How Do I Buy a House?
I wish there was one answer to this question – “How Do I Buy a House”, and probably the best answer is “It Depends”. There are many factors that go into buying a house.
- What state or Country you live in
- Where you plan on buying your home
- How much you Make
- How much you Owe
- Your Credit Rating
- How much you have for a down payment
- The condition of the house you are buying
- etc etc etc….
Every situation is unique an different, so buying a home is almost like a fingerprint. No home buying experience is exactly the same, so to tell you that it is will be exactly the same way for you as it is for your neighbor it would be a disservice.
I think the best thing to do is to give you an overall snapshot of the steps you need to take to buy a home with the understanding that these are all general steps. You may need to do more or less that is laid out here, and your situation will determine the process.
Step 1: Why do you want to Buy a Home?
The first step in buying a home is to find out “WHY” you want to buy a home. Are you paying too much taxes every year and need a write off? Are you tired of renting? Do you need a bigger home for your family? Are you relocating? There is a reason at this point of your life why you want to become a homeowner.
The reason you are looking to buy a home is probably the most important, and most overlooked step in buying a house. The actual buying process is not easy, and requires that you gather lots of documentation required to obtain a home loan. This can get very stressful very fast, so the reason to buy a home is what keeps you going. When things get stressful and sometimes even frightening, this will be your reminder of why you are buying a home in the first place, so make sure there is a good reason.
Remember that the reason to buy a house is yours and yours alone. One reason is not better than the other, it should be something that important to you.
Step 2: Review your Finances
Once you have decided why it is important for you to buy a home, the second step is to review your finances.You need to take an honest look at:
- how much money you make
- how much you owe in credit card bills
- how much you spend month to month
- how much you have saved to put as a down payment
- how much do you have to pay for the costs of buying a house
This is not the end all be all. In other words, if you are limited in down payment monies, don’t worry, there are programs that may be able to offer you down payment assistance. There may be home buying opportunities that will not require less of a down payment like buying HUD homes.
There are different loan programs that require less money to come in. In negotiations we can ask for some closing cost credits. There are ways to help you become a homeowner even if your finances are limited. Just note that even for VA buyers who can get 100% financing, they still need to come in with some monies for the costs of buying a home. The actual home loan is what is 100% financed.
You will need to come in with some money regardless of your financing options, So taking a good look and evaluating your financial position will give you and edge and confidence to take the next step in buying your home.
Step 3: Get a Home Loan Pre-Approval
Now that you have looked at your finances, you are ready to take Step 3 – Get pre-approved for your home loan. This step in the home buying process is usually skipped by most home buyers because of a misunderstanding that buying a house is like buying a car. First you look at the cars, and see if you can get a loan for the one you like.
In buying a house, you first need to know two important things. How much house can you get a loan for? What is the payment at that purchase price?
I want to clarify one thing that is a common misunderstanding. How you loan the bank is willing to give you is not always the same as what you can afford. Each home buyer is unique. Some buyers can document income, while others write off expenses and thereby show less income at the end of the year. While technically you may be able to afford a larger monthly payment, the bank can only loan you money on what you can prove you make. This is why getting a loan pre-approval is so important. Your loan officer will be able to tell you your Top Loan amount, and your payment associated with that home purchase price.
You then can start to look at houses with some confidence that you already know that if you like a house at or below the loan approval amount that you can make an offer to buy the home. This saves you a lot of time and frustration when you actually start shopping for a home.
Step 4: Search for Homes Online
Now that you know your purchase price, you can start Step 4: your initial home search. Start by using online search tools to get an idea of what homes are selling for in the area that you want to live. This will help you to determine if in fact your desired neighborhood or community is within your buying power range.
Not all home search tools are the same, so you need to be careful as to which tools you use to find homes. You do not want to use tools like Trulia, Zillow or Realtor.com. These sites are aggregators. They pool home search information from other sources to show that they have more home available. But the large amount of data they collect, it is too expensive to update regularly, so more often than not, we have home buyers who contact us that are frustrated because the find a house they like that is Already Sold.
The home search online tool you choose should do a couple of things. I should pull information directly from the Realtor multiple listing service in the area you are shopping in, and it should update their information at least every 15 minutes. If you are shopping for a house in Riverside County, you can use our Premier Home Search Tool at no cost.
