Buying a house can be an intimidating process for first time (and even second time) home buyers. There are many parties involved and many things to do. The entire process from deciding you want to buy a house to closing with the keys in your hands can take anywhere from 1-12 months. Depending on the local housing market, how quickly things move and how long it takes you to find the right house (no need to rush!), it could be a good while. Without a proper roadmap for what needs to happen, many first time homebuyers will become overwhelmed and may even give up. Buying a house will likely be one of the biggest financial transactions of your life. Let’s walk through the process and a make sure we know where we’re going!

Step 1:

Making sure your affairs are in order. Go through the home buying decision flow chart to make sure you’re actually ready. Regardless of whether the house is a small $80K condo or a large $319K family home, you’ll need to be in a good spot financially. The bank that you’ll apply for a mortgage from will comb, look through and tear apart your financial statements. Although I’m told its loosened up in the past few years, it’s still a daunting process. You’ll have to submit: 2 years of bank statements, retirement info, job info, college degree info, and random other little things, all to prove that you are capable of maintaining your job or a similar job for the next 30 years to pay the bank back. Take some time on the front end to gather these documents and to ensure they are in some kind of a logical order.

Step 2:

Finding a realtor. Although possible to purchase a house without one, it’s not advisable, especially for first time homebuyers. Don’t worry, you won’t have to pay them anything for their services, they’ll take a cut of the money before it heads to the seller. A realtor that knows what they are doing will make your life so much easier. They’ll not only help you with big picture stuff, but also help you dot your i’s and cross your t’s. The only problem is finding a good one! I’d recommend asking around to family/friends for a recommendation. It that fails, you can certainly google one online, but just ask for the agents qualifications, and recent sales to ensure you’re getting a good one.

Step 3:

Start looking! Hopefully you have some idea of what/where you’d like to end up. One you sort of know the area you’d like to end up in, then the question is what type of a house? A condo, townhouse, duplex or single family unit are all options. Are you looking for something a little bigger, to have for when you start a family or to rent out to roommates? Your realtor will certainly help you flesh this out but the more you can do on the front end the better!

Step 4:

Make them an offer (that they can’t refuse?). Once you find a house you like and are comfortable with the price range, you’ll work with your realtor to make an offer. This is a legal contract that says once both parties sign, that they will start taking steps to transfer ownership of the house. Depending on the market, you’ll likely make your first offer for less than their asking price (aka negotiating) and then the seller will counter offer and you’ll counter offer again..you get the picture. Sometimes these offers will be in writing or just over a phone call. But, make sure the final agreed upon sales price is the price on the final contract. You’ll also negotiate larger items like leave the refrigerator or place a lock on the back door. Once the you’ve both come to terms and signed the document, you are officially ‘under contract!’ At this point, you’ll lay down a deposit, called ‘earnest money’. This will likely be $500-$2,000, and just let’s the seller know that you are serious. Take some time and read your contract offer, in full. This is a serious document!

Step 5:

Apply for that loan. As daunting as it sounds borrowing a hundred (or two) thousand dollars, it’s all part of the process! Although you aren’t obligated to borrow the money until you find your house, I’d say hold off on the application (has a fee) until you’re pretty sure you’ll be making serious offers. There’s no need to go through the exhaustive process of getting all the documents together and filling out al the forms if you are just window shopping. However, things might move fast and someone who has been pre-approved brings a lot more to the table than someone who will need to go apply.

You can always get pre-qualified by a bank. It involves providing basic personal and financial information and then getting a letter from the bank saying that pending final approval, they’ll lend you a certain sum of money.

Step 5:

Get an inspection. Although not required, it’s highly recommended. This should run you $250-$500 for a good one. Be sure they are licensed and up to date on their certifications (they’ll likely tell you when you inquire). They’ll come out one morning or afternoon, and take a couple of hours to do a thorough inspection. They check to make sure things are working and are in good shape. They’ll inspect things you can think of and things you can’t think of. For instance, our inspector noted that our stove wasn’t tip safe, and a toddler or small child, if standing on the open oven door, could tip it over. They’ll detail almost everything and compile in all into a multi-page report. It’s important to note that not everything will need to be fixed. Somethings are more important than others. An inspector’s job is to be thorough and report everything, it’s your job to decide if you want it fixed.

Step 6:

Re-negotiate. At this stage, the seller will also receive a copy of the inspection. You’ll negotiate with them on the things you want them to fix and the things you’re willing to let slide or fix on your dime. This can be a process, and could be some back and forth. At anytime you should be able to back out of the contract, assuming the due diligence period hasn’t elapsed. Due diligence is the period of time in which you can (and should) get an inspection and can back out of the contract without losing your earnest money. After the due diligence period has ended, you can still back out but you forfeit your earnest money. If you can’t come to an agreement satisfying to you on fixing the house up before due diligence ends, consider walking away. Don’t let your emotions get in the way of such a large purchase! We came to an agreement in which the seller fixed about 60% of what we deemed needing repair.

Step 7:

Get approved for the loan. Not a lot to say here! A lot of contracts will let you back out without losing earnest money if you don’t get approved for financing. Even if you back out and look again, at least you’ll have been approved, and it shouldn’t be that difficult for have them re-approve you for another house.

Step 8:

Final walk through. After the repairs have been done, the financing is in order and closing is near, you’ll get one last chance to back out. You’ll do a final walk through with your realtor in which you’ll walk through and inspect the house one last time. You’ll ensure that the agreed upon repairs have been made and that the everything is to your liking. If it’s not, your realtor will work with you to have it fixed before closing.

Step 9:

Closing! Different contracts will have different closing durations. Expect the time for due diligence and the securing of financing to last 30-90 days. After all is taken care of, you’ll have your closing scheduled. You’ll go to a closing attorney’s office and take about 1-2 hours signing tons of documents. Let’s just say you’ll have perfected your signature once you’re done. Money will transfer hands and you’ll get the keys! Don’t be alarmed if you get a gift from your: realtor, closing attorney or mortgage lender, that’s quite common!

Step 10:

Enjoying the new house! Congrats! You’re a homeowner At this stage, you’ll  be in more debt than you’ll have ever been before and for 30 years. It was weird seeing the payment schedule for us going out until 2044. Start picking those boxes and filing up the moving truck!

Buying a house can be a long and daunting process. It can take months of paperwork, inspections, shopping around and final signing documents before you get the keys. But, ask any homeowner and they’ll likely tell you it’s worth it! Hopefully this 10 step process lays it out a little and you’ll not feel a if you’re in uncharted waters when you begin the process!

As always, please reach out with questions, I love hearing from and helping readers out!

Still curious in learning more? Here’s the book that I read before I started the house search. I’d highly recommend it! Nolo’s Essential Guide to Buying Your First Home

One other resource that’s very interactive guide around Budgeting for a Home.

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