Buying a home starts out as exciting, but often ends up being stressful. It’s not just the dizzying array of legal and financial details to be sorted out—it’s the fact that much of the home-buying process takes place under the pressure of a deadline.
Once you and the seller sign a purchase agreement, the clock starts ticking on getting everything lined up in time to close the deal. Here are steps that walk you through how to buy a house.
1. Check your credit report
What is the first step to buying a home? Our buying a house checklist advises a review of your credit report because it can take some time to clear up issues. Don’t wait until you apply for a mortgage loan to find out whether or not you have any problems. Review your credit history as soon as you start thinking about buying a house.
2. Do some budgeting throughout the home-buying process
Buying a house can be a serious financial strain, beginning with getting enough cash together for a down payment and closing costs. The best way to prepare is to get serious about your budget. Account for your day-to-day living expenses plus any existing financial obligations such as student or car loans. Use saving for a down payment as a trial run for your homeowner’s budget.
3. Get pre-qualified or pre-approved for a mortgage loan
Pre-qualification is a relatively informal process of giving a lender some basic information about your finances and receiving an estimate of your qualification for a loan in return. Pre-approval involves providing more detail and documentation, in return for which you may receive a written commitment that you qualify for a mortgage up to a specified amount. Pre-approval typically involves a fee, so take this step only if you are serious about buying. Also, be sure to shop for competitive mortgage rates before you take this step.
4. Line up your service providers
The home-buying process can include services from a lawyer, home inspector, and an insurance agent for your homeowners policy. Start shopping for qualifications and rates while you are still house hunting, so you’re able to put things in motion immediately once you sign an offer agreement.
5. Build time into the home-buying process
Speaking of the offer agreement, this contract specifies how long you have to get your mortgage loan commitment and complete all the other steps to take when buying a home prior to closing. Don’t cut this too close. Negotiate ample time in the agreement for coordinating various schedules and solving the inevitable glitch or two that comes up.
6. Prepare for closing costs
Besides your down payment, upon closing you have to pay lawyer’s fees, loan fees, insurance premiums, and possibly some other costs. Budget for these well in advance of the closing so you don’t get caught short. Also, personal checks may not be accepted at closing for any major costs, so come prepared with bank wire arrangements in place, or a certified or cashier’s check for the amounts required.
7. Review the mortgage loan closing disclosure
Your lender must provide you with documentation of all your mortgage loan details at least three days prior to closing. Review this for accuracy as soon as you receive it, to allow maximum time to clear up any problems.
8. Organize your home-buying documents
When you go to the closing, you need a photo ID, proof of insurance, and the means to take care of any closing costs. It also might help to bring along a copy of the purchase and sales agreement and your loan disclosure to make sure there are no last-minute discrepancies. You may leave the closing with a large bundle of documents, including your deed and a loan agreement, although these files are sometimes provided electronically. Keep these documents in a secure place (a fireproof safe or backup drive) in your home.
The best way to handle any deadline is to get as early a jump as possible on the tasks at hand. The eight steps to take when buying a home should help you get some parts of the home-buying process out of the way even before the deadline clock starts ticking, and also minimize surprises that can throw you off schedule.
This information is provided for informational purposes, may not be applicable to all situations, and is not intended to provided legal, tax, or financial advice. For specific advice about your unique circumstances, you may wish to consult a qualified professional.