Home Buyers Guide: A Step By Step Guide To Buying Your Next Home
Introduction
Purchasing a home is one of the biggest financial decisions you will make, and it’s important to approach the process with care and preparation. At Brown Wright Realty, we understand that navigating the home-buying journey can feel overwhelming, but with the right guidance, it becomes a manageable and exciting process. In this article, we provide you with a comprehensive 10-step guide to help you buy your dream home with confidence.
Purchasing a home is one of the biggest financial decisions you will make, and it’s important to approach the process with care and preparation. At Brown Wright Realty, we understand that navigating the home-buying journey can feel overwhelming, but with the right guidance, it becomes a manageable and exciting process. In this article, we provide you with a comprehensive 10-step guide to help you buy your dream home with confidence.
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Step 1 - Assess Your Financial Situation
Before you start browsing homes, it’s crucial to assess your financial health. Take a close look at your savings, income, and existing debts. Consider the costs of home ownership, including the down payment, closing costs, monthly mortgage payments, property taxes, and maintenance. By understanding your financial standing, you’ll know what price range is comfortable for you. Step 3- Find a Real Estate Agent
Working with an experienced real estate agent is key to navigating the complexities of buying a home. A professional like those at Brown Wright Realty can guide you through the entire process, from finding properties that meet your criteria to negotiating the best deal. They can also provide valuable insights into the local real estate market. Tip: Choose an agent who is familiar with the neighborhoods you're interested in and understands your needs. 
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Step 2.-Get Pre-Approved for a Mortgage
A pre-approval letter from a lender is a vital step in the home-buying process. It not only gives you a clear understanding of your budget but also shows sellers that you’re a serious buyer. To get pre-approved, the lender will review your financial situation, including your credit score, income, and debt-to-income ratio. A pre-approval helps you avoid wasting time on homes that may be out of your budget. Tip: Shop around for mortgage rates to ensure you get the best deal. 
Chapter 2 - List of Requirements
Now that you know what you qualify to buy, you need to write down those qualities of a home that are important to you and just how important they are. This will allow you to focus your search on areas that match your criteria and not get distracted and lose focus. A loss of focus at the beginning of a search will cause you to waste a lot of time as well as get confused as to what is important and what is not. Buyers who skip this step will spend several months driving around and looking at houses without any clear idea what they really want. This will eventually lead to them seeing homes that will be sold by the time they get focused. This causes them to compare ever house that is for sale to the "perfect house" that is already sold and they can no longer buy. This will lead to further confusion and second guessing. This step is crucial in making sure you don't miss out on the "perfect home". Also remember that unless you build it yourself, you will never find the "perfect home". You will only find the almost perfect house that will eve |
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Chapter 3 - Search for Homes
Now that you have your list you can start looking for homes. Bear in mind that the lists you created in the previous step are not written in stone and once you start actually searching for homes that meet your criteria, you might have to rethink and repriortize your lists. Search the Internet Over the last couple of years the internet has become a great resource for homes. You can now search online and find most of the listings that at one time only agents had access to. This allows you to spend a lot of time searching for homes in the convenience of your home. You can find multiple high resolution pictures of most homes. You can get satellite views of the street and see exactly what the home backs up to. There are vast amounts of data about the neighborhoods. And there are tremendous amounts of data about prices and values. |
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Your Agent as a Resource
Although the reliance on the agent to find a home has dropped off significantly because of the internet, they are still an valuable tool for finding houses that you might not be able to find or have overlooked. They also have access to data that is much more accurate and timely than almost all internet sites.
You can send them links to houses that you like and get their opinion. This will also allow them to see what you like and make suggestions and send you listings that they think you might like. And because the market is fluid and houses come on the market everyday, it is good to have another set of eyes looking for the perfect home for you.
Also, agents can use the database of information in the MLS that is not public and analyze prices and market activity that is invaluable to finding a good value or recognizing changing conditions.
Viewing Homes
By this time you should have a pretty good idea if you can get the house you want for the price you can afford. The internet will have saved you plenty of time avoiding hours driving around looking at homes that don't meet your criteria. And you should have your agent in the loop on houses that you like. At this point you should have your agent preview any houses that might meet your criteria but the information available on line was insufficient to really tell if it is a good prospect or not. This is an invaluable service that good agents perform for their clients.