Most Realtors who have their independent websites should have a similar tool for you to search for homes.
Step 5: Find a Realtor
Finding a Realtor, Step 5, is a step that most home buyers want to skip until the very end, or sometimes altogether. There is a misconception that Realtors are “Just like Car Salesman”. Don’t get me wrong or think this is biased because I am a Realtor. I have come across some car salesman for sure in helping home buyers, but are the exception. Realtors are bound by a code of conduct and governed by the Department of Real Estate to ensure that they put the client’s ( that’s you) best interest first.
Buying a home is a long term commitment, and you will need to find a Realtor that you can trust to represent your best interest, and at the same time give you honest advice and feedback on the home buying process. They can also let you know if the offered price is realistic, or just a price to draw you in. Price draws are very common with short sales, so having a good realtor is essential.
I am writing another article on how to find a good realtor in your area. Rather than make you wait, I will give you a quick checklist.
- Avg Sales for a Realtor 4 transactions per year( Higher transactions = more experience)
- Sold houses in the Community you are searching – determines area expertise
- Years in the business ( longer= better realtor)
- Registered with NAR ( National Association of Realtor) and State Association.
In our upcoming article, we will include which questions you need to ask to qualify your Realtor.
Step 6: Look at Houses to Buy
Once you have found a Realtor, you can start to set a home preview schedule. You should set aside 1.5 to 2 hours for the day you want to preview homes. It is normal to try and look at all the possible homes on the market the same day, but this is counter productive.
We have found that when looking at houses to buy, you want to keep the maximum of home preview to 6 or 7 a day. Otherwise, the house start to run together. Even with the property information sheets we provide, it is easy to forget the first house you saw by the end of the day.
You should arrange to see homes in a single community per day. This will help maximize your home preview time, and limit the drive time going from home to home. Your Realtor should be able to send you a preview list and route for the day outing.
Step 7: Make Offers to Buy
Once you have found the house you want to buy, it is time to make an offer to buy the house. Note that great house are also being south out by other buyers, so be ready to put your best foot forward in making an offer.
To make a strong offer or be competitive, your realtor should provide you with recent sales comparables. This will give you a good idea of what other buyers are willing to pay for a similar house, and you can make your offering price within the same range.
Your offer will include asking for closing costs, time to close the transaction, contingencies of the purchase, cost allocations, financing term conditions. The more you ask for, the weaker the offer. Note that this does not imply that you do not ask for anything. You should weigh everything out and basically say ” If all these conditions are met, then I am willing to buy the house”. Your realtor can walk you through the entire purchase contract to make sure you cover everything.
While we all want a good deal, it is important to note that when you have multiple buyers looking for a good opportunity, they will also be making competitive offers.You may or may not successfully win the first offer you make, so be prepared to make offers on homes until you get an offer accepted. It is not uncommon to make several offers on houses before getting accepted.
Step 8: Buying the House
The last step in the process is actually buying the house. One your offer is accepted, the process begins by the seller’s agent opening Escrow. Escrow will be an impartial 3rd party that basically ensure that both the buyer and seller act in accordance with the purchase contract.
Once escrow is opened, you Realtor will provide you with an opening package that must be filled out and returned to escrow. They will also notify your loan officer that your offer to buy your home has been accepted, and they need to start the full loan approval process.
Your loan officer will ask your for lots of documentation that the bank will require to give you the loan. Making sure you, your realtor and your loan officer are communicating openly and frequently will ensure a successful transaction. The loan is usually the longest part of the transaction, so having a good loan officer is key.
Once you have full loan approval, you will be asked to go into escrow and sign the loan documents, and bring in the necessary monies needed to close your home purchase. All the loan documents will be reviewed by the lender, and if in order, they will fund your loan, and give permission to escrow to record the sale.
Once escrow records the sale, you are officially the new owner of the home, and can pick up your key from your Realtor.
These are all the general steps taken in buying a house. Again, every home buyer is different, and so having a Realtor with experience can be the greatest asset in your home purchase. They will help guide you through the steps, and represent your best interest.
I look forward to your comments and feedback. If you are a home buyer in the Murrieta and Temecula Area, and want to know more. Please see our website 951-HomesForSale.com
Nikki Aguirre – DRE# 01731793