I'm sure you read "Home Buying Part 1: Prepare Finances Before Buying Your First House," right? Now that you're preapproved for a loan, you can start the fun part of the home-buying process: looking for a home. If you haven't gotten preapproved for a home loan, the people at your credit union can help you with this process.
Now, let's break down the process of actually purchasing your first house, from identifying what kind of home you need and want to the closing.
decide what you want
Make a list of criteria that you'd like to have in your new home and things you must have in a spreadsheet or even a basic list. Assign a weight to each item, depending on how important it is to you (for example, having two bathrooms might be essential, so you'll weigh that as a 10, while a bright and cheery home might just be nice, so rank that an eight). This evaluation structure will help you objectively rank and compare homes that you like, and will help you get the things you really want and need in a house. When comparing several properties, add up the weighted values for each criterion you identified to come up with a final score.
Start browsing on local realty sites or Zillow to see what's available in your price range—the figure you developed with a credit union loan officer in your prequalifying phase. Don't look at anything that's more than 10% above your upper limit; that will set your expectations too high.
Find a good real estate agent. Ask friends and family for personal recommendations. Interview potential agents—you'll spend a lot of time together, so make sure your personalities mesh. You should feel confident your real estate agent is looking out for your best interest and won't try and talk you into a house you can't afford in order to make a high commission. Tracy Jean Ashfield, president of Ashfield & Associates Real Estate Consulting Firm, Madison, Wis., recommends you find an agent experienced with the type of property you want to buy (for example, a townhome, condo, or single family home) and the location you're looking at. Also note that the real estate agent is working for the seller unless you have a contract between yourself as the buyer and the agent.
Try your credit union first when shopping for a mortgage—you'll likely find that it offers better terms than you'll find elsewhere. Meet face to face with your real estate agent, and bring your trusty spreadsheet or whatever simpler form you decide to draw up. Discuss your price range, requirements, and wants. If you have specific ideas about location or what type of property you want, let the agent know. The more information you provide up front, the more tailored your listings will be.
Your real estate agent will pull together a group of listings for you to review. If you aren't familiar with some of the neighborhoods, walk or drive in the area—at different times of the day—to get a feel for them. Then, select up to five properties you're interested in viewing for your first showing. Trust me, any more than five and your head will be spinning when you're done; this is why you need some kind of cheat sheet for each address, either the elaborate spreadsheet here or some simpler list to help you capture details. Ask your agent to print an extra copy of the MLS listing (detailed home listing plus pictures) to take notes on. MLS stands for multiple listing service. It's basically a database for all houses for sale in your area. Each property is assigned an MLS number, which is another way to identify the property in this huge database.
On your first showing, take time to go through the entire house, whether or not you're interested in buying it. This gives you the opportunity to refine your criteria and will help you get a better idea of what you're looking for. Be diligent about taking honest notes about each property, and be sure to note a few identifying features in the house to help remind you of the details (for example, a lime green bathroom). "Take pictures on your phone if you can," recommends Ashfield. Using technology can help you differentiate properties.
If you like any of the properties you visit in your first trip, enter the property and details into your spreadsheet or simple list and rank the home accordingly.
Visit another round of properties. The more you visit, the faster you'll know what you like and don't like.
Once you decide on a property (or several) that you really like, schedule a subsequent showing and bring along a friend or family member who can provide an objective opinion about the house.
make an offer
When you decide to make an offer, meet with your real estate agent to fill out the purchase agreement. Your agent will walk you through this process. Remember to only put in an offer that you're comfortable paying. You'll need to have an earnest money check at this point to show the seller you're serious. Usually about 1% of the purchase price is sufficient, but your real estate agent will help you make that decision. "There's a lot more to an offer than price," advises Ashfield. "Knowing what's important to the seller can give you negotiating power. For example, if a seller doesn't want to close until her kids are out of school, she might be willing to lower the price if you can meet that request."
Wait for a response. You can hear each second on the clock ticking. It's exciting and nerve-racking at the same time.
Use a home-buying wish list.
Lower homeowners insurance costs.If the seller accepts your offer, congratulations! Usually it's not that simple, and the seller will come back with a counteroffer. Decide if the counter is amenable to you. You always can counter the counteroffer. Just because you put in an offer does not obligate you to buy the home, but at this point you should be pretty certain that this is the house you want. If you back out after submitting it, you'll most likely lose the earnest money you put down.
Agree on terms. Sign the final counteroffer purchase agreement (if applicable) and ensure that it makes the sale dependent on a satisfactory inspection by a professional home inspector—not your handy Uncle Herb. Schedule the inspection as soon as possible. Depending on the inspection outcome, work with your real estate agent to write a list of things the seller must complete before you purchase the home.
finalize your financing
Shop around to find the best mortgage rate—even a few hundredths of a percentage on your loan rate can affect how much you pay during the life of the loan. You most likely already have compared rates and know where you'd like to get mortgage financing, and if you're already preapproved then this step is almost done. To shop around, you'll need to know your credit score, the amount you're willing to put down, and the type and duration of the loan you want—for example, a fixed- or adjustable rate mortgage. Try your credit union first: You'll likely find that it offers better terms overall than you'll find elsewhere. For example, rates may be comparable among lenders but the credit union might offer better application and closing fees, all important when you're counting every dollar of the transaction.
Meet with a loan officer to determine mortgage details. Look at many options, and have him or her run numbers with different loan terms (for example, 15 or 30 years) or a different percent down.
Work with a loan processor to provide additional information. You'll need to find and pay for your first year's homeowners insurance at this time. Get your down payment in order—the people at the title company will tell you how they require payment. You might not be able to use a personal check, for example, and instead must bring a cashier's check or money order.
Prepare for the closing. Bring copies of all your documents in case you need something. If you're buying the house by yourself, it's nice to bring a friend or relative for moral support. There are lots of documents to sign, but you're essentially in control of the situation. Take time to read the documents—don't feel pressured to hurry—this is a big purchase you're making. "Request copies of the closing documents 24 hours in advance" of the closing if you're worried about feeling pressed for time at the closing, suggests Ashfield.
At the end of the closing, the seller will hand you a key, and you'll have to ask your accomplice to pinch you, because you're officially a homeowner!