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Step by Step Guide
to buying a home
Step 1:
Find the Right Agent
Yes, finding a real estate agent is the very first step. Before you start looking at homes online, before you start saving your money, before everything. It does not matter if you are planning to buy a home next month or next year. The sooner you speak with an agent, the better. They won’t pressure you to buy now, and they won’t get frustrated that you aren’t ready to buy. And if they do, their priorities are out of line and are probably not the best agent for you.
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It is extremely important to find a real estate agent you get along with and trust. One of the biggest mistakes made by buyers is choosing the first real estate agent they come across, whether it is the listing agent on a home you like, or family friend that does real estate. Always interview multiple agents.
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For a list of questions to ask while interviewing agents, check out our Frequently Asked Questions.
Step 2:
Find a Lender
Once you have found the right real estate agent, it is time to find the right lender. The only reason why finding a lender is the second step, is because your real estate agent is a great source for finding a great lender.
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Your lender will look at your credit report and tell you if there is anything that may prevent you from getting a great interest rate or from getting a mortgage at all. Knowing this information in advance gives you time to correct anything. The lender will give you advice on what you can do to increase your credit score. A lot of time it can six months or longer to do so. This is why you don’t want to wait to talk to a lender until it is time to buy.
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The lender will also explain the different loan types, how much down payment you need, tell you how large of a loan you will qualify for, and what a monthly payment will be at certain price points. If you do not qualify for as much as you were hoping, they will give you information on how much money you need to save or how much debt you need to pay off to qualify for the home you had in mind.
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By talking with a lender at the start of the process, it gives you time to get all your ducks in a row, so that when it comes time to buy a home you are ready.
Step 3:
Create a Game Plan
Start looking at homes online that are in the price range the lender said you qualify for. Once you get an idea of the type of home you can buy, start making a needs/wants list. Write down everything you absolutely need in your home, and the things you would like to have, but can live without. Make sure to keep this list realistic. You probably are not going to find a 3,000 sq ft home with a pool and a view for less than $350,000.
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Also, start creating a plan to accomplish the tasks the lender told you to do. If you need to save money for a down payment, decide how much you will save every month. If you need to pay down your debts, create an action plan on how you are going to do that.
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Bonus Tip: If your housing payment is going to increase when you purchase your home, try living with the higher payment before you commit to the mortgage, by putting aside the difference in your current payment and your expected new payment.
Step 4:
Get Pre-Approved
To get pre-approved you will meet again with the lender, and they will look at everything you have done since the last time you spoke. They will ask for additional information from you to verify everything you are telling him. The lender will ask for at least two months of bank statements, the past two pay stubs, and W-2s or 1099. The lender may need other documents depending on the loan type and situation.
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Once the lender has all your paperwork, your loan will be submitted to the underwriter. The underwriter is the one who ultimately gives you the thumbs up. Once the underwriter reviews the file (and everything looks good) you will be issued a Pre-Approval letter and another list of needs they will need before closing to tie up any loose end.
Step 5:
Go Look at Homes
By now you and your real estate should have a good idea of what you are looking for. If you have a pretty generic search and there are a ton of homes for sale that match your search, let your agent know your top 5 or 10 homes. Your agent will make the necessary calls to set up all the showings. If you have a very specific search, there may only be 1 home that matches the search, or even no homes that match the search. In this case, your realtor can set up a property notification search to send you an email as soon as a home matching your search hits the market. And when a home hits the market, you can schedule a time to see it. Or you need to adjust the search because your search may be unrealistic.
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You typically do not want to see more than 5 homes in one day. After you see more than 5 homes, the homes have a way of blurring together. You will forget what home had what, and you will take the best part of each home, combining them into one amazing home that doesn’t exist. Trust me, it happens. To see the 10 homes, you chose as your top 10, it may take multiple days to see them.
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How do you know if you found the right home? Here are two questions to ask yourself:
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Am I comparing every other home I see to this home?
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If someone else buys this home, will I feel like I lost something?
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If you answered yes to both questions, it is time to write an offer.
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Diamondback Difference: This is when we start marketing your buyer needs to find you homes that are off the market, that no one else knows about. Giving you more options to choose from, and less competition. Find out how we find off the market homes for sale click here.
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Step 6:
Submit an Offer
Working with an experienced agent that you trust will make all the difference when writing an offer. Your real estate agent will do a CMA (Competitive Market Analysis) on the property to determine if the home is priced correctly, too high, or too low. Some sellers will price the home high hoping for the best price, while some sellers may intentionally price the home low to create a bidding war to drive the price up. Don’t get too wrapped up on the list price. Our ultimate goal is to get the home under the market value.
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Depending on how the home is priced will make a difference in how you write the offer. We have strategies for all situations from newly overpriced homes, stale overpriced homes, to bidding wars, and off the market properties.
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There is more to the offer besides the price. We can also leverage the terms of the offer to get you a better deal. We breakdown each component of the offer on our Frequently Asked Questions.
