Here's Exactly What It Takes To Buy A Home

From start to finish.

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Rob Wilson

Buying a home isn’t like buying a pair of shoes, or even a car. Rather than simply showing up with money, the process of purchasing real estate is a legal transaction as well as a financial transaction, and it takes weeks—if not months—to complete. But, when you find a place you can call your own, it's totally worth the wait.

Use this home-buying timeline so you know what to expect every step of the way, and roughly how long it'll take you to get there. It may seem daunting (especially as you try not to let your eyes glaze over at the mention of words like "escrow" and "PMI"), but you've got this.

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6-8 Months Before You Want To Move In:

First, figure out your funds.

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Before you begin the home-search process, it’s crucial to get a good idea of how much house you can afford. Financial expert and author Dave Ramsey recommends multiplying your monthly take-home pay by 25 percent to determine what your maximum mortgage payment should be. You can then use a mortgage calculator to determine the ballpark home price that will keep your monthly payment under that amount.

5-7 Months Out:

Next, narrow down where you want to live.

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Rob Wilson

When you know what you can afford, start limiting your options. Take time to learn the neighborhoods you’re considering: Research the schools and municipal services, and drive through them at various times, day and night, to determine whether you want to actually live there. Do you feel safe walking around the neighborhood? How far is it to the nearest stores and restaurants, and how much does that matter to you?

While you’re at it, spend time searching online for recent home sales in the areas you’re considering to get a sense of whether the homes are in your price range.

3-6 Months Out:

Get pre-approved for a mortgage.

Before you start working with a Realtor and seriously searching for you home, you should find a mortgage lender and get pre-approved for a mortgage. It shows your Realtor and the sellers that you’re qualified to purchase a home, and it ensures you know the price range you should be looking for. In a competitive market, many sellers won’t consider an offer without a letter from a lender ensuring that the potential buyer can qualify for the mortgage.

"Many first-time homebuyers will begin to look at properties prior to speaking with a lender, but this is a huge no-no," says Colin McDonald, a licensed real estate agent at Berkshire Hathaway HomeServices Blake, in Delmar, NY. "Most Realtors or sellers will not start to show houses to buyers until they've actually spoken with a lender and can provide a pre-qualification letter."

McDonald recommends working with a local lender rather than an online or non-local lender, even if the online lender is offering a better rate. "Working with a local lender that's knowledgeable of the local market ensures you a smooth transaction right through to closing," he says. "Local lenders are typically also more readily available to their clients, and many local lenders will match the rates their competitors are offering."

When you’ve found a local lender, you’ll have to submit your financial information to get pre-approved, including tax forms and W-2s, recent pay stubs, savings, retirement accounts, and debt obligations. After reviewing all of this information, the lender will let you know the size mortgage for which you can qualify and provide a letter that shows you’re pre-qualified. In the meantime, keep track of all those financial forms and add new pay stubs and bank statements to the file, as you’ll need them again. That pre-approval letter usually expires after 60 or 90 days, so if you haven’t found your home before it expires, you’ll just have to resubmit the paperwork.

Find a real estate agent.

You can buy a home without a Realtor, but there’s really no reason to do so. Because in most cases, the seller of a home pays the real estate commission. So, as a buyer, you have nothing to lose. (Some real estate firms do charge a fee to buyers; if you don’t want to pay for their services, look for a Realtor that charges sellers exclusively.) And having a Realtor on your side can help you all the ins and outs of buying a home, which can be confusing.

"This investment shouldn’t be entered into without someone who knows the market, the neighborhood, local trends, specific values, and how to navigate the process," says George Lawton, licensed real estate agent with RE/MAX Over the Mountain in Birmingham, AL. "A Realtor who is your advocate and is looking out for your needs can simplify this process and make it enjoyable. But don’t just hire your neighbor’s mom who does this part time for Christmas money. Interview a few that are recommended by friends and family and see who you feel most comfortable with. You may be working together for months, and you want it to be a good relationship."

Start house hunting.

