How To Buy A House - 10 Steps To Buying Your First Home

Are You Thinking It Might Be Time For You To Buy A House?

The journey through life creates many amazing experiences and memories that we cherish. In fact, one of those most important life events can be when you buy your very first home. Not only is this event impactful on it’s own, but it can be the home to many of the wonderful memories to come that will help tell your life story. 

When you think about making the first step to buy a house, it can be a very intimidating mission. However, with the right guidance, it can in fact be a very smooth and seamless process. To simplify this process for you, I went ahead and laid out the 10 steps you’ll need to go through when you buy your first house. Let’s get to it….

1. Get Your Credit In Order 

When you start the process to buy a house, one of the most important factors in the pursuit of getting pre-approved for a home loan, is your credit score. As you may or may not know, the better your credit, the lower the interest rate you will be given. 

Be sure to check your credit well in advance of purchasing a home, so you can give yourself enough time to make any adjustments if needed. A great app that I personally use to help track my credit score is Credit Karma. This will help tell you why your credit score is where it is, and it will give you recommendations to help boost it. If you have anything in collections, you must make sure to pay those off first. 

As a general guideline, here are the requirements for our most popular first time home buyer programs… FHA has a great loan option for buyers that requires a 3.5% down payment. For this program, your minimum score needed is 580. Another popular option is to go $0 down with a WSHFC down payment assistance program. For this program, you’ll need a minimum 620 score. As you increase the amount that you put down, there will be more options to qualify with a credit score lower than 580. 

2. Contact Your Local Real Estate Agent/Broker

One of the most important aspects when buying a home is having an advocate on your side that you can trust. There are many moving parts throughout the length of a real estate transaction. It’s the job of your Real Estate Broker to guide you through every step, and put you in the best position as possible to succeed. 

Your Real Estate Broker will be your main point of contact through the length of the home buying process. They will help you look for homes, write up contracts, negotiate on your behalf, and organize the timeline to make sure everyone stays on track. If you are thinking about purchasing a home in the near future and don’t yet have a Real Estate Broker you trust, feel free to reach out to me at my contact info at the bottom of this article, and I would be happy to assist you in your home purchasing dreams. 

3. Get Pre-Approved Through A Mortgage Lender

The next step towards finding the home of your dreams, is to contact a local mortgage lender and see where you stand in terms of qualifying for a mortgage. The lender will look into your credit score and financial information to see if you’re in good standing to qualify for the type of home you are looking to purchase. The lender will identify which of the many loan programs they have will be the best fit for you. The type of program you’ll qualify for will depend on many factors such as credit score, income, debt, down payment, and location. Once all of that is identified, you will be given a maximum purchase price pre-approval amount so we know what price range you are able to shop in. 

It is very important to find a great mortgage lender that will provide a very high level of service when you look to buy a house. The reason you should get in touch with your Real Estate Broker first, is because they will have a relationship with multiple lenders they trust that they can connect you with. Therefore, if you don’t have a relationship with any lenders, don’t worry, talk to your Real Estate Broker about who they trust. 

4. Make Your Wish List & Start Shopping For Homes

Once you’re pre-approved, it’s time to start shopping for homes! Before you start to view homes in person, it’s important that you sit down and make your wishlist. Figure out how many bedrooms and bathrooms you need, the ideal size of the home and lot that you desire, your preferred location, and any other features that are important to you. 

Once you have that all figured out, converse with your Real Estate Broker and make a list of available homes that fit your criteria. From there, you can pick a day or multiple days, and go out with your Broker to view all of these homes. Don’t worry though, this isn’t HGTV. You can look at more than 3 homes. It’s important that you get a good idea of what’s out there. As you’ll come to find out, the pictures you see online can be deceiving. Your opinion on a home can completely change once you see it in person.

5. Make An Offer On A Home

Once you find the home that you love, It’s time to put an offer in. You’ll want to sit down with your Broker and discuss what the offering price should be. There are multiple aspects you’ll need to consider before making this decision. We’ll want to look at the comparable sales in the area to see if the home is in fact worth what they are asking. Your Broker will need to gauge the interest on the home and see if there are other buyers putting offers in, as this can drive the purchase price needed to get the home above the asking price. Lastly, you’ll want to see if all of those factors line up and still put you within your comfortable price range. 

