I remember going through my first home buying process. I also remember the confusion and frustration of not having a "big picture" in my mind of how the process should work. That's why I'm giving you what I never had, a start-to-finish road map of the process.
Home Buying Process - By the Numbers
In reality, there's no way to predict exactly how the process will go for you. There are too many variables along the way. But there's a general pattern to the process, and that's what we will examine here.
1. Decide to buy a home
It all starts with this spark. And since you're reading this article, we can assume you're already past this point.
2. Conduct a financial self-assessment
Some people put this step later in the home buying process. But it belongs at the beginning. Before you start looking at houses and shopping for mortgages, you need to take a good look at your financial situation. You can start by ordering a copy of your credit report, and reviewing it for errors.
3. Make a home buying wish list
Once you have an idea how much you can afford, start writing down the things you'd like in a house: style, size, features, location, price, etc. Prioritize each item as either a "must have" or "would like to have."
4. Get pre-approved for a loan
Pre-approval is the process of applying for a loan and getting approved for a certain amount before having a purchase agreement (contract). Having a pre-approval letter also shows sellers you're serious about buying their house.
5. Find a real estate agent
It's rarely a good idea to buy a first home without professional help. If you're an investor and you've purchased a half-dozen homes in the past, you might be comfortable enough to go it alone. But when buying your first home, it's in your best interest to hire an agent.
6. Begin House hunting
Now comes the fun part, the house-hunting process. If you follow the steps I've outlined here, you can shop confidently (knowing that you have a pre-approval letter, a price range, and an agent to represent you).
7. Make an offer
How much you offer will depend on the asking price, the market, comparable sales in the area and other factors. Your offer might be accepted, rejected or countered. You might be the only buyer, or you might have to compete with others. You won't know until the time comes, which is another reason to have an agent help you.
8. Request approval for the loan amount
If the seller accepts your offer, you must then go back to your chosen mortgage lender and submit paperwork for loan approval. In most cases, it's easiest to return to the lender who gave you the pre-approval letter, but it's not mandatory.
9. Get a home appraisal
Your lender will require a home appraisal to make sure the home is worth the price you've agreed to pay. In the event that you can't make your mortgage payments, the lender will foreclose on the home and resell it. It's not a pleasant thought, but it's reality. So the home appraisal is how the lender protects its own interests.
10. Get approved for the loan
If the house appraises at a value equal to your loan amount (and provided all other factors are well and good), your mortgage lender will then approve the loan.
11. Get a home inspection
On average, home inspections cost between $300 and $600. That's a small price to pay for the peace of mind it brings. Get a home inspection as soon as possible after the sellers accept your offer, and make the contract contingent upon the inspection. That way, if the inspector finds a problem you're unwilling to accept, you have a legal way out of the contract.
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