8 Key Steps to Buying a Home
Warren Buffett famously said, “a home is one of the most important assets that most people will ever buy.”
A home can provide comfort and stability as well as create financial security and build wealth through appreciation in value. Buying a home can also be a very involved & daunting process, especially for first-time homebuyers.
In an effort to make the process a bit more digestible, I have outlined 8 key steps to the home buying process below.
*Keep in mind that every individual and their situation is different and laws/processes can vary state by state. 1. Connect with a real estate agent.
You may think that this step shouldn’t be first, but personally, I believe it is crucial to interview agents as soon as you begin to think about buying a home. When you choose a great agent, they will be there to guide you through all of the remaining steps and will probably have some top notch recommendations for other people you will be working with, such as local mortgage lenders and inspectors. Your agent should provide advice, guidance, context, education, and resources during the entire process and beyond. A good agent is an agent for life, not just when you are buying and selling.
2. Get pre-approved for a home loan.
If you will be securing a mortgage loan to buy a house, as most people do, then you will want to work with a lender to get pre-approved for a home loan before you begin to seriously house hunt. It is fairly standard, especially in today’s strong market, to include a pre-approval letter from a lender with any offer you make on a home. This is why if you find your dream home before becoming pre-approved, you may miss out on the ability to put in an offer. Getting pre-approved also gives you a better idea of what you can afford. You may be surprised to learn that you can afford more than you thought, which will expand the pool of homes that you are able to consider. Pre-approval is one step further than what’s called a pre-qualification because the information is actually verified. You can read about the difference in more detail here.
When you work with a lender they will look at your full financial profile such as employment history/status, tax returns, assets, debts, credit score, retirement accounts, etc. They’ll review your information as well as current interest rates and how much money you have for a down payment and closing costs. This will determine the maximum loan amount you qualify for, and therefore, the maximum purchase price. Mortgage lenders vary in terms of the different mortgage options they offer, so many people like to talk to a few different lenders.
3. Determine your home criteria.
Spend time thinking critically about what you want out of your future home and neighborhood. Choose around five “must-haves” – the elements you can’t live without. Maybe it’s a garage, a yard, at least two bathrooms, etc. Then, pick five “nice-to-haves” – for example, a view, open floor plan, hardwood floors, etc. Keep in mind which items can physically be removed or changed and which cannot. Your agent should be able to help figure this out or can suggest contractors or vendors who can. Most importantly, understand that it’s a game of compromise. No home has it all!
Lastly, think about your lifestyle and how you fit into the property. If you’re someone who does not like yard work and you don’t want to pay a gardener, consider a townhouse or a home with a small yard. If you want to be able to walk into town for dinner and shopping, think about looking for a home in close proximity to restaurants and shops. Maybe you have young children or are planning to have kids at some point, then research the quality and reputation of the school district. Take things like this into consideration so you don’t end up making a choice you regret!
4. Start the search.
Now it’s time for the real fun to begin! There’s a pretty good chance that you’ve already been checking Zillow or Redfin often, but you can now search with more confidence. Your agent should also be able to set up a search for you within the local MLS (Multiple Listing Service) where homes are listed for sale. My goal is to immediately get my buyer clients setup with auto-emails from the MLS after our initial meeting. This gives them the opportunity to see homes that come on the market before they are filtered out to Zillow and other sites. It’s a great way to get a head start!
5. Visit open houses & tour with your agent.
The next step is to go out and actually tour the homes that catch your eye. You can visit open houses on the weekends as well as tour homes privately with your agent as needed. In Santa Barbara, most listings currently require buyer’s agents to make an appointment to privately show the home to their clients. Your agent can schedule appointments and take you on a tour of several homes in one day or spread out showings to fit your schedule. Whatever works for you!
6. Conduct due diligence (research & inspect).
It’s extremely important to fully understand what you’re signing up for when you buy a home. Your agent should provide you with context & guidance at this stage so you know what to look for. That said, the liability and responsibility ultimately falls on buyers to do their due diligence (at least in California).
A few items you might review include the property history, environmental impacts (is the home in a flood zone?), easements (is there a shared driveway?), and any liens against the home. If it’s a condo or co-op, check out the HOA (Homeowner’s Association) information including bylaws & rules, budget, and meeting minutes. A professional home inspection is strongly advised, mainly so that you’re aware of any issues with major systems like the foundation, roof, electrical, and plumbing.
*I have this step listed before submitting an offer because in the current market it’s common for the process to play out in this order. Many buyers are doing their research and getting a home inspection prior to offering, so that they can feel good about what they are buying and waive contingencies with their offer. This, in turn, makes their offer more competitive because it lowers the risk that they’ll back out before the sale closes, which makes the seller more comfortable choosing their offer. On the flip side, in a market with more inventory (or in a situation where a home has less buyer competition), you’re more likely to have success including an inspection contingency in your offer.
7. Offer & (hopefully) reach mutual acceptance.
When you find a home that you love, your agent will work with you to create a strategic offer. You’ll weigh factors such as how much competition is expected, what the sellers are looking for in an offer, what their motivation is, what price other comparable homes in the area have sold for recently, and more. This is where your agent should really do some digging so that you have the best odds of winning the house!
After your agent submits your offer, one of three things will happen within a day or two. 1) Your offer could be rejected and you’d go back to the drawing board. It’s OK if this happens! Sometimes buyers have to offer a few times before finding success. It just means there’s a better home out there! 2) The seller could accept your offer as-is, signing it and therefore creating a mutually accepted purchase and sale agreement. If that happens – hooray! Or 3) the seller might send a counteroffer, altering some of the terms that you initially proposed, and then it is up to you to reject/counter/accept that counteroffer.
8. Close & get the keys!
After mutual acceptance is reached the house goes into “escrow.” This is the time it takes to complete the remaining items in the buying process. During escrow, which is usually around 30 days, the escrow company (a neutral third party that holds all money and documents) and your mortgage lender will work together to make sure everything is in order. Your home loan will need to be officially funded and you will send funds for your down payment and any additional closing costs. You will also sign a lot of paperwork and perhaps do a final walkthrough of the home. When the county has recorded the sale and any proceeds are available to the seller, it’s deemed closed and the keys will be yours! When you move in is up to you. Congrats!
If you have any questions about this post or buying a home in general, please don’t hesitate to reach out! Whether you’re wanting to buy now, six months from now, or you’re just curious, I’m here to help in anyway that I can.
Paige Harvey | Realtor®
Berkshire Hathaway HomeServices
paigeharvey@bhhscal.com
805-403-3878