize your wish list to group them into must have requirements and nice to have requirements.
Step 2. Look at your Financial Numbers
Down payment – how much down payment you are planning to put? Where do they come from?
Monthly Mortgage Payment – It’s important to consider your income and the total of your other debt payments (like credit card debt or car payments) when deciding if you can afford to purchase your own home. Lender only looks at pre-tax gross income when they qualify you. You need to also look at your after tax income and cash flow. Remember to add prorated property tax, insurance and HOA (if you buy townhouse/condo) or mortgage insurance (if you pay less than 20% down) into your monthly expense calculation.
Step 3 Find a REALTOR® to be your Buyer Agent
REALTORS® provide expertise on market trends, property conditions, and many other aspects of a real estate transaction. By working with a REALTOR®, you will be able to see comparable homes for sale, track sale prices in the desired neighborhood and gain insight on many other aspects of a real estate purchase.
A REALTOR® is a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS®. Realtors abide by a Code of Ethics, which sets forth standards of practice that includes honest and ethical treatment for all parties in transaction-related matters.
Interview several agents to ensure that the REALTOR® you choose works with prospective buyers and is knowledgeable about the area in which you want to purchase. Make sure the agent you select is someone with whom you are comfortable sharing personal information.
Having a buyer’s agent doesn’t cost you anything: the commission is paid from the sellers’ funds at closing, but your buyer’s agent will have a signed agreement to work for you, and will hold your information confidential. A good buyer’s agent will help you clarify what you are looking for, identify neighborhoods and properties that could suit, and answer your questions about the process and the area. It’s also perfectly fine to start working with a buyer’s agent NOW to track the market, even if you aren’t thinking of buying for a year or more
Step 4 Get PreQualified / Preapproved
You can get pre-qulification/preapproval before you locate an agent or after. This helps to know what is the loan amount you can qualify and give you an idea of price range you can work with for buying your house. Ask your loan agent for different loan programs such as 30 year fixed, 5/1 ARM, 7/1 ARM or 10/1 ARM to understand pros and cons of each program and which one fits your needs the most.
Check our list of documents needed for loan for details on what to prepare.
If you are not sure about your credit score, this is the good time to check and fix any errors on your report. If you know your credit score already but not sure if you will buy within three months, discuss with your loan agent to see if it’s good to pull credit report now or wait until you are more ready to put offer. Remember to let lender pull the credit and do NOT pull yourself as lender will not take the report from you.
Step 5 Search Home for Sale
Ask your agent to set up automatic alerts for you to get detailed info of the house that fit your requirements.
Schedule time to check the houses you are interested in in person
Give your agent feedbacks after viewing the houses and ask your agent’s opinion on the houses too. For the houses you are interested in, ask your agent to get disclosures, reports, offer deadline, price comparison to know more details of the house.
Step 6 Put an offer for the House You Consider Buying
Go through the questions you have after reading through the reports and disclosures your agent provided you in step 5. Discuss the offer competition status and the pricing analysis with your agent to reach offer pricing and terms.
If you are considering a low-ball offer, ask your agent to substantiate this price for you. Prepare for multiple offers if the home is considered desirable in a hot location.
Step 7 Offer Status and Negotiation
Once you send the offer to the seller, seller may accept the offer, counter your offer or reject your offer.
If seller accepts your offer, make sure you know the timeline of the offer execution and what are the items you may still negotiate about before closing.
If seller counters your offer, find out how many offers seller countered and seller’s expectations to decide on the response.
If your offer is rejected, ask your agent to explain why and don’t repeat that mistake with your next offer.
Step 8 Offer Accepted – Contingencies and Inspections
After you’ve ratified your contract, you have a time period to get your financing approved (including a satisfactory appraisal of the home’s value by the lender) and perform your inspections.
As soon as your offer is accepted, you need to notify the lender and provide them with your most updated financial info and inform them to proceed to underwriting your loan asap. You should discuss with your loan agent to finalize the loan program and discuss the appropriate time to lock the rate.
Once your inspections are done and loan is officially approved, you will remove contingencies. Remember, once your contingencies are removed, you should be ready to close the deal. Otherwise, your deposit could be at risk.
If the listing agent has not open escrow when the house was listed on the market, this is the time the escrow needs to be open either by listing agent or your agent. Deposit should be sent to escrow directly and stay in your escrow account until close.
Decide on how you want to hold the title and let escrow officer and lender know. Check here for the different ways to hold title and their impact.
Step 9 Ready for Close
Lender has issued the loan closing docs to your escrow officer after final approval. Your insurance agent contact and quote should be made available to escrow officer so that they can order the insurance policy for you. The effective date should be the close of escrow date.
It’s important to note that most homeowner’s insurance policies don’t cover flooding. Only a flood insurance policy will cover flood damage. Your insurance agent can tell you more about the benefits of flood insurance and in most cases, you can purchase flood insurance coverage from the insurance agent who sells your homeowner’s policy. The National Flood Insurance Program has a website to help you prepare and learn more about floods and flood insurance. To learn about your flooding risk and how to protect yourself and your property visit www.floodsmart.gov.
Floodsmart.gov is an interactive website. You can enter your property information to find out your flood risk.
Do Final Walk-Through before lender funds the loan. Inspect the property to make sure it’s in the same condition as when you agreed to buy it. If you find a serious issue, address it now before lender funds the loan.
If final walk through is good, sign escrow documents along with your loan documents with notary. Escrow officer can arrange the signing. After signing, send your funds to escrow officer. Expect escrow to pad the amount, so you will receive a refund after closing. Consider asking your bank to wire the funds to escrow, saving you the hassle of waiting in line at the bank.
Step 10 Close Escrow
Your property deed, seller’s reconveyance and deed of trust will record in the public records. Escrow officer will notify you and your agent when it records. After recordation, unless your contract specifies otherwise, the property is yours — change the locks immediately.
