The process of buying a home can feel intimidating, whether it’s your first real estate purchase or your third. The key to making it less scary is to know what’s ahead and surround yourself with knowledgeable professionals who can help guide you.
Here’s a step-by-step checklist for buying a house:
[Read: The Guide to Selling Your Home]
Think about the kind of house you want and the neighborhood you prefer to live in. Visit sites like Zillow, Trulia, Redfin and realtor.com to get an idea of the houses for sale that meet your criteria.
Consider doing some basic calculations to figure out the home price you could afford. Online mortgage payment calculators are a good starting point and may help adjust your expectations — for example, if you’re looking at million-dollar houses when your budget is more in line with a $250,000 house.
Gather Your Financial Information
Before you reach out to real estate agents and lenders, gather your financial information, including recent pay stubs and bank statements, so you’re ready to provide details as needed. You’ll also want to know your credit score and any issues affecting it, so now is a good time to get your free credit report.
Find a Real Estate Agent
Next, reach out to real estate agents and set up initial meetings or calls. It’s a good idea to interview a few and select the agent who fits your personality and communication style and is knowledgeable about the area where you’re looking to buy. The right agent will help educate you on the homebuying process, point out when price and expectations don’t match and offer insights that you hadn’t thought of before.
Treat the initial meeting or call with an agent like you’re interviewing him or her for a job. “I probably have five, six Zoom calls a day from buyers that are introducing themselves to me,” says Dawn McKenna, a real estate broker with Coldwell Banker Realty who helps clients buy and sell homes throughout the Chicago metro area as well as in Naples, Florida.
Get Preapproved for a Mortgage
Contact potential lenders to prequalify or get preapproved for a mortgage. This is the first opportunity to tap your real estate agent for advice and guidance on which lenders may have loan programs that will benefit you.
Rachel Street, a Realtor based in Philadelphia and host of “Philly Revival” on DIY Network, says a client’s financial history and ability to get preapproved for a mortgage is often a part of the initial conversation so she knows where to begin. If credit history may be a problem, for example, she can put the client in touch with a credit repair agency.
A strong credit history and financial profile is especially important in times of economic uncertainty because lenders aren’t as willing to take on borrowers with a higher risk of defaulting on the loan. While borrowers with high credit scores and a history of paying off loans on time won’t have a problem getting a loan, “if you’re not in that situation, you may find it harder to secure financing,” says Patrick Boyaggi, co-founder and CEO of Own Up, a mortgage technology company and marketplace based in Boston.
Start Touring Homes
Your real estate agent will likely present you with listings that meet your budget and needs and also encourage you to look online for other homes you may be interested in. While most homebuyers prefer in-person tours of a property to make a decision, McKenna notes that virtual tours, Instagram Live events and enhanced photography for online viewing are growing in popularity among buyers who can’t or don’t want to visit in person.
Find the House You Want and Make an Offer
Once you’ve found the house you’d like to call home, it’s time to have a conversation with your agent about making an offer. Review the sale price of similar homes in the area that sold recently to help you determine how much you feel the home is worth.
Street says she often explains the market value of a home based on data, but she stresses that buyers should factor in their own wants and needs as well. For example: “This house is priced at $600,000, but the market value of this house is probably closer to $550,000 — where do you feel comfortable? And obviously you don’t have to come in at $550,000 if you feel it’s worth $600,000 to you,” Street says.
Negotiate as Needed
The seller may make a counteroffer or request that you cover certain closing costs, which requires some back and forth between your agent and the agent representing the seller. During negotiations, work with your agent to find the best path forward regarding contingencies in the contract or other outlying factors that might affect the sale price, your willingness to purchase the house or your ability to close on time.
Schedule a Home Inspection
With the deal pending, it’s time to get moving with the due diligence process — part of which is the home inspection. McKenna explains that your agent should be a solid source of professional recommendations as you approach closing and should give you more than one to choose from. “From the moment something is contracted, we give (buyers) several inspectors that have provided in-depth analysis of inspections and have done a great job,” she says.
Submit Your Loan Application
“As soon as you go under contract, you also want to make a formal application for the mortgage with your lender,” Street says. You’ll need to provide your most recent financial information, such as bank statements and pay stubs, to show you’re still employed and haven’t made any major purchases recently.
Tap Other Necessary Professionals
Before closing, you’ll also need to pull in other professionals, including a title insurance company, real estate attorney, homeowners insurance company and maybe an architect or contractor if you’re planning to renovate the house immediately.
Get an Appraisal
Your lender will typically require an appraisal of the property to ensure the determined sale price matches the market value of the property. The appraisal often figures into the total closing costs of a home.
Do a Final Walk-Through
A couple of days before closing, you’ll complete a final walk-through of the property, which allows you to check and make sure it’s still in good condition.
Close and Receive the Keys
Closing itself is fairly straightforward and requires signatures noting the transfer of ownership. You may sign documents in person with a representative from your title insurance company or with e-signatures if they are allowed, depending on your state.
Once you have the keys in hand, you’re now the owner of a new home. Don’t be concerned about navigating tricky situations you’re unfamiliar with on your own — your real estate agent will remain a valuable resource well past your purchase date. “We don’t just drop people when they close,” McKenna says. “We’re constantly in touch with people long after.”
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