The 7 Steps to Home Ownership

I know that there are likely thousands of these kinds of articles on the subject of how the home buying process works. Rather than focusing my efforts on unenthusiastically explaining how it’s done, I want to get at the big “why” of it all; the one thing in each step that makes the rest of the process simple. After all, everyone who buys a home has a goal in mind… you just have to get some clarity on how to get there.

First, let’s start off with dispelling some fears about buying a home. The first usually centers around affordability. You may hear yourself saying, “I can’t afford to buy a home right now.” To that, I would actually respond, “You can’t afford NOT to buy a home right now.” The best time to plant a tree was 20 years ago, and the next best time is TODAY. Sure, it would have been great to buy a home 20 years ago… imagine how much more valuable it would be in this market. Now think about how happy you’ll make your future self in 20 years when you buy your home today.

Estimated net gain after nine years – Purchase @ $125,000 vs. Renting @ $1,000 per month.

The same type of fear may prompt you to think, “I should wait until the real estate market gets better.” But what does a better market really look like? The truth is that there is never a wrong time to buy the right home, and the right home can be found in any market. It may not be your dream home, of course. But the best way to get closer to buying your dream home is to buy your first home. So let’s get started!

1. Hire an Agent

This is the most important step, and it comes first.  A licensed real estate professional actually has three jobs: 1. They open doors and show you homes, 2. They give you their opinion of value based on location, condition, and size, and 3. They negotiate on your behalf.  A professional Realtor is your best resource when buying a home, not only because they can do all these jobs but also because they know the market conditions, can provide financial guidance, and turn you on to neighborhoods that you may never have known existed. And to top it all off, this service is completely free to you because the seller customarily pays the commission to both Realtors.

So how do you know who to hire? The right Realtor will take the time to understand your goals and ask you questions – not just about the kind of home you want to buy, but about how you want to buy it. This person is going to help you with a huge financial decision, and you should build a relationship of trust so that you both are on the same page before setting foot in your first showing. This is best done during a preliminary consultation at the Realtor’s office, not at the house you saw online with the new kitchen and amazing back yard. If a Realtor offers to give you a consultation before showing any properties, then they are in it for more than just the commission check.

2. Create a Financial Strategy

If you are like most buyers in the market today, chances are good that you’ll need to obtain a loan to purchase your home. In real estate terms, this is called a Mortgage (from the French words for “death” and “grip”). Inspiring, isn’t it?

There are a wide variety of mortgage loan products out there today, and the best source for all the information on which loan is right for you is your local mortgage lender. I want to stress, local lender. Sure, any of the large banks can originate and service a loan. But to those institutions, most of the customers they serve are the result of national marketing campaigns and online lead generation. To a national lender, there is little consequence if a case terminates and a customer is dissatisfied. They’ll just get another handful of leads from Lending Tree or Zillow. A local lender, however, serves clients in the market in which they live, are familiar with the aspects of the market that make it unique, and are available whenever you need them (by giving you their cell phone number rather than a desk phone line that shuts off at 5:00 pm every day). Most importantly, they earn their business on the back of a great reputation built by satisfied clients and agent referrals. To me, those are way more trustworthy than any pay-per-click campaign.

3. Find your Home

This is the fun part – the part that everyone who watches all the Real Estate shows on HGTV really likes. By this time, you’ve met with your Realtor and discussed your wants & needs. Now it’s time to go see what your market has to offer and if there’s a good fit for you out there. It may be useful to judge each new home on the basis of its price, location, condition, and size. Or, by how its living spaces, lot, and location meet your needs. However you do it, I encourage you to stick to what’s most important to you and to keep an open mind for surprises along the way. You never know when you’ll get “that feeling”.

That being said, be mindful not to see too many homes. I know it sounds strange, but seeing too many homes will actually give you a bad case of FOMO (fear of missing out), and you won’t be able to pick a favorite. Think of walking into an ice cream shop and having to choose just one scoop of ice cream. It’s going to be a lot easier to pick your favorite flavor out of three and only missing out on two than it would be to pick out of thirty and missing out on twenty-nine. When on showings, stick to no more than ten, and even fewer if possible to avoid the FOMO.

4. Write an Offer

An entire blog post can be (and probably has been somewhere) devoted to how to make a strong offer on a property. If it’s your favorite house, then chances are other buyers are thinking the same thing too. Make sure you consider some of the big questions. How long has it been on the market? Are there other offers? What’s your financial strategy, and when can you close? Your Realtor will be able to guide you through the steps and tell you how to write the strongest offer, so listen to them and make sure you are always putting your best foot forward. Be careful not to waste time pursuing a big discount, because you could spend days trying to save a couple of thousand dollars and another buyer could come in and steal your future home from you.

Remember, the best deal is the best house… not always the best price. And the question you should always ask yourself is, “Can I pay the price I have to pay to buy the house I want to buy?”

5. Do your Due Diligence

When you make it this far, you’re now officially under contract. This period is your opportunity to inspect the home for defects, get your insurance quotes, check the school district, commute times to and from work, and look into crime or other neighborhood characteristics. Depending on the market and your offer, this could be as long as fourteen days or as short as five.

Home Inspection Reports

The home inspection is probably the keystone event in this period, and is when most buyers tend to have reservations about continuing with the purchase. Rest assured, the seller wants to sell as much as you want to buy. So if you present a reasonable list of concerns (or repairs) that seeks to address major defects like system or mechanical malfunctions, leaks, building code violations, or safety issues, then you’re likely going to get that list satisfied. Always consult your Realtor when it comes to nuances of the market in which you are buying, and whether you are asking for too much or not enough.

6. Close the Deal

Yay! You’ve made it through inspections, appraisal, and financing. You’re headed to the closing table and ready to sign. In most cases, you’ll have to be present unless you’ve assigned a power of attorney to sign on your behalf. Bring photo ID and a checkbook (I’ll tell you why later). By this time, your lender and/or closing attorney have let you know several times just how much this is going to cost when you settle, and how much you’ll be paying each month. Keep in mind, sometimes the exact numbers aren’t so exact so have some tolerance for some minor changes and be prepared to write a small check just in case the property taxes were miscalculated or your interest rate was adjusted. Most importantly, ask questions about any of the documents you are signing before you finish the closing.

7. Enjoy (and Protect) your Investment

Once you’ve got your keys and are moved in, the responsibility moves right in with you. Make sure your homeowner’s insurance policy takes effect on day one, start your utility services, and change all your mailing and billing addresses. You definitely want to make sure your autopayments go out without a hitch when the new month starts… especially the mortgage 🙂

Consider adding a home warranty as added protection to your systems and appliances. Old Republic Home Protection plans start between $400-$500 a month and cover repairs and replacements for a lot of the big ticket items in your home. Renew every year, and you may end up having them cover the cost of a new washing machine, plumbing repair, furnace replacement, or more.