After your agent has previewed the houses you like and other houses that might be good, set up a time to look at the best 5-7 homes. Have your agent set this up for a 2-3 hour block of time. This is the most homes you want to look at in one trip because any more and the properties start to run together and you get mixed up as to what house had what features. Also, when you go house touring do not bring your kids because they will only distract you from the task at hand.
If you have done the preliminary searches and your agent has done the previewing you will only need to see 10-12 houses at the most. This means it should take you two outings to find the right house. If, however, you do not have that many to choose from, after the initial outing, you will have to set the alerts for new listings and go visit them one by one as soon as they come on the market. You should also trust that after seeing 8 or more homes you will have a very good idea of value and will be able to pick the best house for your new home.
Although the reliance on the agent to find a home has dropped off significantly because of the internet, they are still an valuable tool for finding houses that you might not be able to find or have overlooked. They also have access to data that is much more accurate and timely than almost all internet sites.
You can send them links to houses that you like and get their opinion. This will also allow them to see what you like and make suggestions and send you listings that they think you might like. And because the market is fluid and houses come on the market everyday, it is good to have another set of eyes looking for the perfect home for you.
Also, agents can use the database of information in the MLS that is not public and analyze prices and market activity that is invaluable to finding a good value or recognizing changing conditions.
Viewing Homes
By this time you should have a pretty good idea if you can get the house you want for the price you can afford. The internet will have saved you plenty of time avoiding hours driving around looking at homes that don't meet your criteria. And you should have your agent in the loop on houses that you like. At this point you should have your agent preview any houses that might meet your criteria but the information available on line was insufficient to really tell if it is a good prospect or not. This is an invaluable service that good agents perform for their clients.
After your agent has previewed the houses you like and other houses that might be good, set up a time to look at the best 5-7 homes. Have your agent set this up for a 2-3 hour block of time. This is the most homes you want to look at in one trip because any more and the properties start to run together and you get mixed up as to what house had what features. Also, when you go house touring do not bring your kids because they will only distract you from the task at hand.
If you have done the preliminary searches and your agent has done the previewing you will only need to see 10-12 houses at the most. This means it should take you two outings to find the right house. If, however, you do not have that many to choose from, after the initial outing, you will have to set the alerts for new listings and go visit them one by one as soon as they come on the market. You should also trust that after seeing 8 or more homes you will have a very good idea of value and will be able to pick the best house for your new home.
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Chapter 4 - Making an Offer
So you have found a house and now it is time to write an offer and submit it to the sellers agent. This is where your agent and the resources available to him or her will be extremely valuable. It will also be important that your agent knows the current market trends and makes you aware of those trends before putting together and offer. Sales Price to List Price Ratio You want to submit an offer that has a price that can be supported by recent sales, current inventory and price trends. You don't want to put an offer in that is too low and does not even get a response back from the sellers and at the same time you don't want to go too high and pay too much for a house. A good starting point to use is the list price to sales price ratio of completed sales. A good agent can tell you what price a home sold for and compare that to the final list price of the home. In a strong sellers market this number is close to or in some cases above 100%. That means buyers are paying full price or bidding houses over list price. In these market conditions it is important to know this ahead of time so you don't get discouraged putting in offers that never get accepted by the sellers. In a buyers market when there is plenty of inventory this ratio can get down closer to 93 or 94%. This means that buyers are offering well below list price and negotiating to a number in between. In a balanced market this number is usually around 97%. This means that a buyer can offer around 94 or 95% of list price and get the seller to accept less than full list. 
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Days on Market
But you can't use the sale price to list price ratio by itself. You must also consider how long the house has been on the market. A house that is new on the market will probably have home owners that are less likely to take an offer significantly below the list price. In most cases they will counter at full list price or not at all if they feel the offer is low. They will do this because they will assume that if someone likes the house enough to put an offer in when it first hits the market that others will follow and hopefully they will have a better offer to consider. And the opposite holds true. A home that has been on the market longer than other homes in the same area should expect to get lower offers. Either that or the seller should adjust their price until they receive an offer that reflects market conditions. At which time a buyer that has been following the home waiting for the price reduction will then step in and offer a price more reflective of the averages. |
Contingencies
There are certain contingencies that you can put into a contract that protect one party or the other. These contingencies provide protection for one party while increasing risk for the other party. An informed and professional agent will be able to tell you what contingencies are commonplace and will not cause the sellers to balk at your offer as well as which contingencies will most certain never be accepted by the other party. This information is extremely valuable to know before you write an offer and submit it.
