Steps to Buying a Home:
Get Pre Approved For A Mortgage
When you’re ready to start house hunting, it’s time to get pre-approved for a mortgage. You can find one of our trusted lender partners in the "Vendors" section of our site. When you apply, your lender will give you a pre-approval letter that states how much you’re approved for based on your credit, assets, and income. You can show your pre-approval letter to your real estate agent so they can help you find homes within your budget.
To get pre-approved, you need to apply with your lender. The pre-approval process typically involves answering some questions about your income, your assets, and the home you want to buy. It will also involve a credit check.
There are multiple types of mortgage loans. Knowing your options can help you make the right decision. Here are some of the most common types of mortgage loans.
Conventional loans, sometimes called conforming loans, are loans that aren’t backed by the federal government. Conventional loans are a popular option for home buyers, and you can get one with as little as 3% down. Conventional loans typically have the least strict appraisal conditions.
Backed by the Federal Housing Administration, FHA loans are less of a risk for lenders because the government insures them if you stop making payments. As a result, FHA loans have credit score requirements that aren’t as strict. You can get an FHA loan with a down payment as small as 3.5%.
VA loans are mortgage loans for active-duty members and veterans of the Armed Forces. You can get a VA loan with 0% down if you meet service standards. VA loans are insured by the Department of Veterans Affairs.
Another type of government-backed loan, a USDA loan, helps people in rural and suburban areas buy homes. You can get a USDA loan with 0% down, but your home must be in an acceptable rural area and you must meet income eligibility rules.
Begin House Hunting
Pomerleau Realty Group will help you begin looking at properties within your budget. It’s a good idea to make a list of your top priorities. Once you find a property you like that fits your needs and budget, it’s time to make an offer!
Make An Offer On A House
When you decide to make an offer on a home, you must submit an offer in writing. Your offer includes details about yourself (like your name and current address), the price you’re willing to pay for the home, and more. It will also include a deadline for the seller to respond to your offer.
Most offers also include an earnest money deposit. An earnest money deposit is a small amount of money, typically 1% – 2% of the purchase price. Your earnest money deposit goes toward your down payment and closing costs if you buy the home.
Once your offer is received by the seller, they can respond in one of three ways:
- Accept the offer. If the seller accepts the offer, you can move onto the next step
- Reject the offer. If the seller rejects your offer, the ball is back in your court. You can choose to submit another offer or move onto another home.
Give you a counteroffer. The seller can also come back with a counteroffer of their own. They may change the purchase price or the terms of the sale. You can accept the counteroffer, reject it or make another counteroffer.
Negotiations may go on for some time after you submit your offer. Let your real estate agent help you manage negotiations and don’t be afraid to walk away if you can’t reach an agreement. Once you and the seller agree to an offer, it’s time to move on to the appraisal and inspection.
Get A Home Inspection And Appraisal
You can make a satisfactory appraisal and inspection a condition of your offer.
An appraisal is a review of your home that gives you a rough estimate of how much the property you want to buy is worth. You must get an appraisal before you buy a home with a mortgage loan. Lenders require appraisals because they can’t lend out more money than your home is worth. Appraisals typically take 35-50 days.
An inspection isn’t the same thing as an appraisal. An inspector will go through your home and specifically look for problems. They will test electrical systems, make sure your roofing is safe, make sure appliances are working and much more. After the inspection, the inspector will give you a list of problems they found in the home. Inspections can typically be completed within 1-2 weeks of being under contract.
Lenders don’t require inspections to get a loan. When you receive your inspection results, go over each item line by line and look for major issues.
You’ll be liable for any major repairs after your sale closes. A clogged toilet or a sink that won’t drain aren’t major issues. However, if your home has an expensive problem (like cracks in the foundation or poorly installed windows), you may want to reconsider the sale.
Ask For Repairs Or Credits
After you view your inspection results, you might want to ask your seller to correct some of the problems you found. You can do this in one of three ways:
- Ask for a discounted purchase price considering the results.
- Request that the seller gives you credits to cover some of your closing costs.
- Ask that the seller have the problems fixed before you close.
Your real estate agent will submit your requests to the seller’s agent. The seller might accept your request, or they might reject it. If your seller rejects your request, it’s up to you to decide how to proceed. If you have an inspection contingency in your offer letter, you can walk away from the sale and keep your earnest money deposit. Keep in mind that in a competitive buying market, the seller may be less inclined to negotiate repairs.
Do A Final Walkthrough
You should do one last walk-through alone in your new home before you close(typically the day before the closing), even if you’re 100% committed to the property. This time allows you to check and make sure that the seller has made the repairs you requested and cleared out the property.
Walkthrough the home and make sure the seller hasn’t left any belongings. Check your repair areas if you requested them. You may also want to double-check your home’s systems one final time to make sure everything is in working order. If everything looks good, it’s time for you to confidently move toward closing.
Close On Your New Home
Your lender is required to give you a document called a Closing Disclosure 3 days before closing, which tells you what you need to pay at closing and summarizes your loan details. Read through your Closing Disclosure and make sure the numbers don’t vary too much from your Loan Estimate, which you would have received 3 days after your initial application.
Once you’ve reviewed your Closing Disclosure, it’s time to attend your closing. Bring your ID and a bank-certified check for your down payment and closing costs.
You’ll sign a settlement statement, which lists all costs related to the home sale. This is when you pay your down payment and closing costs. You’ll also sign the mortgage note, which states that you promise to repay the loan. Finally, you’ll sign the mortgage or deed of trust to secure the mortgage note. You will receive the keys to your new home at the closing
After closing finishes, you’re officially a homeowner!