Buying stuff online has spoiled us with “one-click ordering.” If only buying a house were so easy. A lot of people stumble into the whole thing and try to figure it out as they go. That’s tough; we’ve been there.
From that first home — little more than a cottage, really, but what seemed like such a massive leap of faith at the time — to the urban split-level loft with a view, we’ve made the mistakes. But you don’t have to. Let us break down the homebuying process for you.
How do I even start?
Besides determining what your housing needs are, setting a budget, getting your financial ducks in a row and obtaining a preapproval — which is a lot to do — you’ll also want a firm idea of just what it is you’re looking for. A wish list can be a good tool. Among the potential considerations:
- What part of town do you want to live in?
- Are schools a factor?
- Older home, or newer?
- One story or two? Condo?
- Contemporary or traditional? Something else entirely?
- A fixer-upper or move-in-ready?
- Near public transportation or other amenities?
- How many bedrooms? Bathrooms?
- Yard? Fenced?
These are just a beginning. You’ll have a much longer list once you start brainstorming.
Do I have enough money?
You know about making a down payment. But there are other expenses due before or at the loan closing that you’ll want to prepare for, such as:
- Earnest money, a deposit you’ll make to the seller upon signing the sales contract to show your good faith.
- Closing costs, listed in an official Loan Estimate, including an appraisal, credit report, loan origination fees, home insurance premiums, property taxes (often prorated at closing), title insurance, recording fees and attorney’s fees.
- An initial deposit to your monthly payment escrow account (if one is to be established).
You will receive a Closing Disclosure regarding the total charges three days before your scheduled loan closing. You can compare these details with the Loan Estimate you received three days after your application was made. Expect to pay roughly 3% of the home’s purchase price in closing fees.
Sometimes a seller will agree to pay some, or all, of the closing costs, depending on how competitive your housing market is. Plus, some lenders will allow you to roll the fees into your mortgage (called lender credits) — but then you’ll be paying interest on what could have been a one-time charge. Lender credits, or “rebate pricing,” may also cause the interest rate you pay to be higher.
Do I need a real estate agent?
A real estate agent knows what’s selling and at what price; the neighborhoods that are in demand or overpriced; and where the homes are that fit your budget. An agent will also know how long a particular house has been on the market — information that’s not always available online, and which can affect the home’s price and enhance your bargaining power.
But most real estate agents are ultimately working for the seller, in that commission is paid by the seller and only triggered by a sale. That’s why you’ll want to find an exclusive buyer’s agent, if you can. They can be hard to find. However, agents of all kinds are generally bound by state real estate licensing laws to act in a fair and ethical manner.
How long will this take?
You’ll likely view about 10 homes over 10 weeks to find a home you’re willing to make an offer on, according to a survey by the National Association of Realtors. Roughly half of those surveyed said finding the “just right” home was the most difficult part, but even so, there’s lots left to be done.
The entire process from contract to closing (not counting the time you’ll spend getting preapproved for a loan and house hunting) will normally take from 30 to 45 days. A contract timeline is usually no longer than 60 days. Some of the steps involved include:
- Negotiating and submitting an offer (1-5 days)
- Signing a sales contract (1-3 days)
- Securing your financing (21-30 days, sometimes more)
- Having a home inspection completed (7-10 days)
Unfortunately, after the contract is accepted, it’s mostly out of your hands. Any hitches along the way can sometimes delay the process. If you need to sign an authorization or respond to a request, do it as quickly as you can — and then just wait patiently.
Managing expectations
Buying a home, especially the first time around, will probably leave you with a feeling of information overload. At practically every meeting you’ll be given “helpful” guides, informational booklets and legally required disclosures. That’s why we’re boiling it all down for you — our goal is to limit your homebuying experience to as few surprises as possible.