Buying a house: It’s a big deal. It’s not like purchasing a pair of shoes, a new suit or even a car, for that matter. While it’s certainly fun and exciting, it can also be downright confusing.
While brunching with a friend the other day, our discussion turned to real estate. She’s a 28 year old ready to dip her toe in the market. Like most first timers, she quickly realized that she had no idea where to start.
“Tell me how to buy a house. I’m like a baby … I know nothing.” Her words, verbatim.
Two hours (and several mimosas) later, she had a darn good idea of the process. Here, I’ve recapped our discussion, broken down into ten basic steps. If it’s your first (or even your second) time buying, you’re going to have lot of questions and will need guidance and a bit of handholding. But this outline will set you in the right direction.
1. Establish Your Real Estate Goals
First things first, you’ll want to do a little soul searching to define your real estate objectives. Put together a high-level budget, and look at inventory to see what your money buys. What type of home do you envision yourself in — is it a condo, single family or multi-family? Are you looking for an investment or are you ready to settle into your dream home? Research neighborhoods and come up with some basic criteria for your search. As you get further along, you’ll be able to fine-tune everything.
2. Start Building Your Dream Team
Buying a home takes a village. My advice is to find a reputable real estate professional by asking your friends, family and colleagues for recommendations and to vet buyer agents thoroughly. You can then leverage your agent’s connections to assemble key players with a proven track record. In addition to your agent, you’ll need a lender, perhaps an attorney and definitely a home inspector. These experts will come into the equation at different points throughout the process and advocate on your behalf.
3. Talk to Lender
Once you get serious, you’re going to have to talk money. Buying a home is a huge financial endeavor. Fortunately, interest rates are still rock bottom, which means borrowing money is cheap. In speaking with a lender, you can establish your max budget and get an idea of monthly payment amounts and loan programs. There are lots of products designed specifically for first-time buyers. Your lender will equip you with a pre-approval letter, which is an absolute must for submitting a competitive offer.
4. House Hunt
Finally, you’re getting to the good stuff. Once you have your ducks in a row, you’re ready to start the house hunt. Have your agent sign you up for a direct feed of new listings and keep tabs on housing websites. It’s important to track recent activity, quickly evaluate new listings that meet your criteria and window shop by attending open houses. Once you feel ready to make a move, don’t be shy. In a competitive market, you’ll have to pounce to get what you want. It’s ideal to schedule a tour at the first available showing.
5. Get an Accepted Offer
Once you’ve found a place that strikes your fancy, it’s time to put together an offer. Be aware of any offer deadlines, as you don’t want to miss the boat. Your agent will be able to provide guidance on how to structure a bid that is most competitive for the situation. The offer provides a timeline for the transaction and outlines any special terms and contingencies, like a home inspection and mortgage. Offers can be accepted, rejected or negotiated. Fingers crossed for good news!
6. Do Your Due Diligence
The work doesn’t end with an accepted offer. If you negotiated a home inspection, you can hire a licensed professional to assess the property and provide you with a report of the findings. Use the inspection as a learning opportunity, gathering as much info as you can about how to maintain the house. Sometimes you can use the report to negotiate with the seller on any shortcomings that impact the value of the property. Also use this time period to research the house and neighborhood. Do what you need to do to be comfortable with the purchase!
- Call the building department and ask for permits, which you should review to confirm that you're not inheriting a hot mess (i.e. strange issues or renovations that weren’t approved by the town/city).
- Introduce yourself to the neighbors.
- Check the local sex offender registry.
7. Loop in an Attorney for the Purchase and Sale
When you’re ready to move forward, it’s time to bring in your attorney strong arm to help prepare the purchase and sale. An attorney, although not required in every state, is a great resource and will make sure that your interests are represented. The purchase and sale is a binding document. Unless a major contingency is not met prior to closing, it’s rare for a deal to fall apart after both parties sign.
8. Secure Your Mortgage
During the process, you’ll be working in tandem with your lender to secure a mortgage. Once you choose a financial institution, you’ll need to provide a loan officer with a ton of documentation. At a minimum, you’ll be obligated to turn over your tax returns and allow the lender to pull a credit report. You might be required to take a first-time home buyer’s course to be cleared to close. The mortgage company will also send an appraiser and surveyor to the property. Assuming things checks out on all fronts, you’ll get the green light.
9. Pass Papers
Finally, the big day arrives: closing. Your attorney has already performed a title search on the property and prepared a giant stack of documents that will be ready for your signature. You may meet the sellers for the first time at the closing table. Your attorney will explain many important details, like how to pay your mortgage. After you wrap up, the deed will be officially recorded at the registry of deeds, and you’ll be given your new keys.
Now, all that’s left to do is crack open a bottle of bubbly. Congrats, you are a homeowner!