Making the decision to buy your own home is monumental - and then the fun begins! The process can be full of ups and downs, and there are certainly many steps to buying a house that you must take before you turn the key. When you are prepared, you can proceed with more confidence and assurance.
Before you can even begin to think about the offer, you have to go through some preliminary - and very important - steps:
In what area do you want to live? Look through real estate listings and note how long homes here stay on the market. How are comparable homes priced? Overall, you want to get a good sense of the market in your location and stay on top of any relevant trends.
Do a deep dive into your budget. If you are going to make a 20% down payment and have a moderate amount of debt (e.g. student debt, car loans, etc.), your home should cost 3 - 5% of your annual household income. If you take on a payment that is too large, you will soon find yourself in a whole world of stress and financial struggle. Be realistic.
Once you have a figure in terms of how much house you can afford, do some comparison shopping for lenders. At this point, you should have cleaned up your credit as much as possible (e.g. clearing old debts) to get your score as high as possible. A hard credit inquiry, such as those run by mortgage lenders, do have an impact on your score, so you want to make sure it’s as high as possible.
Getting prequalified involves providing some financial information to the lender (e.g. income, savings, investments). They will then give you a price range. This is not the final amount they will lend you but rather a ballpark of what you can expect. When you get pre approved, you provide more in-depth information (e.g. W-2s, bank statements, pay stubs, etc.), and if approved, the lender will give you the amount for which you are approved.
A good real estate agent is an invaluable ally in your home buying journey. They can provide in-depth information on the neighborhood, as well as guide you through the complex process. They’ll have an insider’s view of the houses on the market (and those that are about to be on the market) and be able to help you house hunt with confidence, and more importantly, results.
Now it’s time to shift into high gear when it comes to your housing search. You’ve got pre-approval and a great agent working with you. Now start going to viewings and showings. Many of these are virtual today, so it is important to ask for as many photos and videos as possible. Don’t be afraid to ask questions. If you see a home you love, “kick the tires” a bit. How’s the plumbing? Any signs of flooding in the basement? Is the wiring relatively new? How’s the heating system? Look at anything and everything.
When you’ve fallen in love, make an offer. Your real estate agent will help you put in a competitive offer and one that is reasonable given the market.
And if your offer is accepted, keep moving!
What happens after an offer is accepted on a house, and what do you need to do?
In some situations, you may have to deposit earnest money into an escrow account. This shows “good faith” and it assures the seller that you plan to go ahead with the purchase. It is usually 1 - 3% of the sale price. If you do proceed with the deal, then it is applied to your down payment or closing costs. If you do not for an agreed upon reason (e.g. the home inspection showed the house is in worse shape than you anticipated), then this money is returned.
You had to provide documentation in order to get pre-approved; now you’ll have to send yet more so the lender can clear you to close. Ask your real estate agent and lender which documents will be required, and get them to the lender as quickly as you can.
You will need to have an attorney to close on your house. Make sure you set a date. Again, your real estate agent can help by referring you to a lawyer they work with and helping set a closing date.
Never, ever, skip this step. Getting a house inspection is critical. A home may look great on the surface, but a thorough inspector can spot dangerous mold in the walls, issues with the roof, problems with the plumbing, and faults in the foundation that may not be as readily apparent. This is $400 (or more for a larger house) that is very well spent. This is one reason you can successfully back out of an offer.
It’s also a good time to do a home appraisal so you know that the money the lender is giving you is sufficient.
Now it’s time to do all the bits and pieces, such as securing home insurance, turning on utilities, packing up your old place, etc. After closing, it’s time to move in!
At closing, you will sign documents - many, many documents - and receive the keys to your new home. Enjoy this monumental step in your life!
So, how long does it take to buy a house after making an offer? It depends. Do your part to streamline the process by providing lenders with documentation promptly, scheduling inspections and closing early, and keeping your real estate agent on speed dial!
Need help? Information? Resources? Visit Homes & Land to start your home buying journey on the right foot.