Read this basic how-to and find out everything you need to know about the homebuying process to make the best decision possible for yourself and your family.
How Does Homebuying Work?
Buying a home is nothing like making a grocery run. Most shoppers put in a tremendous amount of planning, preparation, touring, and investment when finding the right home at the right time—much more complex than simply picking up dinner ingredients for the week.
Consider, for example, three of the most important factors that buyers often evaluate during the homebuying process:
1. Price: This is a given, but homebuyers should evaluate the amount they can spend on a home before they buy a home. Costs include a monthly mortgage payment, closing costs, interest costs, property taxes, HOA fees, insurance, and more. (Read this handy guide to find out more about home prices.)
2. Space: One of the trickier elements entry-level shoppers experience during the homebuying process is evaluating how much space they’ll need, both now and in the future.
For example, erring on the side of a bigger home may make more sense in the long run, but more square footage typically means higher prices. In five years, a family may expand from two to four. The parents may also receive a few raises and promotions during this period, but these developments are often difficult to predict. (Layout can also play a significant role in impacting a home’s energy efficiency as well.)
3. Location: It’s well beyond cliché by now, but location really is everything. Between school district preferences and property values, plus proximity to work, restaurants, entertainment, and grocery options—and so many other factors—where you reside determines how you’ll work, live, and play.
How Can Homebuyers Find the Right Home for their Situation?
There are near-infinite options within each of the categories mentioned above. Two bedrooms or three. This side of town or that. It’s a wonder anyone can find what they’re looking for in a home search. Yet it happens all the time.
Sometimes, it’s pure luck. Other times, it’s because buyers are working with an excellent sales professional, or they hired a great realtor. Regardless, no matter how people end up in their new home, the search always goes smoother when the buyers understand the most important steps in the homebuying process.
Step-by-Step: The Homebuying Process
While not completely comprehensive, first-time homebuyers should consider the following steps before they begin the homebuying process.
Step 1: Saving for a Down Payment
It’s very common for homebuyers to first save money for a down payment before purchasing a home. And while Zillow says that 20% is the ideal amount for a down payment on a home, this isn’t a hard-and-fast rule.
For example, consider that in 2019, 56% of homebuyers put down less than 20% on their homes. Nerdwallet states that down payment conditions vary by lender and borrower, with some mortgages available after down payments of only 3%. This option makes it easier for more people to afford new homes and furnish these homes with furniture, decorations, and more once they’ve moved in.
In general, the more a buyer pays up front, the lower their monthly payment (and better chance they aren’t required to purchase private mortgage insurance).
Step 2: Get Preapproved for a Loan
Getting preapproved lets everyone involved in the homebuying process know that you mean business. Plus, in hot real estate markets, being preapproved for a loan could mean that you win a bid on a home over another buyer who didn’t make time to get it done.
First, contact a preferred lender to get the process started. Then, determine how much you can afford towards a mortgage loan each month. There are several other steps to the home loan preapproval process, so reach out to First Choice Lending Group to learn more.
Step 3: Find a New Home Expert
Most people need a hand when shopping for homes. By working with an experienced new home expert, such as an onsite sales professional or online new home advisor, first-time home shoppers can locate the right home that matches their needs—and be fully prepared through every step of the process.
Step 4: Search for the Right Home
First-time homebuyers need to consider the different homebuying factors discussed earlier: price, size, and location.
It’s recommended that buyers work with their sales professional or real estate agent to find a region and community that fits exactly what they’re looking for. Other essential factors could include school districts, nearby amenities, proximity to work, and neighborhood makeup.
Some buyers may find their dream home right away while others require more time. That’s okay—patience is key. It’s a home after all, not a loaf of bread.
Step 5: Sign a Purchase Agreement
Once you find the perfect home, it's time to get it under contract! Your sales professional can walk you through the entire contract document so you have a full understanding and are ready for the next steps.
Step 6: Closing
This second-to-last step marks the end of the homebuying process. When a buyer has completed the first six steps and all of the details are squared away, they sign the purchase papers and the house is theirs.
Step 7: Celebrate
You've made it! Purchasing a home requires a lot of time, energy, and attention to detail, but the end reward is so sweet. You deserve to celebrate.
What’s Next in the Homebuying Process?
The above steps will help any first-time buyer get started on their homebuying journey. With that said, the list is meant as a starting point; there are no doubt nittier and grittier details within each step that homebuyers can and should consider during the process.
Remember: The better prepared a person is, the better chance they have at finding exactly what they want and need in a new home.