Before beginning the home buying process, you’ll need to make sure that you’re prepared financially. Ask yourself the following questions – 1) Do I have enough money for a down payment? 2) Am I prepared for added costs such as repairs, annual taxes, and utilities? 3) Is my debt-to-income ratio less than 45%? If the answer to all three questions is yes, you’re probably in good shape to begin the home buying process. Below is a step-by-step guide to purchasing your first home:
- Find a reputable real estate agent
One of the most important steps when preparing to purchase a home is to find a reputable real estate agent. You can do research on your own by reading reviews on agents in your area, or you can ask friends and family members for their recommendations. A knowledgeable agent will be able to help you find a house that meets your needs and support you throughout the home buying process.
- Begin shopping for a home loan
Unless you’re going to be making a cash purchase, you’ll need a home loan. Securing a loan before going out shopping is in your best interest as it will give you a better idea of how much house you can afford and make your offer stronger when it comes time to write one. You can find a lender and compare mortgage rates on your own or ask the real estate agent that you’ll be working with for their suggestions. Once you find the right lender, they will advise you on what type of home loan works best for you and how to apply for a home loan.
- Find a home
Now comes the fun part – shopping for your first home! Give your real estate agent the parameters for your home search and they’ll be able to set you up on a listing alert so that each time a home that meets your specific needs hits the market you’ll be notified. When you find a house that appeals to you, ask your agent to set up a showing. Tip: Look for a house that you can add value to overtime to increase your equity.
- Write an offer
Once you find a home that you love, it’s time to write an offer. Your agent will work with you to create an offer that meets your needs and negotiate terms with the listing agent that both you and the seller are happy with.
- Deposit earnest money & schedule a home inspection
Once your offer gets accepted, you’ll deposit the earnest money with your closing agent. The earnest money is a good faith deposit on the property that you’re looking to buy. If you’re getting a home inspection, you’ll also want to schedule it during this time. The average cost of a home inspection in Washington state is between $250 and $400. A sewer scope will generally cost $250-$500. This may seem like a lot of money to fork over, but it could save you thousands of dollars in the long run. A home inspector will look for any hidden problems including mold, termites, cracks in the foundation, etc. When performing a sewer scope, the inspector will look for damages to the pipe, blockages, and other sewer line issues.
- Escrow & Appraisal
After the home inspection is over and terms have been negotiated with the seller, there will be a few weeks of waiting while your lender schedules an appraisal of the home, and your escrow closers make sure that all the legal documents and funds are properly prepared before you close. The escrow process typically takes between three and five weeks. An appraisal is the process where a licensed appraiser conducts a thorough inspection of the property to determine its market value. Your lender wants to make sure that you’re not paying more than the home is worth before issuing a home loan for the amount agreed upon between the buyer and seller. If the appraisal comes in below market value, your agent can help you negotiate a new price with the seller or you can choose to walk away from the sale with no repercussions.
- Closing Day
If all goes well with the escrow and appraisal process, you will arrive at closing day. This will happen once the buyer and seller have signed all their legal paperwork. On closing day, the escrow agent transfers funds from escrow and updates the deed of the house to your name. This is when the ownership of the property is transferred to you, the buyer! Unless the date of possession differs from the date of closing, you will generally receive the keys to your new home on closing day. In Washington state, you are entitled to receive your keys by 9pm on the date of possession, however, an earlier time is often agreed upon between the listing and selling agents.