A home is often the most expensive purchase someone makes in their lifetime. The home-buying process can involve a lot of steps and a lot of confusing terms. Before you jump in with both feet, it’s important to know what to expect.
You might already be scouring internet listings and turning your head every time you see a “For Sale” sign, but before you get too far into your search, you should get pre-approved. You can apply and start the pre-approval process at any eCO branch. A pre-approval is an offer by a lender to loan you a certain amount of money under specific terms. The terms can include mortgage product, rate, and a set time frame. A pre-approval allows you to shop with confidence and can prevent you from falling in love with a home that doesn’t fit in your budget.
Now that you know how much you can afford, it’s time for the fun part… finding your dream home. First, you should choose if you would like to work with a realtor or not. Realtors can serve as an expert and consultant. When purchasing home, you can typically negotiate realtors’ fees to be paid by the seller of the home.
There are many things you should consider when shopping for a home. A few things you should research are:
- Physical Attributes
- Growth Potential
Once you find a house you love, it’s time to make an offer.
Offer & Counter Offer(s)
If you’re working with a realtor, they’ll typically handle the process of submitting your offer and presenting you with any counter offers. Your offer will include sales price, terms (like who is paying closing costs), contingencies (like inspection and appraisal), timeline, and a target date for closing. Many also include earnest money when making an offer. Earnest money, generally between 1 and 5% of the home’s purchase price, is money you put down in a good faith gesture to show you’re serious about buying a house. If everything moves forward with your house, the earnest money is typically folded into your closing costs.
It’s not unusual for a buyer and seller to go back and forth a few times before settling on price and terms for the sale of the home.
Once you reach an agreement, it’s time to sign the official contract. From contract to closing typically takes between 30-60 days. Go ahead and let eCO or your mortgage company know you’re under contract so they can begin processing your mortgage and provide you a loan estimate. The loan estimate will include a breakdown of what you should expect to pay on closing day.
After you’re officially under contract, you’ll want to schedule a home inspection. The home inspection includes evaluation of structural elements, electrical features, plumbing, and heating and cooling systems; it can help you avoid any surprises. You, the buyer, pay for the home inspection, and it typically costs between $200-600. When the inspection is complete, the home inspector will provide a written report that details any issues with the home.
Using the home inspection, you can ask the seller to make any repairs you deem necessary before purchasing the home. You will want to be as detailed as possible about any updates that need to be made. If the inspection reveals any major issues or the seller refuses to make the requested repairs, you can typically back out of the contract with no financial penalties.
An appraisal is an objective look at a property to determine how much it’s worth. A licensed professional will calculate the value of the property based on age, location, and square footage. If you are financing your home, the appraisal will typically be ordered by your lender, but you will pay for it. Appraisals typically cost between $250-600; the cost can often be wrapped into closing costs.
The lender will use the appraisal report to make sure they are not loaning you more than the home is worth.
A property survey is a document that shows your property lines, including any land, structures, and features you legally own. A survey is typically not required when purchasing a home, but it can be a good idea to have one completed to see clear property lines. If you wish to complete a survey, you will pay for it.
Don’t forget to apply for home insurance. It’s always a good idea to shop around to be sure you’re getting the best price and coverage. Your lender will want you to have insurance squared away before closing day.
Typically, a buyer will get to do a final walk-through before closing. You’ll want to do this as close to the actual closing as possible. If you’re working with a realtor, they’ll help you set up your walk through. At this time, you’ll want to be sure no serious damage has occurred and all requested repairs have been completed. Go ahead and test appliances, fixtures, windows, doors, and toilets too.
Phew! We’ve finally made it to closing day. Closing day is the day you become the legal owner of your new home—FINALLY! The closing date is typically set back in the contract step, but it can be changed due to hold ups in the process.
At the closing, you’ll pay any remaining closing costs, and you will sign a settlement statement, mortgage note, and mortgage or deed of trust. Go ahead and practice your signature leading up to closing day because you’ll be signing your name A LOT.
Not overwhelmed yet? Ready to buy your first home? eCO is here to help. With a variety of mortgage products, we can make owning your dream home a reality. We also have friendly, local service and will help you navigate the steps to purchasing your home. Learn more.