8 Steps to Buying a House

Buying a house is probably a completely different experience from any other purchase you have made before. The process of securing a loan, looking at houses, negotiating prices and closing the deal all add up to a unique purchasing experience.If you’re buying your first house,it’s likely the most expensive purchase of your life.You’re not only buying a place to live, but also making a major investment and commitment. Before you begin the home buying process,it’s important to determine if buying a house is the right decision for you at this point in your life. If you’re willing to stay in the same place for several years and are able to handle regular maintenance and repairs, buying a home might be the right choice for you. Once you make the decision to buy a house, follow these steps to complete the process:

  1. Set a budget: Plan on shopping around fora mortgage instead of just going with the first lender you meet with. De pending on your mortgage, you could end up paying for the next 30 years, so make sure you get along with your lender and are comfortable with all of your loan’s policies. The type of mortgage you get will depend on how much money you have for a downpayment. It’s best to put 20 percent down on a house. You can still get a mortgage if you don’t have that much saved, but you may have to pay extra in private mortgage insurance.

    In addition to the monthly mortgage payments and down payment, you also need to factor in the cost of homeowners insurance, closing costs and property taxes. Before you get pre-approved, you may choose to get pre-qualified. The lender will gather information from you about your financial situation (debts, income, credit history) and estimate how much you can afford to spend on a house.

  2. Get pre-approved: The pre-approval process is more official—you’ll have to provide the lender with paperwork proving your income and debt amounts, and he’ll run a credit check to determine what interest rate you’ll get. Typically, mortgage lenders follow the 28/36 rule, which means you should only put 28 percent of your gross income or 36 percent of your net income toward a home. If your debt to income ratio does not comply, you may not be able to get a mortgage. Once your pre-approval is done, you’ll receive a pre-approval letter, which you can use to negotiate with sellers later on. Having an official letter will make your offers more legitimate to sellers.

  3. Find a realtor and a lawyer: Some states require the use of a lawyer for home sale s,but you may want to hire one even if it’s not required. Your lawyer can help you negotiating the contract and closing the deal. A realtor is also very helpful, not only in helping you find a house, but also for making sure you get a fair deal. Your realtor knows the local area and market well and has relationships with sellers’ agents and lenders. Make sure to sign a contract with a buyer’s agent to ensure that your realtor will be working for your best interests. Both realtors—the buyer’s and seller’s agent—get paid a percentage of the final sale of the house, so if yo u only work with the agent selling the house, you may end up paying more for it.

  4. Shop around and find a house: Your realtor can suggest houses you might like, and you can also look online at websites such as Trulia.com and Realtor.com. Your realtor can arrange showings for houses you’d like to see, which are usually done without the sellers being present. Make sure to look at a good number of houses before making a decision. It’s a good idea to take photos and notes about each house you visit and look for signs of damage or problems when you’re visiting houses. If you find a house that meets your criteria and fits in your budget, move on to the next step.

  5. Make an offer: Unless you’re shopping in a hot market, the listing price is usually higher than what the sellers actually expect to sell the house for. Look at what comparable homes in the area have sold for recently to see what you can expect to spend in the end. Your realtor can help you come up with an offer price that is fair to both parties. This is when having a pre-approval letter is important. You may also include earnest money with your off er,typically $1,000 to $5,000, which shows the seller that you are serious about the house. You’ll send an offer letter to the sellers,which is a legal contract that lists the price you’re willing to pay, where you’ll obtain financing from, when you expect to close the deal and any contingencies you’d like included. Contingencies are conditions that must be met to make your offer valid. For instance, you’ll only buy the house if your mortgage approval goes through, the house included in the sale. passes an inspection and the dishwasher is included in the sale.

  6. Settle on a price: You should expect to hear back from the sellers within a few days of making your offer. They may accept your offer, reject it or provide a counter-offer.The negotiating process is quite common,so it’s very likely that you’ll go back and forth before settling on a price. Work with your realtor to negotiate the price with the sellers.

  7. Begin escrow: The escrow period is typically one to three months long and includes the home inspection and mortgage approval. Try to find your own home inspector and be there when the inspection happens. The inspection fees are included in the closing costs, which the buyer pays for. Your lawyer and the seller’s lawyer will go over the contract, and you’ll make sure all contingencies are met after the inspection is done.

  8. Close the deal: If everything goes according to plan, you can move into closing the deal. This involves signing a stack of paperwork, transferring the deed and title to the house and paying both the down payment and the closing costs. Your bank will also pay the sellers the total cost of the house. Once the closing is complete, you’ll be handed the keys and are free to move in.

  9. The home buying process can be complicated and lengthy, but do your best to understand the process and the contract you sign. Buying a house is not a decision to be made hastily—if you put in the necessary time and effort, you can see your purchase turn into a profitable investment as well as a place to call home.