Buying a house is one of the biggest purchases you’ll ever make, so you want to feel nothing less than great about your choice. Figuring out your budget and getting preapproved for a home loan is the opening act. We’ll walk you through those steps in our post “Buying a Home — 4 Steps to Get Started.” Once the financing is squared away, how do you find a house that’s the best match for you, and what are the steps involved in buying it?
Step 1: Find the Right Real Estate Agent
Working with a real estate agent puts you in the hands of a professional who understands the different home options on the market and can navigate the legal steps and negotiations involved in a house purchase. Real estate agents get paid a commission or percentage of the house sale price, which is typically 5–6%.
With so many real estate agents out there, how do you find one that’s perfect for you? We recommend making a list of key features you want in a home and then talking to agents about their knowledge of the types of homes you want to buy. The more you know about what you want, the easier it is to find someone with experience matching your needs. Consult your mortgage lender as they may have real estate agents to recommend.
Tips for a “What I Want in a Home” list:
Separate your list into must-haves and nice-to-haves because it’s likely you’ll need to make some compromises.
- Location: Which neighborhoods would you consider?
- Schools: Are there certain schools you want to be near?
- Type: Single-family house, townhouse, condo, etc.
- Size: What is your ideal square footage? Do you want a yard and, if so, what size?
- Bedrooms and bathrooms: How many of each do you need?
- Home condition: Are you open to a fixer-upper or want your house to be move-in-ready?
Questions for interviewing real estate agents:
- How long have you been a real estate agent?
- How would you describe your strengths and special skills?
- How many clients are you currently working with?
- Describe your experience finding homes in my price range.
- Describe your experience looking for homes in my desired neighborhoods.
- Do you have references I could speak with?
Step 2: Make an Offer
Once you’ve found a home you love, your real estate agent will help you submit an offer letter in writing. In addition to including details like your name, address, the price you’re willing to pay and a deadline for the seller to respond, an offer letter is your chance to make a human connection with the seller by telling them how much you love the home and sharing a little about yourself to help you stand out among other bidders.
If your offer is accepted by the seller, most require you place a deposit in an escrow account to show you’re serious about the offer, which is 1–2% of the purchase price. This “earnest money” will be applied to the down payment and closing costs if you purchase the home. Your real estate agent can include an inspection contingency in your contract that allows you to receive this money back should the home have a significant issue.
Step 3: The Appraisal
When the seller accepts your offer, you officially kick off moving forward on the closing process. Your mortgage lender will ask an appraiser to evaluate the home and provide an estimate of what it’s worth, referred to as “getting an appraisal.”
If the appraised value is lower than the price you’re offering, the lender may not provide financing. You should speak to your lender about your options if the appraised value is lower than your offer.
Step 4: The Inspection
Though the lender doesn’t require it, you will want to order a home inspection where a qualified inspector examines the property’s safety and condition. They’ll look at everything, including the roof, foundation, plumbing and electrical. Depending on the inspector’s findings, your agent can help you request repairs from the seller, renegotiate the sales price or cancel the sale. And if there’s nothing glaring on the inspector’s report, you may move on to closing.
Step 5: Closing
This is the home stretch. “Closing” is the day you’ll make a few final transactions with the seller and a closing agent (usually the title company) who oversees the closing process. Before closing, you just have a few final to-dos:
- Walk through the property with your real estate agent to make sure everything looks good and that the seller made any repairs as agreed.
- Review the Closing Disclosure document provided by your lender that shows all the terms of the loan, closing costs and any remaining fees.
On the official closing day, here’s what generally happens:
- The property title transfers from the seller to you.
- You sign several legal documents including the Closing Disclosure, promissory note, deed of trust and certificate of occupancy.
- You pay closing costs, which may include fees for your mortgage application, appraisal, survey, title search and funds to establish an escrow account, which is the account that holds your payments for property taxes and insurance premiums. To learn more about these fees, download our free Homebuyer’s Guide.
Final step: Take the keys and enjoy your new home!
Download our free Homebuyer’s Guide for tips on how to shop for the best mortgage rates and make a smart offer. You’ll also receive information on upcoming homebuying events.
Ready to talk to a mortgage professional? Our experienced, award-winning team of mortgage lenders is here and happy to serve you.