In some of the hottest real estate markets in the country some homes stay on the market just a few short hours and ultimately sell at or above their asking price due to a bidding war amongst multiple purchasers, making it imperative that serious buyers have the assistance of an experienced buyer’s real estate agent and understand the home buying process as well.
It’s quite natural for many buyers to spend several weeks or even months looking for the right home. However, in some of the flourishing property markets in the country things can sometimes move rather quickly in the final stages of the buying process. Ensuring you understand the entire process from beginning to end and knowing the most important things to do throughout the process can help make the home buying process much more enjoyable and successful.
Below, we have listed the necessary steps to complete the entire process of purchasing a new home successfully. Not only will you find all the steps needed for a great buying experience, you will also find valuable tips about the most important tasks throughout the buying process and many things you will want to remember to reference later on. Following our outline for the steps involved in the home-buying process will help you find a great buyer’s real estate agent who can also provide financial assistance to partner with and will allow you to handle all the requirements of purchasing a home effectively.
Step 1: Choose an Experienced Buyer’s Real Estate Agent
The absolute number one most important step in purchasing a home is the very first step, choosing the right buyer’s real estate agent to partner with. An experienced and savvy buyer’s agent can save you thousands of dollars throughout the property purchase process and will offer you valuable insights on a wide range of topics throughout your search for a home.
A knowledgeable buyer’s agent can help guide you on how much you should pay for a particular home, suggest the best mortgage lenders to work with and offer you the valuable advice you can only get from a real estate professional with extensive experience in the local market. Additionally, there are a few buyers agents that offer special incentives such as buyer cash back programs and down payment assistance you never have to repay!
If you only follow one of the steps we have included in this list, it should be this one. Partnering with a great real estate agent is many times the single most important factor in searching for a new home and successfully completing a purchase.
Step 2: Discuss and Review Needs with Your Buyer’s Agent
Once you select an agent to work with it is important to have a detailed initial meeting to discuss all the details of your situation with your agent. Keep in mind, a buyer’s agent should represent you and you alone. You do not want to work with a transaction agent who is working for both the buyer and the seller. A transaction agent has no fiduciary responsibility to either party and as such can disclose everything to the seller and vice versa. A buyer’s agent’s purpose is to negotiate for you alone always having your best interest in mind and to do everything they can to put you in the best possible negotiating position. They will review with your all disclosures and laws so you have an understanding of the home buying process legal requirements. Therefore, it’s important to openly discuss all the important aspects of your new home search with your agent including any financial concerns, family issues or any items that you absolutely cannot do without.
The better they understand your overall personal circumstances, the more effective they can be at helping you achieve all your objectives and requirements. Obviously, the topics discussed during your initial meeting will vary quite a bit from person to person, depending on your main concerns. However, the key areas below are typically the minimum amount of topics that should be covered during the meeting.
Your lifestyle will determine what type of home might be most suitable for you. Therefore, it is important to let your buyer’s agent know about your work, your family, and your overall lifestyle. Discuss the things in a home that will be the most important to you as well as the least important.
Financial Situation and Challenges
If you have any special requirements, limitations or credit issues now is the time to discuss them with your agent. If you are upfront and honest about it, then they can help you find viable solutions to any existing issues. If you choose to hold back information then they may not find out until it is too late for them to offer you help and or save the deal. Remember, your buyer’s agent is on your side and there to help you.
Establish Initial Price Range/Budget
You should always establish a budget in terms of monthly payment and total price before you begin shopping for a new home.
Step 3: Pre-Approval and Completing the Mortgage Approval Process
Once you complete your initial meeting with your buyer’s agent, it’s time to get pre-qualified for a mortgage. If you have chosen your real estate agent partner wisely, then they will most likely have some recommendations for which lenders might offer you the best options. Obtaining a mortgage pre-approval or pre-qualification is a crucial step in the home buying process.
Having a lender review your financial situation and give you a formal pre-approval letter will let sellers know you are not only willing to purchase their home, you are also able to make a purchase. In fact, some sellers will not even consider an offer unless you have gone through the lender pre-qualification process. It’s important to take care of this step very early on in the process and to keep your buyer’s agent informed of any communication or extra requirements of the lender.
There are many different types of mortgage programs available and all of them have advantages and drawbacks. The three most common types of mortgage loans are usually classified as FHA, VA or as a conventional mortgage. However, there are some specialty programs available as well, often connected with the classification of your employment or geographically specific related programs.
An FHA mortgage is a federally insured mortgage sponsored by the Federal Housing Administration. If you qualify for this type of mortgage, then the Federal Government insures a portion of the mortgage in the event you are not able to fulfill your commitment and repay the loan. This reduces the risk for lenders who are facilitating the loan. An FHA insured mortgage usually requires around a 3% down payment plus closing costs and the maximum loan amount varies from county to county.
A Veterans Administration mortgage is a special program for former members of the U.S. military. Similar to FHA loans there are specific requirements that an applicant must meet in order to qualify for this type of loan. However, in certain circumstances this type of mortgage can offer significant advantages as the loan to value is normally 100%; meaning no down payment is required, yet there will still be some closing cost.
