The home-buying process is alive and well in the US, with slightly over 5.6 million homes sold in 2020 alone. Even so, it’s a major step and the home buying process timeline can run several months. First time home buyers can often feel overwhelmed by all the details and steps involved in purchasing their first home.
If you’re thinking of starting your first time home buying process, keep reading. We’ll break down the five major stages of the process so you’ll have a better idea of what you should expect as you move forward.
1. Financial Prep
First up on the home buying process checklist is financial prep. You should start your prep a year or two in advance of when you’ll want to start a serious home search.
Starting that far in advance lets you improve your credit score. It also lets gives you a chance to put save up enough for a down payment.
You should take this time as an opportunity to figure out what size payment you can afford on a monthly basis. Consider the other costs of homeownership like taxes, HOA fees, and insurance.
Next up on the checklist as you prepare for buying a house is pre-approval for a mortgage. Pre-approval gives you a good idea of what kind of bid you can realistically make, which informs your home search. You’ll need the same kind of paperwork for pre-approval that you’d need for actual approval, such as:
- Proof of income
- Proof of assets
- Employment verification
- Credit score – 620 or higher for most lenders
- Other documents – ID, social security number
Assemble this paperwork in advance to keep the process smooth.
3. Home Selection
This is the fun part of the new home buying process. You search listings in your preferred area, visit the homes, and make an offer. In most cases, you’ll make the offer through a real estate agent.
Once the owner accepts your offer, you must finalize your mortgage. If you got pre-approval, this should happen fairly quickly with minimal changes to the terms. The bank will deposit the money into an escrow account once they approve the mortgage.
In most cases, the money will stay in escrow for about a month while you finalize terms with the owner. For example, you might negotiate about any last-minute repairs. At that point, you sign all of the paperwork, the money changes hands, and you take ownership of your new home.
The Home-Buying Process and You
The home-buying process can often feel like it’s dragging out when you’re ready to buy. If possible, keep in mind that the process happens in stages.
The longest delay typically happens between making an offer and closing. While sometimes frustrating, it happens as a protection for everyone involved. It ensures that the buyer is committed and that there are no surprise problems with the home.
Looking for more information or helpful tips about the home-buying process? Check out some more of the posts over in our Real Estate & Household section.