An example of a contingency is for financing. This provides the buyer a certain amount of time to secure the commitment from the bank that they will in fact lend you the money on the house you have selected. This gives a buyer time to complete the loan approval process and gives the bank time to value the property on which it will be lending you money. Almost all sellers will allow this type of contingency. Other types of contingencies that protect the buyer are Inspection Contingencies, Appraisal Contingencies, Sale of Home Contingencies. Ask your agent which ones they recommend and how they will protect your and for how long.
Settlement Date Selection
This is usually a date 3 to 6 weeks into the future that represents a time that both you and the sellers can sit down at a settlement table and sign the documents that transfers ownership to you. Try to avoid the last couple of days of the month because it is very busy for lenders and settlement offices and delays are almost expected at those times. Also, avoid Fridays if possible because a slight delay on the bank's part in getting the funding completed could push the settlement to the following day and that will be Monday if Friday was the target day.
There are certain contingencies that you can put into a contract that protect one party or the other. These contingencies provide protection for one party while increasing risk for the other party. An informed and professional agent will be able to tell you what contingencies are commonplace and will not cause the sellers to balk at your offer as well as which contingencies will most certain never be accepted by the other party. This information is extremely valuable to know before you write an offer and submit it.
An example of a contingency is for financing. This provides the buyer a certain amount of time to secure the commitment from the bank that they will in fact lend you the money on the house you have selected. This gives a buyer time to complete the loan approval process and gives the bank time to value the property on which it will be lending you money. Almost all sellers will allow this type of contingency. Other types of contingencies that protect the buyer are Inspection Contingencies, Appraisal Contingencies, Sale of Home Contingencies. Ask your agent which ones they recommend and how they will protect your and for how long.
Settlement Date Selection
This is usually a date 3 to 6 weeks into the future that represents a time that both you and the sellers can sit down at a settlement table and sign the documents that transfers ownership to you. Try to avoid the last couple of days of the month because it is very busy for lenders and settlement offices and delays are almost expected at those times. Also, avoid Fridays if possible because a slight delay on the bank's part in getting the funding completed could push the settlement to the following day and that will be Monday if Friday was the target day.
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Earnest Money
You will almost certainly have to put money up as good faith deposit when you submit your offer. The amount will vary by jurisdiction and from seller to seller. But you should expect to put up at lease 1% of the offering price. This money will be held in an escrow account. Upon acceptance of the contract and ratification by both parties the earnest money will be held by one of the broker's in the transaction or by an escrow agent. This also depends on the jurisdiction and corresponding laws of the state. If the contract becomes void then the money will be returned. If there is a dispute then this money will sit in the escrow account until the dispute is resolved. If the transaction is completed, the money will be used to offset closing costs and/or down payment. Lender Letter This was mentioned earlier in the financing section. You will now need the letter from your bank saying you are either Pre-Qualified or Pre-Approved. This letter will accompany your offer. |
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Chapter 5 - Ratification to Settlement
You made an offer and most likely spent a couple of days going back and forth with the sellers on price, settlement date, contingencies, inspections and other specifics of the contract. But hopefully you have come to a point that you are satisfied with the terms and conditions. The date which all parties have signed off on the contract and all changes is called the ratification date. This begins the clock on all deadlines that must be met including the settlement date.
Now you must begin your due diligence and all the parties to the transaction must begin moving toward a smooth and successful settlement. This is also one of the most critical functions of a good real estate agent. They will help you coordinate with the other parties and communicate with the sellers on the progress as it is made. They should also be able to recommend service providers that can act quickly and professionally.
You made an offer and most likely spent a couple of days going back and forth with the sellers on price, settlement date, contingencies, inspections and other specifics of the contract. But hopefully you have come to a point that you are satisfied with the terms and conditions. The date which all parties have signed off on the contract and all changes is called the ratification date. This begins the clock on all deadlines that must be met including the settlement date.