There are many other aspects to an offer that can both strengthen and weaken it. There are contingency’s in place to protect you as the buyer such as inspection, financing, and appraisal contingency’s. Your broker can explain these in depth once you get to that point. 

Once you have decided exactly what offer to put in with the guidance of your Broker, he or she will write up that offer for you and send it over the the sellers and their Broker. Typically, offers have a deadline of 24 or 48 hours. Meaning the seller has 24 hours to respond to your offer. Very often we’ll get a response much quicker than that, it just varies from situation to situation. The sellers may accept your initial offer, or they may send you over a counter offer. If they do send you a counter, we continue to negotiate from there to try and reach mutually acceptable terms. 

6. Deposit Earnest Money

Once you have an accepted offer on a home and are officially under contract, it’s time to deposit your earnest money. For those that don’t know, earnest money is a deposit you put on the house to give you some “skin in the game” through the closing process and helps to protect the sellers from being jerked around by buyers that are not serious. Earnest Money is typically 1% of the purchase price. However, it is completely negotiable. The more earnest money you put down, the stronger your offer will look to the sellers.

Now, it is still very possible for you to back out of the transaction and get your earnest money returned. This can be through multiple different types of contingencies. When you go to buy a house and put together your offer, the 3 most common are an inspection contingency, financing contingency, and appraisal contingency. If you were to have an inspection done and find out there is something very wrong with the home, you can back out and retain your earnest money. The same can be said if your financing somehow falls apart, or the appraisal doesn’t support the purchase price. One thing to note is that the Earnest Money is not another fee. Once you get to closing, that earnest money will be applied directly to your down payment or closing costs. If you are going in with a $0 down program, your earnest money will be refunded to you via check after closing. 

7. Conduct Inspection and Appraisal

As soon as you are under contract, you’ll want to make sure to get an inspection scheduled. If you don’t know any inspectors, don’t worry. Your Real Estate Broker will have multiple inspectors they work with that they can refer you to. When you go to buy a house, it’s very important to get an inspection done to make sure the home is up to your standards, and you won’t have any surprises down the road. Almost all homes (except maybe new construction) will have issues here and there. It is completely normal to have small maintenance and cosmetic fixes in a home. What you really want to look out for are those big projects, or things that can turn into very expensive problems down the road. Things like the roof, foundation, attic, plumbing, electrical, etc…

Once you get through that inspection, the lender will send an appraiser out to the home. The job of this appraiser is to make sure the home is actually worth what you are buying it for. The lender will not grant your loan if the purchase price is higher than the market value, unless you bring in extra cash to the transaction. For example, if you are under contract on a home for $475,000, but it only appraises for $450,000, we’ll need to negotiate the sellers to come down to that appraisal amount. If they refuse to come under $475,000 and you still really want the home, you may have to come up with an extra $25,000 to bring in on top of your down payment to make up that difference.

8. Work Towards Final Loan Approval

Through this entire process, you will be working with the lender to obtain final loan approval. Once you are under contract, the lender will start asking you for more financial information and documentation to complete your file. Once they have everything they need, it will be submitted to their underwriter for review. It is up to the underwriter to approve or deny your home loan. Sometimes they may come back and ask for another document to clarify an issue they are running into, but the goal is to have the underwriter grant your loan approval a minimum of 3 days prior to closing.

9. Conduct Final Walkthrough

Within 3 days prior to closing, you have the right to do a final walkthrough on the home. This is your opportunity to go back over and make sure the home is in the same or better condition as it was previously. If you negotiated to have the sellers make any repairs on the home, this is also your chance to make sure those repairs were completed before officially signing the documents to purchase the home.

10. Sign Closing Paperwork and Receive Your Keys

Once everything has been approved and given a thumbs up for closing, the escrow office will schedule a time for you to come in and sign the closing documents. Typically, this will take place a day or two before the actual closing date. If you are closing on a Friday, they may have you come in Thursday to sign the paperwork. Then the following day on Friday, the sale will be funded and recorded with the county and you will officially be a homeowner and receive your keys!!

While buying your first home can seem to be a daunting task at first, once you cross that finish line and receive the keys to your new home, it can be a feeling like no other. As long as you have the proper guidance and advocate on your side, you should look forward to a successful home buying transaction!