The Home Buying Process in 6 Steps

If you have been reading or talking about buying a home for at least two minutes, chances are you have an idea of how complex it can be and how long it can take. And with so many potential pitfalls, it is important to research and prepare for the process. Not only will this help you to avoid common mistakes made by homebuyers, but it can also make the process less overwhelming. To help you prepare, this guest post presented by Carnegie Home Collection breaks down the six most essential steps involved in buying a home.

1. Get your three credit reports

When assessing your credit situation, you are entitled to one free credit report from each of the three major reporting companies (TransUnion, Experian, and Equifax). Apply for these reports as soon as possible to get a better idea of the type of mortgage you can expect; generally speaking, the better your credit score, the better your interest rate. Plus, applying now allows time to dispute any discrepancies among the three reports.

2. Consider mortgage options

Getting pre-approved for a mortgage is a critical step in the home buying process because it provides essential information regarding what kind of house you can afford. Plus, when there are multiple buyers making offers, the seller will oftentimes go with the one who is pre-approved since they are more likely to land the loan they need to purchase the home.

To get a mortgage, you will need to have money for a down payment. According to the National Association of Realtors, the median amount was around 7 percent of the home’s value; as Nerdwallet explains, the days of the 20-percent down payment are long gone. Of course, the higher your down payment, the better terms you will get for your mortgage. If you’d like to keep your interest rates low, you can pay points on the loan (also known as “buying down the rate”), which means you’ll pay a fee to the lender at the time of closing. Keep in mind that this works best if you intend to keep your home for an extended period. If you are curious to see if paying points will work for you, there are online calculators available that can give you a ballpark idea.

3. Plan for the costs

As you are determining how much house you can afford, you need to factor in all the costs. And there are a lot of costs that come with buying a home. Obviously, there are ongoing expenses like mortgage payments, property taxes, insurance, HOA fees, and utilities. But you also must consider one-time expenses such as the down payment, home inspection, and closing costs.

For instance, you can expect closing costs to be 2% to 5% of the sale price of your new home. You can lower these costs by comparing several loan types and lender fees or by negotiating with the seller to cover a portion. But if these methods do not work and you are unable to afford the closing costs, it could be an indicator that you need to consider a less expensive home.

4. Find the home

Once you have a general price range, it is time to start your home search. Meet with a real estate agent to discuss any homes he might recommend, and then look through online listings together.

Once you have a few houses in mind, your agent can then set up a tour of each property. Unless you get lucky and find the right home on your first outing, you will probably need to visit several homes, refine your search, and repeat the process until you hit the mark.

5. Craft an offer and negotiate

After you have settled on a particular home, craft an offer and present it to the seller. Your agent will be able to use his knowledge of the market to help you come up with a realistic offer. Every now and then, the initial offer is accepted by the seller, but be prepared to negotiate pricing, contingencies, and so on.

6. Bring in a home inspector

So, you found a home and made an offer that was accepted. The next step is to hire a home inspector. The purpose of a home inspection is to point out any necessary repairs or other concerns that need to be addressed before closing.

Once you have the inspection report, you can then negotiate with the seller on what repairs will be made and how they will be handled. For example, sometimes the seller agrees to certain repairs, sometimes they will reduce the sale price, and sometimes they will provide repair credits. After you finalize repair negotiations, you will be ready to do a final walkthrough and close on the home!

Yes, a lot goes into the home buying process. But knowing what to expect can save you a lot of stress and help you avoid making common mistakes. Just keep learning as much as you can about the process, and you will be well-prepared for success!