How the home buying process works

Understanding how the buying process works can smooth the path to home ownership! Ready to find your new home-sweet-home?

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Considering buying your very first home? As a novice, you may not know what to expect, so get expert advice and remember to ask questions as you move through the process. Once you have decided that it makes financial sense to buy instead of rent, here’s what to do:

Get financials in order

If your credit score is a mess and you’re carrying a lot of debt (car payments, school loans, credit cards), clean it up before you go any farther. A bad credit score may not just affect your interest rate, but might also prevent you from getting a mortgage.

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Get pre-approved for a loan

Where to start? Veteran real estate investor Chris Yates of C.M. Yates Capital advises, “When looking for a mortgage lender, it’s best to consider multiple sources. If you are a member of a local credit union or small bank, begin there. With so many lending restrictions in current credit markets, local relationships are often your best bet for a streamlined and fairly-priced loan process. If you bank with a company that has a large mortgage lending division, check their rates as well and search online for mortgage brokers that offer loans in your area.”

It’s also important to understand how applying for loans can affect your credit. Yates explains,  “Don’t apply with multiple lenders all at once, as multiple credit inquiries can lower your credit score. Select the lender that feels best to you and begin there.”

Your mortgage lender will help determine what you can afford. Your monthly mortgage payment should total no more than 28 percent of your net paycheck, and your total debts shouldn’t exceed 36 percent. And don’t forget the down payment you’ll need — normally 15 to 20 percent of purchase price, although some lenders will go for 10 percent or even zero.

Find a realtor

Find a realtor and start looking. Talk to friends, relatives and co-workers because a referral is often the best way to find the right realtor. Your realtor should be a good negotiator with experience in the neighborhoods where you are interested in buying. She will help you through the complications of paperwork and keep you updated on home listings that match your wish list.

Narrow your search

Single family home, condo, townhouse? Prioritize what’s important, especially location. You may not be able to afford a home with everything that you want, so be clear about what you won’t compromise.

Make an offer and seal the deal

Once you’ve found the right home, make an offer. If it is accepted… congratulations, you’re almost there! Have a home inspection to determine any hidden issues. Now go through the closing to sign the papers and get the keys. You’ll turn over certified funds covering closing costs and down payments, show proof of your mortgage loan and homeowner insurance coverage. Buyers should also have a contingency that the home appraises for at least the selling price. Your real estate agent will walk you through all the steps in preparation for closing.

More home buying tips

7 Signs it’s time to stop renting and start buying
5 Signs it’s time to move to a new home
How to start your house hunt