Your Home-Buying Process Checklist: 10 Steps to Becoming A Homeowner
Buying a home requires a ton of attention to detail! Even if you’ve gone through the process before, purchasing a home comes with numerous checkpoints that have to be successfully reached before you can finally move in. With so many requirements involved, we decided to develop a step-by-step home-buying checklist to smooth out your home-buying journey!
So, whether you’re a first-time home buyer or an experienced investor, here’s your home-buying guide to smooth out each and every transaction.
10 Steps on the Home-Buying Checklist
If you’re interested in buying a home, here are the 10 steps you’ll need to follow:
1. Check your finances.
Houses are expensive. In fact, for many of us, a house will be the biggest purchase we ever make!
And although there are certain mortgage products designed for low-income individuals, and there are certain strategies for reducing how much cash you need to approach the closing table, most of us will have to fork over a great deal of money to get into a house.
For many loan products, you’ll need at least 3% down, and your real estate agent could charge another 6% (though this fluctuates from agent to agent). On a $200,000 house, that could mean $6,000 for the down payment and $12,000 for your agent—$18,000 total!
Beyond that, though, you’ll also be responsible for a variety of other expenses. You may also be on the hook for:
Monthly mortgage payments
Monthly mortgage insurance payments (if applicable)
Monthly homeowner’s insurance
Monthly utilities
Property taxes
General maintenance costs
HOA fees (if applicable)
Those add up quickly! So, when reviewing your finances, look for two big items:
How much cash do you have—and how much are you able to acquire? If you have money invested or other valuable assets, some of these funds can be liquidated without penalties to assist in your purchase.
How much house do you think you can realistically afford each month? If you’re currently paying $1,200 per month in rent, you might not be able to afford a $1,200 per month mortgage if you’ll also pay for utilities, taxes, and other expenses on top of it!
As we’ll discuss later, your mortgage loan officer can help you dig into the finer details. For now, you want to conduct an honest assessment of your financial well-being to maintain realistic expectations throughout the process.
2. Find a local real estate agent you can trust.
We’re placing a special emphasis on the words “local” and “trust.”
“Local” is important because every market is different. Even in Pittsburgh, different neighborhoods have different houses with different problems and different advantages.
A local real estate agent will be more in tune with what to watch for in each region, and they’ll also have a better grasp on local taxes.
And, of course, the word “trust” is important because buying a home is a major financial transaction.
You don’t want to begin your journey with someone who’s going to pressure you into the wrong home simply to inflate their commission check.
3. Find a local mortgage lender you can trust.
Again, emphasis on the words “local” and “trust.”
We’ve seen countless transactions in Pittsburgh go awry because an out-of-town lender had inaccurate information or provided inaccurate details to their client.
A local mortgage lender understands individual neighborhoods and taxes the buyers and homeowners may be subject to over time.
As with location, trust is also important in a mortgage lender. After all, your loan officer will have a deep, intimate view of your personal financial information!
4. Get pre-approved (instead of pre-qualified).
While seeking pre-approval is optional, it is highly recommended over being pre-qualified. So, what’s the difference?
Becoming pre-qualified means a mortgage lender has collected basic financial information from you and has generated a rough estimate of how much house you can afford. Pre-qualifications can happen pretty quickly, and because they often rely on self-reported information, they’re rarely as accurate as a pre-approval. In fact, it’s possible that your pre-qualified limit is found to be completely inaccurate!
During a pre-approval, however, your loan officer will take a much deeper look at your financial health to determine how much much of a mortgage payment you can afford each month. With this information, you can shop for homes with confidence.
5. Find a home that fits your vision.
Regardless of whether you’re buying to occupy the home or flip and rent it, be sure the home fits your vision.
In some cases, your real estate agent can help you find the perfect home in a single weekend. But depending on the requirements you’ve laid out (number of bedrooms, number of bathrooms, neighborhood, proximity to work, school district, etc.) and the current state of the market, your search could last much longer.
