In our step-by-step series of how to buy a house for first-time homebuyers, we already discussed how to get financing, which is an important first step when buying a house. Now we'll discuss the fun stuff – how to find the perfect house!
Steps to Find the Perfect House
Finding the perfect house requires many steps – most of which you'll do before you step foot on the street to look at houses.
Know what you Need/Want
Before you find a real estate agent, look at houses, or anything else, make a list of wants and needs in a home.
Think about your needs first – how much room do you need? Think about not only now but the future too. If this is your forever home, do you plan to grow your family? Will your parents ever live with you? Consider all future factors when thinking about space.
Also, think about the features that are essential in a house for you. These are your non-negotiables or the things you cannot live without. If a home doesn't have these features, you won't buy it.
Next, think about the features you'd like but aren't necessary. In other words, they aren't a deal-breaker, but it would be amazing if the home had them. A large, winding porch, upgraded appliances, bonus room, or upgraded cabinets are a few examples.
Find the Right Real Estate Agent
Now that you know your budget (you've gotten pre-approved) and you know what you need or want in a house, it's time to find the person who will help you find your dream home.
Finding the right real estate agent is a process too. We suggest shopping around and interviewing at least three agents to find the one that's right for you. A few sample questions to ask include:
What type of homes do you typically help buyers find? Make sure the agent works within the niche you're in (townhomes, luxury homes, areas for young families, etc.)
How do you communicate? This is key. Some real estate agents communicate with you every time they find a house or come up with new information. Others only contact you once a week to update you. Think about what you prefer.
Do you do this full-time? If you want someone hitting the streets non-stop to find you the right home, you want an agent that works this gig full-time and not as a side job to his/her other full-time job.
Look at Homes and Find your Dream Home
Together with your real estate agent, you'll look at homes. You may attend open houses, view homes online, or see them in person with just you and your agent.
When you find the home that checks all the boxes on your' needs' list and some of the boxes on your 'wants' list, it's time to make an offer if the price is within your budget.
Your real estate agent will handle this for you, which is great. You tell your agent what you want to bid, and they do the paperwork and negotiating. It may take a few days of back and forth with the seller to find out if you win the bid or have to look elsewhere.
Don't worry if you don't get it – the home wasn't meant to be.
Sign the Sales Contract
If the seller accepts your bid, you'll sign a sales contract, put down your earnest money. This is a deposit you put down in good faith. If you back out of the sale and it's not for an allowed reason in the contract, the seller can keep your earnest money.
Major tips: Pay Attention to Contingencies
There are a few contingencies in the sales contract that will protect buyers. Here are a few common contingencies.
Home inspection contingency. After the home inspection, if you can't reach a repair agreement with the seller, you can back out of the sales and get your earnest money back.
Finance Contingency. If you can't get a mortgage approved, you can back out of the sales contract without losing earnest money.
Appraisal contingency. If the house's appraisal value is lower than your offer price, you either have to bring the extra money to cover the gap or ask the seller to lower the sales price. If you can't reach an agreement with the seller, you can back out of the contract and get your earnest money back.
All the contingencies have expiration dates. If you need to use the contingencies to get out of the sales contract, make sure to decide before expiration dates or ask for contingencies extension in a written addendum signed by both sellers and buyers.
It is easy to understand why sellers don't like contingencies. In the seller's market (which means there are more buyers than sellers, so buyers have to bid for houses.), buyers often waive contingencies to get their offer accepted. However, before waiving contingencies, make sure you can handle the consequences, or you are confident that those contingencies are not needed.
After the sales contract is ratified, you or your realtor will turn the contract in to your lender, and they'll finalize your loan processing. They'll order title work and an appraisal on the home and clear up any conditions you had outstanding on your pre-approval.
If you haven't done the finance preparation mentioned in the previous blog, you need to pick a loan officer and start the loan application asap.
Here is the detail of mortgage application steps: "How to Apply and Get a Mortgage Approved in Six Steps".
You will also need to find a settlement company and get home insurance. Note that settlement companies' fees vary, so it's better to ask 2-3 settlement companies and compare their price sheets.
After the seller accept your offer (sales contract ratifies), you have a few days to do a home inspection, assuming you didn't waive home inspection in your contract.
Usually, your realtor will recommend a home inspector. It costs 500-800 dollars, depending on your house type. The home inspector will give you an inspection report which lists all the issues found in the inspection. With the report, you can ask the seller to fix the major issues or give you credit to compensate you.
If the issues are small, it is usually a good idea to accept the credit. Then you can fix the issues later on after closing.
The final step is to close on the loan and the sale of the home!
You'll sign your mortgage deed, note, and other lender specific paperwork. You'll also bring your down payment and closing costs funds to the table.
Once completed, you pay the closing agent the money owed, and the seller gives you the keys to your new home!
If you're ready to buy your first home, make sure you're prepared! MRateQuote.com works with banks and lenders that help borrowers in almost any circumstance. When you're ready to buy your first home, we are here to help!