Every state requires slightly different steps to buying a home, although they are basically very similar. Since I am most familiar with the way California does it, here is the path to home ownership in California, broken down into simple steps:
1) Hire a Buyer’s Agent
- A buyer’s agent will represent only you and have a fiduciary responsibility to look out for your best interests.
- Buyer’s agents may ask you to sign a buyer’s broker agreement, but it is the seller who pays the commission.
- Interview agents until you find an agent you trust and with whom you feel comfortable.
- Once you have settled on an area, try to hire a neighborhood specialist.
2) Get PreQualified / Preapproved
- Order a free credit report online and fix mistakes, if any.
- Ask your agent for a referral to a mortgage broker, but also compare rates offered by your own bank and / or credit union.
- Ask the lender to give you a loan preapproval letter, which means it will verify your income and pull a credit report.
- Determine your maximum loan amount, but choose only a mortgage type that you understand and a payment level with which you feel comfortable, which may very well be less than the maximum for which you are approved.
3) Look at Homes for Sale
- Ask your agent to look at homes for you before showing them to you.
- Narrow your search to those homes that fit your exact parameters to find that perfect home.
- Ask your agent to give you MLS print-outs of comparable sales in your targeted neighborhood.
- Consider all homes on the market, including fixer-uppers, REOs, foreclosures, short sales and those overpriced homes with longer DOM.
- Observe open house etiquette.
- Tell your agent which online home listings you are interested in previewing and ask for additional input.
4) Write a Purchase Offer
- Consider writing seller’s market offers in sellers markets and buyer’s market offers in buyer’s markets.
- Select a home offer price based on the amount you feel a seller will accept or counter.
- If you are considering a lowball offer, ask your agent to substantiate this price for you.
- Prepare for multiple offers if the home is considered desirable in a hot location.
- If your offer is rejected, ask your agent to explain why and don’t repeat that mistake with your next offer.
5) Negotiate and Write Counter Offers
- Expect the seller to issue a counter offer.
- If the seller counters at full price, continue to negotiate.
- During offer negotiation, share personal information about your family to give the seller a reason to care about you.
6) Make an Earnest Money Deposit
- When your offer is accepted, deposit your earnest money check with the appropriate party.
- Do not ever make your check payable to the seller.
- Your offer should contain contingencies that will return your earnest money deposit to you if you cancel the contract.
7) Open Escrow / Order Title
- Your agent or transaction coordinator will open escrow and title, if the listing agent hasn’t already done so.
- Ask for the escrow officer’s name, phone and escrow file number.
- Give this information to your lender and your insurance agent.
8) Order Appraisal
- Your lender will require an advance payment for the appraisal.
- If you receive a low appraisal, discuss options with your agent.
- Ask for a copy of the appraisal.
9) Comply With Lender Requirements
- Lenders may ask for additional information.
- Do not make home buying mistakes such as altering your financial situation while in escrow.
- When the file is complete, the lender will submit it for final underwriter approval.
10) Approve Seller Disclosures
- Read and question items you do not understand on the TDS, Seller Property Questionnaire, natural hazard report, pest inspection / completion and other documents such as a preliminary title policy.
- Realize you have 10 days to cancel if lead paint is a health hazard.
- Read every document in its entirety; ask questions about all seller disclosures.
11) Order Homeowner’s Insurance Policy
- Order your homeowner’s insurance early.
- Sometimes previous claims by a home owner can make it difficult to get insurance.
- Get replacement coverage.
12) Conduct Home Inspection
- Hire a reputable home inspector.
- Bring a home inspection checklist with you.
- Attend the home inspection.
13) Issue Request for Repair
- If the home inspection turns up health and safety issues, issue a request for repair by asking the seller to address those issues or give you a credit for them.
- Realize no home is perfect, and the inspector will find faults.
- Be reasonable.
14) Remove Contingencies
- By default, California C.A.R. contracts give you 17 days to remove contingencies.
- Make sure your loan is firm and the appraisal is acceptable before removing your loan contingency.
- If you do not remove contingencies, the seller can issue a request to perform and then cancel the contract, on top of demanding your deposit.
15) Do Final Walk-Through
- Do not pass up doing a final walk-through.
- Inspect the property to make sure it’s in the same condition as when you agreed to buy it.
- If you find a serious issue, address it now before you close.
16) Sign Loan / Escrow Documents
- In southern California, you will sign escrow documents shortly after opening escrow.
- In northern California, you will sign escrow documents along with your loan documentsnear closing.
- Bring a valid picture ID.
17) Deposit Funds
- Bring a certified check payable to escrow.
- Expect escrow to pad the amount, so you will receive a refund after closing.
- Consider asking your bank to wire the funds to escrow, saving you the hassle of waiting in line at the bank.
18) Close Escrow
- Your property deed, seller’s reconveyance and deed of trust will record in the public records.
- Title will notify you and your agent when it records.
- After recordation, unless your contract specifies otherwise, the property is yours — change the locks immediately.