The home buying process step by step

Step 1

Pull your free credit reports from Experian, Equifax, and TransUnion.  You can’t buy a home if you have credit problems.  You also can’t buy a home with a loan if you have no credit. This is common with people who were raised by their parents to pay for everything in cash and for young people just get started.  To get the best interest rate, you want to be above a 720 credit score.  It is essential to know what your credit score is because if you are at 690 and paying off a small loan will get you up and over 720 you will want to do that.  If you have a credit score below 620 you will need to do some credit cleanup before you can get a decent home loan.

Step 2

Talk to a lender.  You can start with a lender at your local bank if you want but start here.  You will want to see what loan amount you will qualify for before you seriously start considering buying a home. If you can afford $300,000 and the only things available in your area are condos and fixers in that price range, you need to know that going in.  Especially in Oregon, people looking for large yards and land aren’t going to get much at those lower price points.

Step 3

Interview at least 3 buyer agents before hiring someone.  It is weird sometimes for buyers to think that they are hiring an agent because most of the time, they don’t pay them directly. You are though. Buyer agent fees are wrapped into the price of the home as the seller generally pays that fee.  Buyers indirectly pay those fees through the home price so keep that in mind. Buyer agents are not “free” to you as a buyer.  The money is just paid out of a different column on a spreadsheet.  This person’s expertise, or the lack thereof, will be used in the purchase of a massive financial asset.  This isn’t a toaster from Amazon. Treat this financial investment with some due diligence on who will guide you through the process.

the home buying process

Step 4

Now you should have at least one preapproval letter and your agent picked out.  Get a couple more recommendations for lenders and shop around for lenders.  It is very, very important that you talk to different lenders about your tentative rate on the same day.  Interest rates fluctuate daily.  You can’t compare who might be giving you the best rate if you ask different lenders about your rate on different days.

 

Step 5

Start looking at homes that are within your price point.  This can be a lender-imposed price point or a self-imposed price point.  Your lender will generally approve you for more than you are comfortable spending.  For some of you, the stretch might make sense if you are just getting started and have incomes that are expected to go up over time.  If you are one of those people that go to open houses for fun, I discourage you from doing that while house hunting.

Step 6

Once you find a house, talk about the pros and cons and condition issues with your buyer agent before writing an offer.  Home inspections are expensive and terminating over obvious issues that should be caught on a basic walkthrough is a good way to waste your hard-earned money.  Take those issues into consideration when crafting your offer.  If your agent can’t talk about the pros and cons and conditions with you, go back to step 3.  It is okay to take a step back if you find out that you made the wrong choice.  Don’t just power through it because you don’t want to let someone go and hurt their feelings.  This will likely be the largest financial purchase you will ever make and you will be the one harmed by a bad financial decision.

This step will involve the agent guiding you through crafting an offer, running comparable home sales for you, and the counter offers that will go back and forth between you and the seller.

Once you have an accepted offer on a property ( here in the Salem Oregon area), then this is what you can generally expect from here on out.

Step 7

You or your agent will take your executed offer and get a copy to the title company and to your lender if you are getting a mortgage.  Your lender needs this contract to lock your rate so don’t delay getting it to them.

 

Step 8

Start your loan application paperwork with your lender and get your earnest money check wired into the escrow account or take a check over to escrow to deposit it directly.  The agents will order that an escrow account be opened for your earnest money check to get deposited into and will order a title report.

 

Step 9

Your agent will order home inspections and get those set up.  Your agent can give you a list of names of good inspectors that they use.   You will have the home inspected. If you have concerns that you want the seller to address you will enter into repair negotiations.  You will be providing your lender with any documents they request.

First time home buyer

Step 10

If you are satisfied with the inspections or you and the seller agree on repairs, then the lender will have the appraiser go out to the property.  You will be providing your lender with any documents they request.

 

Step 11

You will receive a copy of the title report for your review.  If you are buying a home in an HOA, then you will have additional documents to review as well. You will be providing your lender with any documents they request. (notice a common theme here).  Any repairs agreed upon will be happening now as well.

 

Step 12

Start hunting for a homeowners insurance policy as you will need a “binder” to get to your lender which is a commitment from an insurance company to insure the property.

 

Step 13

Your loan application, the contract, the insurance binder, and the appraisal all head off to the underwriter for the lender for a final decision about whether or not they are going to lend you the money for the property.  You will get conditional approval and you will be providing your lender with any additional documents they request.  This will be the last request for items they need to close your loan.

 

Step 14

As soon as you have underwriter approval for your loan, you can start calling the local Salem Oregon utility companies to get services switched over.  You will receive your closing disclosure which tells you all of your loan charges and how much money you need to bring in to buy the house.

 

Step 15

The lender sends the documents over to the escrow company to process them and you will receive a preliminary settlement statement to review. This should match your closing disclosure closely.

 

Step 16

You will set up a time to sign the loan documents at the title company and you will either wire in the funds you need to close or you will get a cashiers check and bring it in with you.  The seller of the property will also be signing the deed and a few other documents.

 

Step 17

Generally the day after signing, the lender will review all of the signed documents, wire in the loan funds into escrow and release the funds to the escrow company so they can record the deed transfer to you.

 

home in West Salem

Step 18

The property will be recorded at the county and the home is officially yours.  The seller will receive the money after recording.  Your agent will get you the key to the house by 5:00 PM on the day of recording/closing unless the seller is staying in the home for a few days after closing per your negotiations.

 

Step 19

You have the house re-keyed or change the locks and change your mailing address with the post office.

 

Step 20

You move in and start the long process of unpacking and getting your home organized.

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