A conventional loan is a mortgage offered through a privately owned or publicly held lender that is not insured or guaranteed by the Federal Government. There are certain cases where this type of mortgage might be preferable to a VA or FHA loan, so do not immediately assume a federally backed mortgage is always the best option. Although conventional loans usually require a much greater down payment.
Other Specialty Mortgage Programs
PATH is a discounted mortgage program available in some states that is offered to some public employees. If you work for one of the following entities, then it might be worth checking into the details of PATH to see if you qualify and if it will offer you any savings.
• Public Employees-Department of Health and Other Local Authorities
• State or Local Public School District Employee
• State University Employee
• Community College Employee
• Employee of the Public Court System
• Members of PERA (Public Employee Retirement Association)
Buyer’s Agent Programs-Cash Back and Down Payment Assistance
A select few buyer’s real estate agents offer special programs to their clients who purchase homes through home buyer’s cash back rebate program or down payment assistance up to $19,000. that never has to be repaid. Not all agents offer these programs and the additional financial help can easily be thousands of dollars which is more than helpful when purchasing a home. The two programs usually cannot be combined as per lender’s regulations.
Get Recommendations from Your Real Estate Agent Partner
Based on the information you share with your agent they can offer you valuable advice for getting help with a mortgage and getting started in your search for a new home. It is always wise to listen carefully to the advice of your real estate agent as the chances are very good they have seen others in the exact same situation as you and are associated with lenders, home inspectors and title companies.
Step 4: Searching for a New Home
An obvious step in the home buying process is the actual home shopping stage. Your agent can analyze comparable property values and help compile a list of properties that fit the parameters discussed ahead of time and schedule a time or multiple times to begin looking at the homes with you. It is important to be open minded as you may come across options you have not spent much time considering.
At first, you might have a tendency to quickly dismiss certain options, only realizing much later, that the home was a perfect fit. You will naturally scale down your options as you begin to get a feel for the area and the homes and pricing available. However, do your best to begin with an open mind and listen to the advice and suggestions of your agent; as he/she is the experienced expert in the area you desire.
Step 5: Choose a Property and Make an Offer
Once you have taken the time to fully review all of your property options and you have discussed things with your agent, it is time to choose a home and make an offer. Most formal offers require a small earnest money deposit showing your good intention to follow through if your offer is accepted, a copy of the pre-approval letter from your lender and an offer in writing, which your agent will prepare and deliver for you. These days things move much faster due to the digital platforms all offers, counters and other documents are handled online on secure websites for everyone’s convenience.
Step 6: Negotiate and Finalize Purchase Agreement
Once you make an offer a number of things can happen. The seller can accept the offer, reject the offer outright or make a counteroffer. Your buyer’s agent will help you properly negotiate the terms in question, as they can include a wide variety of items that range from the selling price of the home to how much of the closing costs the seller may be willing to pay and even if certain repairs will be paid for by the seller.
Once your offer is accepted or final terms are negotiated, then it is time to get prepared to finish the final few steps of the home buying process and close on your new home.
Step 7: Consult with Your Lender and Buyer’s Agent on Mortgage Approval
Once an official sales contract is in place, it is best to consult with your lender and your buyer’s agent to find out what is needed to get the mortgage approval finished and ready to close. It is important to note, the pre-approval process at the beginning is only the first half of completing a mortgage approval. Most of the time, the lender will require updated documents, additional information, employment verification and a variety of details to get the loan ready for an actual closing date. It is very important not to take on or even apply for credit elsewhere as this can damage the successful outcome to a final mortgage approval.
Do not delay in supplying the lender with any additional documents or other requirements, as time is of the essence, each item in your contract will usually have a required completion date and often times final underwriting and approval to close can take a bit longer than was originally projected. Every last detail and piece of paperwork must be submitted and the lender’s underwriters will not grant a „cleared to close“ until everything has been submitted and reviewed.
Step 8: Order Home Inspection and Review
Once you have talked with your lender and your buyer’s agent about the status of the mortgage approval then it is time to order a home inspection. A home inspection should always be completed and will sometimes prompt a few last minute details to be worked out between the buyer and seller. A home inspection is different from an appraisal. The home inspection is usually ordered and paid for by the buyer to help the buyer know the condition of the home they are purchasing and „what if“ any repairs need to be done; whereas the appraisal is now ordered by the lending institution to determine whether the real value of the home is consistent with the loan amount they are lending to purchase it.
Step 9: Buyer Reviews and Approves Settlement Statement
Based on changes in current real estate regulation, a buyer now has to review and approve the Settlement Statement for the closing three days prior to the actual closing date. This is for the buyer’s protection so there are no surprises at the closing table. Your buyer’s agent will work with to review your settlement statement and explain any items that you may not understand or be totally familiar with.
Step 10: Final Walkthrough and Closing
Once you review and approve the Settlement Statement, it is time for the final walkthrough and to complete the closing. Whether this is your first home or your tenth home, finally getting the closing done is always a great feeling and a very good reason for celebrating!