The Buying Process

The home buying process can be overwhelming. We've developed a step-by-step guide to help you take steps in your journey to home-ownership.

Step 1: Find a Realtor®

“Realtor®” and “real estate agent” are often used interchangeably, but they aren’t the same thing. While both sell real estate, only a Realtor® is a member of the National Association of Realtors®, bound by the professional standards of the Realtor® Code of Ethics. This code stipulates that Realtors® deal with all parties of a transaction honestly.

Buying and selling real estate is a complex matter. In this maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to have someone by your side who is a professional with a wealth of knowledge and training.

Step 2: Get Loan Pre-Approval

"Pre-approval" means you have met with a loan officer, your credit files have been reviewed, and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre-approval letter, which shows your borrowing power.

Step 3: Look at Homes

Before you start searching, you should identify your list of “musts” and “wants.” This list is an inventory of priorities for your search, from location to size and of course price. Include your Realtor® in this conversation, and they can help by setting up detailed searches that automatically send you new listings the moment they become available.

Visit open houses and schedule showings for the available listings that catch your eye. Pictures are nice, but seeing a property in person can be especially helpful in determining if it is the right place for you.

Step 4: Get Funding

Discuss with your lender and determine the percentage of your income you want to spend on your new house. You’ll need to provide some paperwork showing proof of income, employment status, and other important financials.

Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.

Step 5: Choose a Home & Make an Offer

The home that catches your eye has been placed on the market, and the seller has established an asking price as well as other terms. As a buyer, you’ll want to make an offer at, below, or above that asking price. Work with your Realtor® to craft this offer, which will not only specify the price you’re willing to pay, but also the proposed settlement date and contingencies — other conditions that must be agreed upon by both parties, such as giving you the ability to do a home inspection and request repairs.

Step 6: Negotiate

No aspect of the home buying process is more complex, personal, or variable than bargaining between buyers and sellers. This is the point where the value of an experienced Realtor® is especially helpful. They’ve seen numerous homes for sale, know local values, and spent years negotiating realty transactions.

In a typical situation, you will complete an offer that the Realtor® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer. Once terms are agreed upon, you’ll sign a contract.

Step 7: Inspections and Appraisals

Two important steps before closing are the inspection and the appraisal. For the inspection, you’ll hire a licensed home inspector to inspect the home for needed repairs, and then ask the seller to have those repairs made or request a reduction in list price to help pay for the repairs you’ll have to make. Keep in mind that in a seller’s market, sometimes a seller will not be willing to make or pay for these repairs. Either way, a good inspection mitigates your risk of buying a house that has major issues lurking beneath the surface, like mold or cracks in the foundation.

When you offer to buy a home, your lender will also need to have the home appraised to make sure the property value is enough to cover the mortgage. In a seller’s market, some buyers will sign an appraisal waiver to make their offer more appealing to the seller. Be sure to do your research before agreeing to any waivers.

Step 8: Get Insurance

No one should drive a car without car insurance, so it figures that no homeowner should be without home insurance. Your lender will require proof of this insurance before closing. The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime. Some things to look into besides home insurance are title insurance, flood insurance, and a home warranty.

Step 9: Closing

The closing process, which in different parts of the country is also known as "settlement" or "escrow," is increasingly computerized and automated. Expect a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, at the end of which you’ll be a new homeowner. Congratulations!