When you’ve selected a Realtor, start searching in earnest for your new home. Your real estate agent will find properties that he or she thinks you may like, but you can also search on your own. Check out internet listings, drive around and look for yard signs, and ask around to learn about houses that may be available in the neighborhoods you want. In a seller’s market, where available properties may be limited, try to exhaust all your options—not just Trulia, Zillow, and whatever your Realtor sends your way.

1-2 Months Out:

Submit an offer—and be prepared to negotiate.

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Rob Wilson

When you find the home you want—and you will—it’s time to make an offer. Talk to your agent about the right price to offer; it's common to make the first offer below the listed price, but in a very competitive market, you may need to offer the asking price or even more. Your real estate agent can help you gauge this, and often can get the scoop on how much competition there is for a certain home.

When you’ve made an offer that’s within your budget, your Realtor will prepare the paperwork for you to sign and will submit it, along with your pre-approval letter and your earnest money, which is a good-faith deposit of about 1 percent of the purchase price. All this usually happens quickly, especially if other buyers are interested in the same property.

Usually, the seller will have about 24 hours to respond to your offer, and in most cases, they will counter your original terms. Your Realtor can help you through the negotiation process.

If you and the seller aren’t able to agree on a price, closing date, and other terms, be willing to continue your search. But if you do come to an agreement with the seller, you’ll both sign the contract, and the buying process will begin.

Then, call your lender.

Once you have a signed contract in hand, let your mortgage lender know immediately. That way, you can lock in the current mortgage rate, and he or she can get started processing your mortgage loan.

Throughout the process, your mortgage lender will likely request various documents from you, such as updated pay stubs, current tax records, and other items that may have changed since pre-approval, as well as information about the home insurance policy you plan to purchase. Try to respond as quickly and accurately as you can, providing the needed information as soon as possible. Your promptness will help move your loan through the process faster and help ensure you can close on time.

3-8 Weeks Out:

Get a home inspection.

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Rob Wilson

Most home sale contracts give the buyer about 10 days to complete a home inspection. If you’re getting a mortgage to buy the house, your lender will likely require you to use a certified home inspector. (Even if you’re not required to get a home inspection, it’s best to get one anyway to make sure you’re not buying a house full of expensive problems.)

Your inspector will provide a detailed report of everything in the home that could be repaired. Some of the items may not be a big deal, but some may be expensive or important repairs, such as the need for a new roof or HVAC system. You and your Realtor can request that the seller make some repairs, and the seller will have a few days to let you know whether they are willing to make the changes or reduce the price of the house. If the inspection uncovers major problems, such as termites or an unstable foundation, it can be your way out of a sales contract.

2-5 Weeks Out:

Choose a home insurance provider and a closing attorney.

Before your lender will close your loan, they’ll want to make sure the home is insured. Locate a home insurance provider—maybe the same company that insures your car—and request a homeowner’s policy. Provide your lender with all the information.

Also, select a closing attorney, or ask your Realtor for a recommendation. The attorney will ensure that you have a clear ownership title to the property and that all the contracts are appropriate. Your attorney will schedule a closing date, and you can start packing.

On Closing Day:

Grab a reliable pen—you've got a lot of papers to sign.

Congratulations, you’ve made it! On closing day, your team (AKA you, your Realtor, lender, and attorney) will meet with the sellers and their attorney to make things official. Your lender or attorney will let you know in advance the total amount of money you’ll need to bring to the closing meeting for your down payment or any closing costs. Bring that amount in the form of a cashier’s check, then sit back and get ready to sign your name—over and over and over.

There will be tons of paperwork to sign, but your lawyer will walk you through each one and what it means. (And if he or she doesn't, don't be afraid to ask if something seems confusing or unnecessary!)

When it’s over—which could take a few hours, so plan on taking the day off from work—you’re a homeowner. Depending on your agreement, you might get the keys and be able to move in that day. Certain counties won't let you move in until the title's been recorded with the local government, which can take a few days, but your Realtor should know that law and brief you beforehand, if that's the case.

At this point, it’s time to start making your home your own.


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