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Breakdown of the Home Buying Process

Feb 13, 2018 - Posted by: Rocky Mountain Credit Union

Buying a home can be an exciting experience, but it can also be intimidating. If this is your first time buying a home, there are a few things you probably don’t know but should. You can alleviate the anxiety of buying a home by learning about the process. Here's what you need to know.

Know Your Credit Score

One of the most important things to know before you even start looking for a house is exactly what your credit score is and what is on your credit report. To determine how much your loan will be lenders look at your credit score.

If your score is good, you can borrow more money, but a bad credit score means you may not get approved at all. Knowing what your score is beforehand will make it easier to fix so that when you do start looking for a home, you can borrow as much as you need.

Get Pre-Approved

Pre-approval tells you what homes are in your price range. It also shows your real estate agent that you are a serious buyer because you had taken the time to go through the vetting process with your lender and have an interest rate and loan amount locked in before you started shopping.

Be sure to work with a loan officer that you like and trust. Buying a home is a major life event, and should not be undertaken with someone you dislike. You’ll also be working with this person for some time, so choose someone you work with well.

Make an Offer

Once you have been preapproved, you can start shopping for your home. This will take time, so don’t rush the process. Choose a home you know is the right for you. If there is any doubt that it is the right home for you, keep looking.

After you choose a home, check to make sure that the information provided by the seller about the home is the same as what is available on public record to make sure there haven’t been any additions to the home that were done without a permit. It also verifies that the seller is honest.

When you have done your homework, make an offer. The type of home-buying market will determine what your offer should be. For example, if you’re purchasing in a seller’s market, your offer will need to be more than the asking price.

If it’s a buyer’s market, you can get away with offering less than what the seller is asking. Your real estate agent will be able to help you create an offer. Be sure you are comfortable with the price; don’t make an offer that you can’t afford or one that you don’t think the house is worth.

Earnest Money

Earnest money is essentially a deposit that shows the seller you’re serious about the purchase and helps solidify your offer. It is typically put into an escrow account and will help fund your down payment. If your offer is accepted and your transaction makes it to closing day, the earnest money will also help with closing costs.

Home Inspection and Appraisal

Once your offer has been accepted, you should have the home inspected by a certified inspector, which is paid for by you the buyer. The inspector should be certified by the National Associations of Certified Home Inspectors (NACHI), the American Society of Home Inspectors (ASHI) or the National Association of Home Inspectors (NAHI). If your inspector finds any problems with the home, you’ll want to renegotiate your offer to accommodate any repairs that made need to be made.

Before your purchase is finalized, your lender will want to have the home appraised. The appraisal is based on the home’s structural condition, location, and sales of comparable homes.

The Closing

When the closing day finally arrives, there are a few things you’ll need to do:

  • Purchase an insurance policy for your new home
  • Have the utilities moved to the new address
  • Do a final walkthrough of the home
  • Take care of any issues found during the final walkthrough

You’ll also pay the closing costs. This includes attorney’s fees, appraisal costs, application fees, lender’s policy title insurance and other fees. These costs typically total about two to five percent of the purchase price of the home.

At closing, you’ll receive the title of your home from the seller and sign quite a bit of paperwork. You’ll also receive a receipt for the sale, also called a settlement statement, from the Department of Housing and Urban Development.

Buying a home should be an exciting experience, not a stressful one. Be sure to work with a realtor and loan officer you trust, and don’t be afraid to ask questions. Most importantly, don’t rush the process. To get all the details on buying a home check out our guide to "Everything You Need to Know About the Home Buying Process (and Then Some)".

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