Buying a Home

by Ilona Bray

Interested in buying a house? Orient yourself to the steps ahead, from researching neighborhoods to closing the deal.

If you've decided to buy a house, you may be wondering where to begin -- find a real estate agent? Go to open houses? You'll have to juggle a number of tasks simultaneously, ranging from the fun to the tedious. The preview below will alert you what's ahead, and link you to other key information.

Step 1: Decide Which Neighborhood You're Interested In

If you're already committed to a certain geographical area, and know you can afford it, jump down to the next step. However, if you're moving to a different state, or you have an inkling that your ideal neighborhood might be out of your financial reach, see Nolo's article: How to Research New Communities or Neighborhoods.

Step 2: Begin Looking at Houses

Even before you're ready to choose a house, visiting open houses is a great way to get to know your local market. Visit a wide range of houses, paying attention to the numbers of bedrooms and bathrooms, special features, and overall charm. If the seller has made pest or other inspection reports available, read them carefully, paying particular attention to the estimated cost of repairs. Ask the agent how many offers are expected on the house (multiple bidders can drive up the list price, and vice versa).

When you're ready to get serious about choosing and making an offer on a house, see Nolo's article Beginning Your Home Search.

Step 3: Assemble Your Team of Professionals

Most people prefer to work with a real estate agent or a lawyer at some point in the process. (In fact, in a handful of U.S. states, a lawyer must be hired to help finalize the sale.) A mortgage broker can also be of great help in finding the right home loan.

Experienced, responsible professionals can save you time, money, and aggravation. By the same token, incompetent or unethical ones can mess matters up badly. Take the time to get referrals from friends, and meet with a few prospects before you hire anyone.

For more on whether and how to get outside help, see Nolo's article: Should I Hire a Real Estate Agent or Lawyer to Buy a House?

Step 4: Figure Out How You'll Pay for the House

Despite recent dips in the real estate market, the price of a house relative to the average U.S. income remains high. So unless you're a statistical outlier, you'll probably have to save, scrounge, and borrow in order to afford your house.

There are two parts of the purchase that you'll need to prepare for: your down payment and your mortgage. If you can make a down payment of 20% or more of the purchase price, you'll have an easier time qualifying for a loan and avoid payingprivate mortgage insurance (PMI). For ideas on where to draw your down payment money from, see Nolo's article Finding Your Down Payment.

You'll need to think about what you can afford to pay each month and how much uncertainty you're comfortable with when choosing a mortgage. The two main choices include fixed rate and adjustable rate ones.

Step 5: Offering to Buy the House You Want

Here's where you lay your cards on the table, and present the seller with a written offer to buy the house. (Most states have standard contract forms that you or your real estate agent can use for this purpose.) The standard offer form will usually require you to state your proposed purchase price, where you expect to obtain financing, what conditions or "contingencies" you're attaching to the offer, how quickly you're willing to close the deal, and more.

For more on how to craft a solid offer and negotiate toward a purchase contract, see Nolo's article: Making an Offer on a House.

Step 6: Dealing With the House's Physical Condition

Whether new or old, no house is in perfect condition. An important part of the homebuying process is finding out about the house’s condition from the seller, investigating its condition on your own, and protecting yourself against problems that will arise in the future.

Many states' laws require sellers to tell you about many or most problems that they know of concerning the house -- issues like leaks, termites, a faulty foundation, past water or fire damage, and more. See Nolo's article: Required Disclosures When Selling Real Estate for advice to sellers on this topic.

No matter how informative your seller seems to be, you'll still want to have your own inspections done by at least one experienced professional -- and for the sale to be contingent upon your approving the results. See Nolo's article: Get a House Inspection Before Buying for details on the hows and whys of this step.

Neither the seller nor the inspector can know everything about the house, however. Problems could be lurking that they can't see, and new problems -- or disasters -- could arise later. For these, you'll need to buy homeowners' insurance. For more detailed advice, check out Nolo's article{C}: Homeowners' Insurance: What You Need to Know.

Step 7: Closing the Deal

Events start moving very quickly toward the end of the house-buying process. Your purchase contract will normally contain a "closing date," and all your activities will be geared toward wrapping things up by then. You'll need to finalize your financing, review the home inspection and other reports, probably have the house appraised (most lenders require this), get title insurance, and more.

Stay focused on the big picture. Little issues will come up that need negotiating -- for example, the inspection report may show a minor needed repair, which you'd like the seller to pay for. If the seller refuses, he or she risks your calling off the deal. But if you play hardball, you may lose the house over a few hundred dollars.

On the closing day, you may not even meet with the seller in person, but you will need to go to your attorney's office to sign the final documents. Then the house is yours!

So, that's the quick preview. But to be a savvy seller, you'll want to learn a lot more, and avoid the mistakes that others make. For comprehensive yet fun-to-read advice, see Nolo's Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart.

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