Buying a home is unlike any other type of purchase. It’s not something you decide on a whim and can do immediately, like hopping on an airplane or picking up a designer bag at Nordstrom’s! The process begins by shopping for a mortgage and ends at the closing table—with several important steps in between. It can seem pretty complicated, but if you know what to expect, the process can go relatively smoothly.
The length of the home-buying process is different for everyone… it can take anywhere from two months to two-and-a-half years. The average buyer spends 4-5 months in the consideration phase, 1-3 months shopping for a home, less than a week to make an offer (and negotiate), and 1-2 months to close the deal. The length depends on how well you prepare. If you’re new to home-buying, and aren’t able to pay cash, this 10-step guide breaks down the process:
- Shop for a mortgage. Before you waste time looking at (and falling in love with) houses that are out of reach, talk to a lender. Don’t limit yourself to just one lender, either. You may get different rates from each one you contact, so you can end up paying more than you have to if you don’t shop around.
- Make a list of needs and wants. Once you have an idea of what you can spend, you should make a list of the most important things you want in a home. This will help narrow down the playing field, so you won’t waste time by looking at properties that don’t suit your needs. This might include a fenced yard for a pet, an office space, or a specific number of bedrooms.
- Find a real estate agent. You may think you can save money by trying to go it alone, but the fact is, if you don’t have an agent working to get you the best deal – and helping you navigate through all the paperwork – you are going to be relying solely on the Listing Agent of the property. And who do you think that agent is partial to? The Seller! You need someone on your side.
- Peruse listings online at home. You can do your own search on Zillow and Trulia, as well as on many other sites, but you will often find that those listings are not up-to-date. Your agent has access to the most accurate inventory of homes in your area of interest. He or she can set you up with listing alerts that will let you know the moment a house that fits your criteria gets listed. Even better, an agent has access to upcoming listings that aren’t even on the market yet!
- Visit potential homes with your agent. Once you have found a few homes that look like potentials, your agent can schedule viewings. Don’t assume that the houses will look exactly like the photos you have seen online – Photoshop is real, people! A house can look completely different when you see it in person. Take pictures and make notes about each house. That way when you get home, you can compare properties.
- Make an offer and negotiate. When you have found the perfect house, your agent can help you determine what to offer. This number will depend on several things: what comparable homes in the neighborhood have sold for, and what kind of market it is (buyers’ or sellers’), to name just two. When you have agreed on a price and everyone has signed the contract, you will be expected to pay some earnest money – usually 1% – to show you are a serious buyer. This will be credited to you at the closing.
- Schedule a home inspection. Once you have a signed contract, your agent can recommend an inspector to have the home inspected. You can go along if you want to, but don’t worry if you can’t be there. The inspector will send you a detailed report, usually within 24 hours. You may need to negotiate further if the inspector has found any issues with the property. If there are any serious problems, you can walk away if you want to.
- Get your loan approved. At this point, you should have already submitted all the necessary paperwork to your lender in order to get the underwriting process started. There may be items still needed. Your agent will be working closely with your lender to assure that everything is running smoothly, so you can close on the date stated in the contract.
- Wait for the appraisal. Your lender will arrange for an appraiser to contact the agent. This is an important step, because the house must appraise for at least the purchase price, or else the lender can not approve the loan. If it doesn’t appraise, you can either ask for a reduction in price or you can withdraw your offer. Both the inspection and appraisal must be done in a timely manner (the “due diligence” period of a contract).
- Wire funds and go to the closing. When your loan has been approved, you will receive a statement with all the credits and debits charged to both the seller and you. This has to be signed three days before the closing. Your closing attorney will then be able to tell you how much to transfer the day before closing. Most closing attorneys will not accept more than $5000 unless it is in the form of a wire transfer.
So you see, buying a home is not that complicated. If you have questions or need help with any of the above steps, feel free to contact me or visit my website. If you are not looking in Savannah, I will be more than happy to refer you to an agent in your city.