How to Buy a House
Buying a house is one of the most fun and exciting things, especially when you’re doing it for the first time. Many first time homebuyers have a less-than-stellar experience and we would hate for that to happen to you so we’re putting together this guide to help you understand all of the moving parts. Heading into this major purchase with the right expectations and information can save you from the heartbreak of missing out on your dream home or buying more house than you can afford. If you’ve got questions right away, shoot us an email or text or call us today to set up an info session. We are always happy to grab a cup of coffee to discuss this process anytime.
First things first: Talk to the bank.
You’ve got to find out if you can get a mortgage and figure out how much you want to spend. Talking to the bank is probably the most important step. With our crazy hot market right now, houses sell quickly and if you haven’t gotten preapproved and the perfect house comes around, you’ll probably miss out on it, which is a total bummer. The right loan officer (your main point of contact with the bank while you’re getting your mortgage) can make or break your deal. While the type of mortgages you can get and the interest rates available to you might not vary much from bank to bank, the person guiding you through the process DEFINITELY does. You’re looking for someone who gets back to you right away, returns calls and emails quickly, doesn’t talk down to you or over you and doesn’t blur through the details. Talk to a few different loan officers and banks before you get started, or better yet, get recommendations from your agent or a trusted friend or family member who has recently done a mortgage. The best loan officers can talk you through the numbers so you understand all of the different costs associated with buying a house. After you’ve been preapproved, they can also get you numbers (monthly payment and down payment info) on a particular house quickly (sometimes while you’re still standing in the house!) to help you decide if it’s the right one for you.
What to expect at the bank.
Most banks have a quick online application. You’ll answer some basic questions about income and expenses, provide tax returns and bank statements to the loan officer and in most cases be issued a preapproval letter within an hour or less. Your loan officer might ask if you have any properties in mind so they can work up some sample numbers to help give you an idea of what that house would cost for you. A quick note about financing: once you’ve been pre-approved for the mortgage, make sure you don’t make any other major purchases, quit your job, apply for new credit cards, open or close any accounts, etc. If you need to do anything like this, be sure to check in with you loan officer first to see how it will affect your eligibility.
Now to the fun part!
With your preapproval in hand, it’s safe to start shopping! Most people start browsing online on websites like Zillow or Realtor.com. These sites are great, but don’t always have the most current info (in many cases the properties are sold or under contract even though they appear to be for sale.) We will set you up on an autosearch that comes directly from our MLS, meaning you won’t be emailed any properties that aren’t actively for sale. We like to use the most generic criteria possible (ex. Townhouse, condo, or single family home, 2+ bedrooms 2+ bathrooms, 2+ garage stalls and a bigger area on the map then you asked for). This will give you the most listings to browse and while that can be overwhelming, it will also ensure you don’t miss out on something that might be a perfect fit. Since our MLS data is populated by humans, it happens a lot that, for example, someone forgets to check a box and a house that has 3 bedrooms on one level, doesn’t show up when we search for that criteria. We’ll only limit your search by the basics and the deal breakers, so if you tell us you’re looking for an amazing kitchen, we will know that we need to sort through listings manually to determine how amazing the kitchen actually is. As you see some houses and determine more specifically what you’re looking for, we will narrow down this search. Of course, if you find something on another site, you can always send us the info and we will find out if it’s still available for you!
For most people, when it comes to buying a house, this is the best part. Especially in the beginning, it’s fun to see what’s out there and get a feel for what kind of house you’re going to purchase. When you’re first getting started, it’s great to see several houses at once. You’ll be amazed at how different houses look in person vs. in pictures online. If we had a nickel for every time someone told us a particular property is ‘the one’ from the pictures, only to be heavily disappointed as soon as they step into the actual house, we would have a TON of nickels. We like to take you out to see 4-6 houses on our first few showing excursions. This will give you a good idea of what kind of house your money will buy, how different floor plans and total finished square footages feel, and what a variety of neighborhoods are like. While most buyers can find something they like after seeing about 10-20 houses, market conditions, challenging or very specific criteria, and budgets can sometimes make finding the right one (and getting it under contract) a challenge. Not to worry, we are happy to show you as many houses as it takes to find you the perfect place. We believe there is a property for every budget and we’ll never pressure you to settle on something that isn’t the right fit for you!
Is the price right?
This is the big question: how do you know if the house is priced appropriately for the area and it’s condition? While we’d love to tell you that real estate agents are super great at pricing houses and the list price is always right or fair, the fact of the matter is that we always need to do our own research to determine the fair market value of a house. Fortunately, we’ve got some great technology to be able to give you a quick idea while we are standing in the house, and some even better technology to get you all the info once we get back to our computers. We’ll examine sales in the neighborhood from the past six months or so to find similar houses that have sold. Based on this info, we can determine if the house you’re interested in is worth the asking price, and what a good offer strategy might be. There are many factors that influence price. For example, market activity, the condition of the house, seller motivation, location, and proximity to amenities or a busy road all play a role in how a house is priced. We can also share some general market stats, and ones specific to the area in which you’re looking. How long do houses usually take to sell in a particular area? What percent of the original list price did they sell for? What is the median sales price for a neighborhood? And more! It’s really cool to have this kind of data to play with and it will help you make a more educated purchasing decision. Here’s an example from the whole Twin Cities area.
