If you’re in the market to buy a home, knowing what to expect from each stage can make it easier to navigate an otherwise overwhelming process. Buying a home may be the biggest purchase you’ll ever make, so it pays to be prepared whether you’re just browsing, or ready to make an offer.
These 12 steps can guide you through the homebuying process:
1. Decide If You’re Ready for Homeownership
Consider your lifestyle, job situation, future plans, and housing needs for at least the next 5 to 10 years.
FACT: In 2017, the average homeowner stayed in their home for 10 years.
2. Get Your Credit In Order
Check your credit score and fix any errors right away. The higher your credit score, the more likely you are to get a favorable interest rate on your mortgage.
FICO Credit Score Ranges:
- 300-580: Very Poor
- 580 – 640: Poor
- 640 – 720: Fair
- 720 – 780: Good
- 780-850: Excellent
3. Find A Reputable Lender
Unless you’re planning to purchase a home with cash, you’ll need to finance most of the purchase price. Shop around for lenders that can give you a competitive rate and have a good reputation.
4. Set A Realistic Budget
Your lender may review your income information to determine how much house you can afford. However, you should also consider how much you’re comfortable spending on a home.
Each lender has their own debt-to-income ratio (DTI) requirement − speak with your mortgage advisor about which lending programs may be right for you.
5. Get a Pre-Approval Letter
If you qualify, your lender can provide a letter stating you’re pre-approved to borrow up to a certain amount, based on your income and creditworthiness.
Having a pre-approval letter to share with your realtor can help with a seller taking your offer more seriously.
6. Find an Experienced Real Estate Agent
You don’t have to use an agent to buy a home, but it can help when you’re a first-time homebuyer. Find one who is familiar with your desired neighborhood and has good reviews/ratings.
7. Start Home Shopping
Your agent can schedule showings at properties you’re interested in and send you listings that might be a good match. Take your time to shop around to get a feel for different styles and locations.
8. Make an Offer
Your agent can help you make a fair offer based on your budget, market conditions, and other factors.
Your offer will usually be based on:
- Comparative market analysis
- Market trends
- Number of days on the market
- Seller’s motivation and priorities
9. Do Your Due Diligence
Once the offer is expected, the inspection period begins. This period can last between 10 and 15 days.
Inspection Period Checklist:
- Order home inspection
- Order the appraisal for a home valuation
- Go through the MLS description again
10. Sign the Sales Contract
Also called the purchase agreement, this outlines all the details of the transaction, including any repairs the seller needs to make before closing.
11. Wait for the Clear to Close
Your mortgage loan needs to get through underwriting before you can close. This can take anywhere from 24 hours to a few weeks, depending on how much supporting information underwriting needs to approve you for the loan.
12. Close On Your New Home
You’re set to close on the closing date listed in the sales contract. This is when the home is officially yours!
Congratulations! Enjoy your new home and all the benefits of homeownership.