Once you believe you’ve found a good candidate, walk through it with your agent to take a critical look at the home. If possible, consider bringing along someone you trust with construction or remodeling experience for an honest perspective on the home’s past maintenance and current physical condition.
If the home seems like a good fit, congratulations!
6. Make an offer.
Once you’ve fallen in love with a home, your agent will help you make an offer on the home.
That offer can include a variety of conditions to help protect you and your interests. For example, you could include contingencies that:
State you’ll only purchase the home if it appraises within a certain dollar amount.
Build in escalation clauses that allow you to automatically outbid any other offers on the home.
Explain that your purchase of this home is contingent upon the sale of your home.
Part of the offer experience may require placing “earnest money” into an escrow account. In general, “earnest money” averages about 1%-3% of the purchase price, and it’s there to protect the seller in case you suddenly back out of the transaction for a reason outside of the seller’s control.
If the sale goes through as planned, those funds will generally go directly toward purchasing the home.
7. Schedule the inspection.
During your inspection, a third-party expert will closely examine the home to check details such as:
How well the HVAC system performs.
Whether the home has plumbing issues.
Whether there are electrical issues.
The condition of the roof.
Whether the floors are level and safe.
Whether the windows are sealed properly.
The condition of the foundation.
The inspection’s findings could factor into your negotiation strategy or even kill off the sale entirely. For example, if a $150,000 home requires $75,000 of work before it’s legally safe for habitation, it could be unrealistic for you to purchase, depending on your budget and goals.
8. Appraisal.
During the appraisal, an appraiser, generally hired by the lender, will survey the home to give an honest assessment of how much it’s worth. That appraisal directly influences how much the lender is willing to offer you.
For example, if you make an offer on a home for $200,000, but it appraises for $190,000, the lender could give you $190,000—leaving you to come up with another $10,000 on your own (unless, of course, you’ve written a contingency into your offer).
9. Prepare for closing.
Once the appraisal is out of the way, you’re almost ready to visit the closing table!
In preparation, you’ll need to:
Liquidate assets (as necessary) to cover your down payment, your real estate agent fees, and any other costs. Depending on your mortgage product and a variety of other variables, that could easily exceed $10,000 in total.
Purchase homeowner’s insurance. In some areas, you’ll need homeowner’s insurance at the closing table in order to push the purchase of your home through. Check with your real estate agent for the rules in your region.
Remember: This is not the time to begin purchasing furniture for the home—or any other large expenses. Any major purchases will be a red flag to your lender, and it could negatively impact the purchase of your home.
10. Attend the close.
Congratulations! You’re reached closing day.
During the close, you’ll have a variety of paperwork to complete and sign.
Be sure to bring along:
Your ID
Proof of homeowner’s insurance (if required)
Checks or cashier’s checks to cover the costs
Once all of the papers are signed, you’ll be the proud owner of your own home!
What to Do After Becoming A Homeowner
Of course, after you’ve purchased the home, there’s still plenty left to do! You’ll still need to:
1. Move in! Moving can take an entire day, and some people even choose to hire a moving crew to assist in getting it all done. Of course, you’ll also need time to unpack and get everything organized and get situated with your utility providers.
2. Get adjusted. You and your family will need time to acclimate to the new home. Different homes have different characteristics that you won’t discover until after you move in. Things as simple as how long it takes for the shower to heat up and which rooms offer the best natural airflow likely won’t be uncovered until after you move in.
3. Learn the neighborhood. Within the first few days of moving in, it’s wise to get a feel for the neighborhood. Pay special attention to details like emergency resources, pharmacies, and grocery shopping.
4. Learn your routes. And while you’re figuring out the neighborhood, you can also determine the best routes to work, school, the hospital, and any places you frequently travel to.
Once all of these tasks are crossed off the list, you’ll feel like a true homeowner!
Where to Find Additional Support
If you need any assistance on your home-buying journey, contact us! As a full-service brokerage, we can help you every step of the way.