Step 7:
Due Diligence & Inspections
Unless stated differently in your offer, you will have 10 days to do all your due diligence (research) and inspections. I recommend at a minimum having a general home inspection ($300-$500), a termite inspection ($25-$75), and a roof inspection (FREE!). I highly, highly recommend attending the general home inspection. At least be there for the end, so you can see everything they found.
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In addition to all the inspections, you will want to research anything that is important to you. Things to research:
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• Deaths on the Property
• Sex Offenders
• Crime Stats
• School Rating
• Future Construction
• Utility Bills
• Internet Speeds
• Zoning Restrictions
• HOA Restrictions
• Home Insurance Quotes.
Step 8:
Negotiate Repairs
Now that you know everything that you wanted to know, it is time to write up the BINSR or Buyer Inspection Notice and Seller Response. It is extremely important to submit the form to the seller before your inspection period is over. If you miss the deadline, you waive your right to ask the seller for repairs, and you lose the ability to cancel over the condition of the property.
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On the BINSR, you have three options:
1) Tell the seller you accept the house as it is, and there is nothing you want the seller to do. This is extremely rare.
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2) Tell the seller that you do not want to buy the house anymore and give a specific reason of something you discovered during the inspection period. If you elect to cancel during the inspection period, your earnest money deposit WILL be returned. But you will be out the cost of the inspections.
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3) Tell the seller you want specific items repaired or replaced. This is the most common situation. If you choose this option, the seller has 5 days to respond. Their response will be that they will fix everything, they will fix nothing, or they will only fix certain items. If they chose not to repair everything, you will have 5 days to accept or reject his response. If you reject his response and cancel, your earnest money WILL be returned.
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In today’s market, it is extremely common for the seller to give the buyer a credit or price reduction instead of agreeing to make the repairs. This is because it will take weeks to get the repair made, and it is often in the best interest of both parties to keep the closing on schedule.
Step 9:
Appraisal
The appraisal is typically ordered once the repair negotiation is completed. And depending on your lender, is paid upfront or as part of your closing costs. The appraisal typically costs between $500 and $700 unless it is rushed.
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The lender orders the appraisal to make sure the home is worth what you are buying it for. The appraisal protects you and the lender. It protects you by making sure you are not paying too much for the home. And it protects the lender by making sure the home is worth enough to cover the amount of money they are loaning you. With a mortgage, the home is being used as collateral. If the lender is loaning you $400,000, they want to know that the house is worth $400,000 to protect them if you stop paying your mortgage.
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If the appraised value comes in lower than the sales price, it is once again time to negotiate. Because the lender will not give you a loan for more than the home appraised for, you either need to come in with more money, negotiate the sales price down, or fight the appraisal if you believe the appraised value is not accurate. Again, this is where working with an experienced agent comes in handy.
Step 10:
Final Walkthrough
This is a very important step, that sometimes gets skipped. Never skip the final walk through. Once you close on the home, whatever condition the home is, it is now your problem.
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The final walk through happens right before closing. This is when you walk through the home one last time. You are making sure that all the repairs that were agreed on were completed, and that you accept the quality of the work performed. You are also making sure that everything else in the home is in the same condition as when you submitted the offer.
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If everything looks good, you sign off on the home. If something is not completed, or the home is not in the same condition as when you submitted the offer, you need to submit a cure notice to the seller. This notice tells the seller that they are in breach of contract and must fix the problem within the next three days, or you have the right to cancel the contract.
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Quick Tip: After the final walkthrough, schedule the utilities to go into your name on the closing date, or the next business day.
Step 11:
Title Appointment
The title appointment is when you go to the title company to sign the legal documents for you to take ownership of the home. The appointment is usually a day or two before the scheduled closing date but can be the morning of the closing date. This is also when you need to pay your closing costs and down payment. You will need to bring a Cashier’s check (unless you wired the funds) and a valid government-issued ID.
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In Arizona, the Title Company (the company that handles the legal ownership side of closing) and the Escrow Company (the company that makes sure everyone pays and receives the money they were promised) are the same company. We often use the words Title company and Escrow Company interchangeably. This is not the case in other states. In some other states, lawyers are required for a home to close. Also, unlike other states, the buyer and seller have separate appointments. It is very common for the seller and buyer to never meet each other.
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The title company will walk you through the legal documents and explain what they mean. The title company will also give you a breakdown of your closing costs; what is being paid and who is paying for them. You and your real estate agent will want to make sure everything in their paperwork matches the contract. Depending on the loan type, this appointment will last 30 minutes to an hour.
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Important Note: Sometimes steps 10 and 11 are flipped. It just depends on everyone’s schedule. If you do the title appointment prior to final walkthrough, rest assured the title company cannot submit the file until you sign off on the home.
Step 12:
Keys!
Once you and the seller have signed all the required documents, you have paid your closing costs and down payment, and the lender has sent over the money from the loan, all the paperwork is then submitted to the county to be recorded. Once everything has been recorded, you are now a homeowner!!
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You will meet your real estate agent at your new home to pick up the house keys, garage door openers, mailbox keys, gate keys, pool keys, etc.
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Important Note: Closing usually happens between 2pm and 5pm. Do not plan to move into the home on the closing day.