I’m finally at the point where I’m ready to talk about the next huge step in my life. A few weeks ago I got engaged, and a day later my fiancee and I got a call from our realtor saying that the offer we put in on a house was accepted.
There are so many things that can go wrong in the process of buying a house that I didn’t even think it would be worth writing about until I had cleared a few hurdles. As of Monday 10/22, I have cleared enough hurdles where it seems fairly likely that the deal will go through.
For those that have never bought a house or haven’t bought one in a long time, here are the nine biggest steps that I’ve encountered in buying my first home. The following steps assume you will be taking out a mortgage to buy your house (cash buyers would skip a lot of steps and probably know enough that they don’t need a list like this anyway).
9 Big Steps to Buying a House
1. Find a Realtor (optional)
Our first step in finding a house was to find a realtor. You don’t have to get a realtor but it’s free for you (both the buyer and sellers realtors are paid out of the purchase price of the home) and your realtor has a lot of expertise that you probably don’t have.
As someone going through the process without any real estate or contract knowledge, I can say that doing this without a realtor would be way too hard and time consuming.
2. Find a House
Go online to websites like Zillow.com, Trulia.com and Realtor.com to start looking for houses. Your realtor can help you find homes if you like, but Tag and I preferred to find ones we like online and send a list to our realtor so he could set up the showings.
3. Get Pre-Approved for Financing (optional)
Once you’ve found a house you like and are thinking about making an offer, it’s a good idea to get pre-approved for financing. This will help you understand if you can realistically get a loan for the home, and it also shows the seller that you are serious and have the means to buy his or her house. You don’t have to do this, but it makes your offer look stronger.
4. Make an Offer
Talk to your realtor, have him pull some information on recently sold homes in the area and come up with a good offer. If you think the house is worth $200k, go in with an offer that is lower than that but not so low that the seller doesn’t take you seriously.
Remember that your realtor’s commission is based on the sale price of the house, so a higher sale price means a bigger commission for him or her. Listen to your realtor’s advice, but it’s your money and ultimately your decision how much to offer.
If your offer isn’t accepted, negotiate. For the house we are hoping to buy the seller drew a line in the sand at $205k. We came back and said there’s no way we could do $205k and the best we could do was $200k; take it or leave it. We were actually really surprised when he took it.
6. Get an Inspection
I’m not a nationwide real estate expert or anything, but in Texas you have an option period (typically 10 days) where you can back out of the deal at any time. This 10 day period is the time to get your inspection. If there is anything wrong with the property that wasn’t in the seller’s disclosure, consider asking for additional money off the sale price.
Don’t ask the seller to fix problems because you don’t know if they will do it right. Just ask for money off the sale price and do it yourself.
7. Apply for Financing
Once the inspection is done and you are ready to buy the house, you need to talk to a bank and start the financing process. Shop around for rates and keep in mind that closing costs are expensive. You’ll either need to pay cash at closing or have the bank increase your interest rate in exchange for paying some or all of your closing costs.
8. Get an Appraisal
The approval process for getting a home loan is very long and extensive, but one of the biggest hurdles is the appraisal. A bank isn’t going to lend someone $200k for a house if they believe it’s only worth $190k.
In my case the bank hired the appraisal company and set up the appointment while I paid for it (which is part of the closing costs). My appraisal came in right at $200k, so now there’s just one more (huge) step.
9. Get Approved for Financing
At this point there’s just one more hurdle to jump (this is where Tag and I sit today): have the bank approve the loan. They need to make sure you have enough money to pay for the down payment and closing costs, that your income is high enough to support the monthly payments, that you’ve been at your job long enough to consider your income stable. They check your credit score, credit history, and do a bunch of other stuff.
It takes a long time, but that makes sense. If you were going to lend someone over a hundred thousand dollars I hope you’d take the time to review their creditworthiness too!
And Now We Wait…
This is just a high level overview of our process so far. Who knows what other hoops we’ll have to jump through to make sure the financing is approved? Right now I’m just waiting to hear back from the bank to find out if I need to give them any more information.
Over the next few weeks I’ll discuss some of these steps in much greater detail talk through some of the specifics of what Tag and I did, what we did pretty well and what we could have done better. I’m not an expert by any means; I’m just happy to share my experience and I hope it helps someone.
Readers: Have you bought a house recently? Was your experience the same as mine?