The homebuying process today is markedly different from what it was even a year ago. So before you head in unprepared and suffer whiplash at the frenetic pace (or wonder why is this mortgage approval taking so long?), it’s essential that you know what to expect.
1. Find a real estate agent
Given the homebuying process can be emotional and even stressful, you’ll want to find the best agent for you. Agents, after all, are not one-size-fits-all; they specialize in certain areas and types of clientele. Some enjoy the rewards of educating first-time homebuyers, whereas others might prefer more experienced buyers at higher price ranges.
2. Get pre-approved for a mortgage
A mortgage pre-approval is a letter from a bank stating up to what amount of money you qualify to borrow. A pre-approval letter shows sellers you’re serious about buying a house and have the cash on hand to follow through.
3. Browse real estate listings
To make sure you’re seeing everything and the most up-to-date listings available, you’ll want to check a site that aggregates multiple-listing service feeds such as Realtor.com. Check the listings daily, and set up online alerts that will inform you of newly listed properties that meet your criteria. Use your agent’s knowledge of the areas you are searching in order to help you set location parameters. Your agent can also set up a search for you, with automated emails sent when a match comes on the market.
A well-connected Realtor like Whit Harvey will know in advance what properties might be coming up soon but are not yet on the multiple list, giving you a head start on the competition.
4. Schedule home tours
Because there is so much demand and such little supply, buyers may have to put in several bids and go through many transactions before actually getting into a contract. So although you might try and fail to get an offer accepted, you can boost your odds of success by being aggressive.
Saw a home online you’re in love with? Don’t wait until the weekend to go see it. Contact your agent immediately, and try to physically visit the property that same day.
5. Make an offer and negotiate
Assuming your finances are in order and you have a pre-approval letter in hand, you should have no problem making a day-of offer when you’ve found a home you love. Though there’s no rule on how long a seller has to accept (or reject) an offer, 24 to 48 hours is what’s commonly practiced.
One way to make your offer more appealing to sellers is offering to put down extra earnest money. Earnest money is a deposit that almost all buyers make to essentially take the home off the market; it typically ranges from 1% to 3% of the home’s value and is held in an escrow account.
6. Schedule a home inspection
A certified inspector will conduct a thorough assessment of the property to see if there are any issues that could cost the buyer money down the road. If there are problems, the buyer can choose to negotiate the price down or ask the seller to have the repairs made as part of the agreement.
Some buyers may consider waiving their home inspection contingency altogether since this removes one hurdle and might entice sellers to accept their offer over others. Still, most real estate agents don’t recommend forgoing the inspection as that comes with sizable risks.
7. Set up the home appraisal
An appraisal is an unbiased determination by a certified appraiser of a home’s current value. This is based on the appraiser visiting the house, then researching factors like structural issues, size, and neighborhood comps.
An appraisal is important because if a home is appraised for less than the asking price, it could affect your lender’s willingness to back the current loan terms.
8. Get your loan approved
Being pre-approved definitely puts you in a good position to get your actual mortgage approved, and it will make this second step much quicker since all of your paperwork has already been submitted (assuming your pre-approval letter is still valid).
What takes time now is the underwriting process. An underwriter will do an extremely in-depth review of your finances and credit, as well as the property details, to verify that everything checks out. If all of your paperwork is together and no major red flags come up, underwriting can take as little as two to three days. But for buyers with more complicated assets or purchases, it can take more than a week.
The best thing buyers can do is to be as responsive as possible to requests that come from the lender or underwriter.
Ta-da! Now you can close the deal!
In the past, you might have to sign all the paperwork in a room with agents, attorneys, and a lender representative present. But now, in many states, closings can happen remotely, which helps save time. So if getting this real estate deal over and done is a high priority, make sure to ask if a remote closing is an option.