Now you must begin your due diligence and all the parties to the transaction must begin moving toward a smooth and successful settlement. This is also one of the most critical functions of a good real estate agent. They will help you coordinate with the other parties and communicate with the sellers on the progress as it is made. They should also be able to recommend service providers that can act quickly and professionally.
Home Inspection
One of the most critical contingencies and usually the first one you need to take care of is for the Home Inspection. This will be your opportunity to go through the house from top to bottom with a professional. A good home inspector will walk you through all the systems in the house and show you how they operate. He will recommend repairs. Some repairs will be minor and some will be more critical. He will let you know life expectancy of items in the house like the roof, HVAC system, hot water heater and other appliances.
The goal is to uncover any and all defects with the property so that you know what you are buying. Once you finish the inspection you can do one of three things. Buy the house as it is and ask for no repairs be made. You can ask for certain repairs be made at the seller's expense prior to settlement. Or you can void the contract and buy another home. This last scenario usually occurs when a major defect has been uncovered. This is the main reason you want a professional to do the inspection. Major defects usually require the eye of a trained professional.
Financing, Appraisals and Insurance
In order to get the loan, the bank will require you to provide them with information once you have selected a property you want to buy. Your agent should immediately get a copy of the ratified contract to the loan officer and you should get all the documentation to the loan officer as quickly as possible. The bank will then work to get you a final approval. This final approval will be contingent upon an appraisal. The bank will order this and a third party appraiser will assess the market value of the house.
The bank will also require certain inspection reports as a condition of the loan. A pest inspection is almost mandatory and will uncover termites and other wood destroying insects. If there are wood destroying insects present the house will need to be treated before a loan is approved.
Well and septic inspections are also required by banks. If the house you buy has its own well and septic system then these inspections need to be ordered immediately. Again, another reason to have a good real estate agent is they will have access to the companies that handle these inspections.
The lender will also require you have home owners insurance on the property. This is a good time to get that policy in place.
One of the most critical contingencies and usually the first one you need to take care of is for the Home Inspection. This will be your opportunity to go through the house from top to bottom with a professional. A good home inspector will walk you through all the systems in the house and show you how they operate. He will recommend repairs. Some repairs will be minor and some will be more critical. He will let you know life expectancy of items in the house like the roof, HVAC system, hot water heater and other appliances.
The goal is to uncover any and all defects with the property so that you know what you are buying. Once you finish the inspection you can do one of three things. Buy the house as it is and ask for no repairs be made. You can ask for certain repairs be made at the seller's expense prior to settlement. Or you can void the contract and buy another home. This last scenario usually occurs when a major defect has been uncovered. This is the main reason you want a professional to do the inspection. Major defects usually require the eye of a trained professional.
Financing, Appraisals and Insurance
In order to get the loan, the bank will require you to provide them with information once you have selected a property you want to buy. Your agent should immediately get a copy of the ratified contract to the loan officer and you should get all the documentation to the loan officer as quickly as possible. The bank will then work to get you a final approval. This final approval will be contingent upon an appraisal. The bank will order this and a third party appraiser will assess the market value of the house.
The bank will also require certain inspection reports as a condition of the loan. A pest inspection is almost mandatory and will uncover termites and other wood destroying insects. If there are wood destroying insects present the house will need to be treated before a loan is approved.
Well and septic inspections are also required by banks. If the house you buy has its own well and septic system then these inspections need to be ordered immediately. Again, another reason to have a good real estate agent is they will have access to the companies that handle these inspections.
The lender will also require you have home owners insurance on the property. This is a good time to get that policy in place.
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Chapter 6 - Settlement and Post Settlement
The day has come and it is time to sit down at the settlement table and actually buy your new home. You have been in contact with the settlement company, your agent and your loan officer during the whole process so there should be no unpleasant surprises on this day. But you probably had a few moments of anxiety along the way which is typical for a transaction of this magnitude. But those items were worked out and now you can move forward.
Settlement Statement
The settlement statement is a government document that the settlement company uses to reconcile all the money that changes hands at settlement. It is also called a HUD-1. You should get a chance to review a preliminary copy of this document either the day before a settlement or the morning of settlement. Your agent should also review this. This will show all the costs associated with the transaction including lender fees, taxes, escrows, settlement company charges and broker fees. It will have both the buyers costs as well as the sellers costs. It will also have a final amount that you will be required to bring to settlement.