Making an offer.
You’ve been pre-approved, we’ve found a great place, we’ve done our research, we’ve got our strategy figured out…it’s time to make an offer. Sometimes you have time to think it over and see the house for a second time before doing it, but sometimes we don’t have much time to get all of this done, especially if it’s a new listing and a multiple offer situation. In any case, we need to write up your offer if you want to have a chance at purchasing the house. We can certainly do this in person and on paper, but most of the time we will do this entire signing online with digital forms and signatures. We will discuss each and every document to make sure you understand what you’re signing and to double check we’ve included the correct terms in your offer. After you’ve signed the offer, we will submit it to the listing agent for them to review with their seller. Now we wait. Impatiently. This is the hardest part. While most sellers respond relatively quickly (within 24 hours or so) it may take longer than that. The seller can accept, decline, or counter your offer so most often we enter into a negotiation at this time. We will go back and forth until all parties are in agreement, and then (if all goes well!) the sellers will sign your deal! If not, our search continues and we will find you another great house! A sidenote on celebrating small wins: We know this is an exciting time. We know you LOVE this house. We know you can’t wait to move in and make it your own. But, we also know that heartbreak happens a lot during this time. We recommend the series-of-mini-dance-parties technique. Save that bottle of champagne for after you close, but get up and dance a little jig when your offer is accepted!
After your offer is accepted you’ve still got some work to do. We need to send your earnest money (sort of like collateral, real estate people like to call it ‘skin in the game’) to the listing broker. This is typically done via our secure online transfer system and is usually about 1% of the purchase price or more. You’ve got to schedule your home inspection, and we’ll send you the contact info of our favorite home inspector. You’ll want your inspection to be scheduled and completed ASAP in case you need to renegotiate your purchase agreement, which you have the right to do for the amount of time specified in your contract (typically 7-10 days). During this time, you can have as many inspections as you feel necessary (for example, your home inspector recommends having a plumber look at the kitchen sink or an HVAC person inspect the furnace…). Once you’re satisfied with the results of the inspection and any renegotiations have been agreed upon, you will lift your inspection contingency. Mini dance party! We send your purchase agreement over to your bank so they can get started on your mortgage. Please stay in contact with your loan officer and get them everything they need so we can keep you on track to close. Once your home inspection is complete, the bank will order an appraisal. This is how the bank ensures the house you’re buying (and they’re lending on) is worth what you have agreed to pay for it and in a condition they are willing to lend on. The appraisal is done by a neutral third party and a report is sent back to the bank for review. If the appraisal comes in below list price or with work orders, we will renegotiate your deal with the seller. If the appraisal comes in at or above the purchase price, we move forward towards closing. Mini dance party!
Our title company will begin working on your file. The title company does research to ensure that when you close on this property you take title, free and clear of any others being able to come to you stating they have ownership interest in the property and asking for a payout. The title company will have some paperwork for you to get started. Please get them what they need so they can move forward on their end, and let them know your availability for closing. They will schedule your closing on or before the date specified in the purchase agreement. Title is something you have the right to shop for, so if you have a favorite title company you’re welcome to use them. We LOVE working with Title Smart (and they don’t pay us to say that!). They do a great job for us every time and have saved the day on several occasions. Final walkthru! We are getting close to your closing day! We will do a walkthru a day or so before closing to make sure that the seller has successfully moved out and not damaged the property or taken anything they shouldn’t have before closing. This is usually a pretty fun day, many buyers take measurements for furniture, bring paint samples to get an idea of what colors they might paint, or bring friends/family over for the first time. By this time you should have your final numbers from the bank and instructions from the title company about how to get your downpayment to them (wire or cashiers check). Make sure you’ve got everything ready for closing day. Mini dance party! Closing day! The day has finally arrived! It’s time to have that BIG DANCE PARTY! You’ll come to closing and sign a bunch of papers. Then you’ll get keys and garage door openers and the house is officially YOURS!
Congratulations on buying your first house!
Whew! We made it! That’s a ton of info but if you made it all the way to the bottom of this post you are certainly prepared to buy a house. It’s time for you to get started. Give us a call/text or contact us today to get moving. We can’t wait to help you find your first place.
© Copyright 2017, Brick & Banister Real Estate Co.
Properties are provided courtesy of the Regional MLS of Minnesota, Inc., Broker Reciprocity Database.
Information Deemed Reliable But Not Guaranteed. ©2018 Regional Multiple Listing Service of Minnesota, inc. All rights reserved.