Buying Your First Home (Part 2)

If you haven't read the first post about buying your first home, start there. But if you have then here's a quick reminder of the steps we've talked about so far:

  1. Stop watching HGTV
  2. Do your homework
  3. Get your finances in order
    • Look at how much you can afford
    • Test drive your estimated monthly payment
    • Review your credit reports for errors and look at your credit scores
  4. Learn everything you can about home-buying and home-ownership
  5. Start the process
    • Talk to multiple lenders
    • Ask you chosen lender for pre-approval (do NOT use your pre-approval amount as a guideline of how much to spend!)
    • Start interviewing realtors

After taking your time to step through these you are ready to start the process of actually looking for a home. The following steps are a lot of hurry up and wait. Depending on your local real estate market you may have to move quickly when making an offer on a house. If so you'll be glad that you took the time to do the previous steps since some items, like having your pre-approval in hand, make it much more likely you'll have your offer accepted in a competitive market.

  1. Start looking at houses
    • Once you have your pre-approval and a real estate agent that you like it’s time to start looking at houses. Try to see as many houses as you can. If you aren’t familiar with neighborhoods that you’re considering then visit them during different times of the day. See what traffic is like in the morning, during the day, and at night. Walk the neighborhoods and see what they feel like.
    • You’ll want to see a lot of houses, but occasionally you’ll find one that’s just right. It’s in a good neighborhood, close to the amenities you want, has the right number of bedrooms and bathrooms, is in the right school district, and has an asking price that’s within budget! When this happens you will sit down with your realtor to craft an offer. Hopefully, your realtor will walk you through this part of the process, and even give you an idea of what the home is actually worth before you make an offer way too high or way too low for the home. This offer will either be accepted, rejected, or countered by the seller. You may have to repeat this process multiple times on multiple houses before having an offer accepted, but have patience, it will happen.
  2. Finalize the funding
    • Once you have an accepted offer you’ll get the loan approved for the specific house. Your credit will be rechecked, and the mortgage lender will help line up the next few steps they need.
    • Get the home inspected. Find an inspector that doesn’t mind you following them through the house and asking questions. Inspectors are there to find major flaws in the home, and usually won’t move boxes out of the way or pull up a corner of carpet to get a closer look, but that doesn’t stop you from moving the boxes for them and asking them to check the area. You’ll also learn a ton about your potential new home from someone experienced in home maintenance. Ask them to show you how to shut the water off to your home, how to reset the earthquake gas shut-off valve, how to test and reset the smoke alarms; whatever you don’t know, ask. They will also be able to help you see if the siding needs replacement, how close the roof is to needing replacement or repairs, if the current owner has kept up on maintenance, etc. You’ll come out of the inspection with a (hopefully) small list of problems with the home, and your realtor should help you decide if you want to amend your offer to require fixes to these issues or if you should just deal with them yourself.
    • The bank will hire an appraiser to make sure the value of the home is in line with the offer you’ve made. In some areas, the appraiser is more thorough than the inspector, while in others, the appraiser will do no more than drive past the house the look at comparable sales online. If you think your offer may be on the high side for the value, you can ask to be present during the appraisal. This will at least ensure that the appraiser doesn’t just do a drive-by. The appraiser doesn’t work for you though. They work for the bank and don’t have to invite you along if they don’t want to.
    • After the appraisal, your loan will go into a dark hole called “underwriting”. During this time the mortgage lender should keep you up to date on what’s going on, but they won’t have much info since the loan is out of their hands until the underwriter gives approval.
  3. Closing the Deal
    • Assuming everything went through and necessary changes were made you’ll next be heading for closing. Find out the exact amount you owe for closing and have your bank write out a cashier’s check for you. They won’t accept your personal check for closing. Verify that the check is made out correctly, both the amount and who it is written to.
    • You’ll schedule closing at a title company. Hopefully, they are up to date with technology and you can use an eSignature software to sign the stack of papers. If not, prepare for hand cramps as you sign an inch or so of paper. The title agent should explain what you are signing as you go. If you have any questions make sure to stop and ask. A good realtor will also be there with you to help this go smoothly and make sure you know what you’re signing.
    • Depending on the deal you may get the keys at closing. If you sign before the seller then you’ll likely need to pick up the keys from your realtor after they finalize the closing. Either way this is the last step. Make sure to ask for the garage door openers, garage code, and alarm code as you’re grabbing the keys. If your realtor doesn’t have the information they’ll reach out to the seller for you.

Congrats on your new home! Now you can offer your friends pizza and beer to help you move!