The Basic Home Buying Process

Posted by Jace

March 25, 2008

Basic Home Buying Process & Tips

Step 1: Determine what you can afford

If don’t have a written budget you are going to want to make one. How much of a house payment fits into your budget? Don’t go off the max the lender will loan you because they will often give you more than you can afford (part of the reason there are so many foreclosures!).

You mortgage payment is made up of principle and interest (calculate P&I at http://www.bankrate.com/brm/mortgage-calculator.asp). But there are other home-ownership costs you have to be aware of such as mortgage insurance, property taxes, hazard insurance, home-owner’s association dues (HOA), mortgage insurance (?), closing costs, etc.

Step 2: Get Pre-Qualified

Talk to lenders who work can work with the government loan programs like IHFA. There are special programs with lower interest rates, down payment assistance, or closing cost money to help you buy your first home! Of course, with any government program there is a long list of stipulations such as income limits.

Step 3: Find a good Realtor

Working with most Realtors as a buyer is completely free! How is that? Well, when a seller lists their home with an agent they usually pay a commission to the listing agent and the listing agent offers a portion of that to the buyer agents in the area. There are many advantages working with a Realtor but sure it is someone you like, trust, and experienced.

Step 4: Where do you want to live?

Home prices can change drastically depending on the area. For example, you get a lot more house in Meridian than North Boise but if you work downtown, is the extra commute worth it? If you want to be in a more expensive area, would you consider a home needs some work or updating? Each area will have pros and cons but as you begin to look at your various options with the help of your Realtor you can begin determining how to prioritize what is most important to you.

Step 5: Want kind of house do you want?

Bedrooms, bath, single-story vs. two story, age of home, etc. Other things held equal, you can get more square footage with your money in a two story home than a single level. What about the master-bedroom upstairs? Maybe you don’t mind but could be negative at resale later.

Step 6: Find your home

As you have now focused down the area and features of your ideal home your Realtor should be able to help you find your top several homes, prioritizing them 1-2-3.

Step 7: The offer

Your Realtor will help you form your offer and come up with a game plan to negotiate with the sellers. Right now is so much fun to buy because it is a “buyer’s market” meaning with the right approach you can get the sellers to be very flexible. Make sure your offer is contingent on a home inspection!

Step 8: The Basic Contingencies

Once you have a signed purchase and sale agreement, you typically have 3 to 4 weeks to close on the property. During that time the contingencies laid out in the agreement are met. These usually include:

1) Home Inspection- After you have an accepted offer you will have your home inspection. Once you get the list of items that could be addressed, determine with your Realtor what you want to ask for the seller to fix. If they don’t agree fixing the things you demand you can walk away (if the offer was written correctly!).

2) Clear Title- The title company will search the public records to see if there are any liens or any clouds on the Title.

3) Final Loan Approval- You got pre-qualified before you began looking for a home, now your loan application goes through underwriting process and get formal approval.

4) Appraisal- The house must appraise for the purchase price.

Step 9: All Contingencies Satisfied and Proceed to Closing

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