Your Guide to the Home Buying Process
Finding the house is the first step of a LONG journey.
For us as first time home buyers, we learned an entirely new language with words like option periods, earnest money, appraisals, and more.
To distill it down for you:
Get ready for the journey and be ready to spend A LOT of money.
But no need to be scared about it, this will help you be prepared.
Step 1: Get a Pre-Approval
Work with a lender to see how much house you can afford. They’ll do a deep dive on all of your credit history, investment accounts, bank accounts, retirement accounts, car values, if you own it - they’ll want to know about it.
This lets the lender pre-approve you. That way when you find the house you want, you can confidently make an offer.
Step 2: Write Your Offer
Once you like your house, you make a written offer. Your realtor will draw up all the paperwork, you just have to decide what goes on it.
Are you offering the asking price? Above the asking price? Below the asking price? Do you want to request some of the furniture stay? You can put whatever you want in your offer.
If the seller accepts your offer, you’ll enter an option period. For $100-$500 you buy a set amount of time (normally 5-10 days) where you “have claim” on the house but you can still back out of the offer in that window.
Once you are through the option period, you don’t yet own the home but you’re a big step closer.
When they accept your offer, you'll also put 1% of the purchase price (called earnest money) into an escrow account (just a holding account between you and the sellers). This is refundable during the option period, but non-refundable after that.
Step 3: Inspections
During the option period, you’ll want to get home inspections done.
Our inspector was at our house for OVER 6 HOURS. He checked the roof, foundation, crawl spaces, HVAC, every single appliance, floors, everything you can think of. The house isn’t that big, he was just that thorough.
Expect $300-$800 for inspections depending on your area and home size.
Based on the inspection report, you can negotiate with the sellers to see if they'll pay for repairs or give you the cash to pay for repairs yourself.
If the inspection comes back really bad, you can still back out (hence why you do it in the option period 🙂)
Step 4: Loan Origination and Appraisal
Once it’s go time on the house, the loan process ramps up.
Your inbox is going to be flooded with requests for documentation:
- Paystubs
- Tax Returns
- Bank Statement
- Credit History
It’s honestly a bit overwhelming but I guess it makes sense, a company is about to loan you hundreds of thousands of dollars… they need to know who they’re loaning to.
Along those lines, you’ll also need an appraisal (another cost) .
This is the bank’s way of protecting themselves on the loan. If they loaned you $1 Million for a house deemed to only be worth $300,000 they’d be in a tough spot.
Step 5 (almost there!): Insurance and Final Walk Through
Before you close you'll need home insurance (we're now proud bundlers of home and auto). You'll also do the work to get utilities, internet, and everything else transferred to the new place.
24 hours before signing, you get to do a final walk through.
Any repairs you requested, were they done?
Are the appliances you asked for still in the house or did they take them?
Finally, Step 6: Closing Day
I’m actually writing this a week before we close, so I haven’t been here yet.
But my friend Zach said closing required signing the “thickest stack of papers he’s ever seen” and he could barely feel his hands when he was done… dramatic guy that Zach.
After that, you’ve done it.
Get the keys, call the movers, it’s go time baby!
Buying a home is a marathon of mini-sprints.
Each of those sprints (inspections, appraisal, insurance set up, utilities, etc.) costs money.
Make sure you’re financially ready for it, and make sure you have a great realtor who can help guide you through the process.
Enjoy the journey though, the end will be well worth it 🙂