This is a preliminary statement but it shouldn't be too different from the final as long as the lender has given the title company all their required costs. This number should also be close to the number on the Good Faith Estimate.
Final Walk Through
Either the night before or just before settlement you and your agent should do a final walk through of the house. You want to make sure that everything is still in working order, the house is vacant and cleaned up according to the terms of the contract. You also want to make sure nothing is gone from the house that was suppose to stay such as lighting fixtures or appliances. You want to make sure no damage occurred during the moving process. Any problems need to be address immediately with the sellers. Your agent should handle this with the sellers agent.
Settlement Table
The most important thing to bring to settlement is you. And you must prove you are who you say you are so bring identification. All buyers must be present or someone who has the power to sign for them. Arrangements must be made in advance if a buyer or seller will not be physically present at settlement.
Next most important is the funds required to settle. This must be in the form of certified funds such as a cashiers check or money order so make arrangements to have this done prior to settlement.
You will also want to bring any documentation you have accumulated along the way from your lender so that any discrepancies can be resolved. Bring a copy of your insurance policy or proof of payment for the policy. It is a good idea to put everything into a file and bring it to settlement.
Post Settlement
The hard part is now over and best part begins. You now get to enjoy your new home. You should have received keys to the home as well as garage door openers, mail box keys and other items that come along with home ownership. If you purchased a home warranty that will now be in effect and you should keep that information readily handy. All the other documents from the settlement should be carefully filed because you will need them in the future.
You will need your settlement statement when tax time comes around because there are costs on the statement that are tax deductible such as taxes and lender points.
You should continue to use your agent as a resource for real estate related items. The good agents have handymen, painters, deck builders, and other contractors in their list of contacts. And your loan officer will be a great resource when it comes time to refinance.
The day has come and it is time to sit down at the settlement table and actually buy your new home. You have been in contact with the settlement company, your agent and your loan officer during the whole process so there should be no unpleasant surprises on this day. But you probably had a few moments of anxiety along the way which is typical for a transaction of this magnitude. But those items were worked out and now you can move forward.
Settlement Statement
The settlement statement is a government document that the settlement company uses to reconcile all the money that changes hands at settlement. It is also called a HUD-1. You should get a chance to review a preliminary copy of this document either the day before a settlement or the morning of settlement. Your agent should also review this. This will show all the costs associated with the transaction including lender fees, taxes, escrows, settlement company charges and broker fees. It will have both the buyers costs as well as the sellers costs. It will also have a final amount that you will be required to bring to settlement.
This is a preliminary statement but it shouldn't be too different from the final as long as the lender has given the title company all their required costs. This number should also be close to the number on the Good Faith Estimate.
Final Walk Through
Either the night before or just before settlement you and your agent should do a final walk through of the house. You want to make sure that everything is still in working order, the house is vacant and cleaned up according to the terms of the contract. You also want to make sure nothing is gone from the house that was suppose to stay such as lighting fixtures or appliances. You want to make sure no damage occurred during the moving process. Any problems need to be address immediately with the sellers. Your agent should handle this with the sellers agent.
Settlement Table
The most important thing to bring to settlement is you. And you must prove you are who you say you are so bring identification. All buyers must be present or someone who has the power to sign for them. Arrangements must be made in advance if a buyer or seller will not be physically present at settlement.
Next most important is the funds required to settle. This must be in the form of certified funds such as a cashiers check or money order so make arrangements to have this done prior to settlement.
You will also want to bring any documentation you have accumulated along the way from your lender so that any discrepancies can be resolved. Bring a copy of your insurance policy or proof of payment for the policy. It is a good idea to put everything into a file and bring it to settlement.
Post Settlement
The hard part is now over and best part begins. You now get to enjoy your new home. You should have received keys to the home as well as garage door openers, mail box keys and other items that come along with home ownership. If you purchased a home warranty that will now be in effect and you should keep that information readily handy. All the other documents from the settlement should be carefully filed because you will need them in the future.
You will need your settlement statement when tax time comes around because there are costs on the statement that are tax deductible such as taxes and lender points.
You should continue to use your agent as a resource for real estate related items. The good agents have handymen, painters, deck builders, and other contractors in their list of contacts. And your loan officer will be a great resource when it comes time to refinance.
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