Buying a home can be intimidating and overwhelming if you don't know what to expect. For many of us, it can be one of the biggest purchases we’ll ever make.
When searching for a home, you'll have to balance finding what you like, need and want with what you can afford. It means taking into account different tastes, style, needs of a partner or children, and evaluating all the tradeoffs involved with choosing the best home for everyone involved.
To help prepare you for the big purchase, we’ve simplified the entire homebuying process to give you a better idea of what to expect when you buy. By following these 8 steps to buy a home, you will be able to navigate the homebuying process with more confidence, direction and clarity.
8 Steps You Should Take When Buying A Home
1. Define the characteristics of the home you'd like to buy
What does your dream home look like?
Before you get into the nitty-gritty of calculating your budget and applying for mortgage loans, start with the preliminary step of exploring your possibilities and considering your priorities. To help you narrow down the qualities you are looking for, we’ve put together a list of questions to ask yourself and your partner (if you are buying a home as a couple).
Questions to Help Define Your New Dream Home:
- What does the concept of “home” mean to you? Is it a place for resting and relaxing? A place to hang out with friends and family? An escape from the demands of work? A place to enjoy your hobbies?
- What do you like to do in your spare time? Do you like to watch TV or read from a quiet nook? Do you enjoy cooking or entertaining? Will you tinker in the garage or plant a garden?
- What’s important to you about your home’s location? How will you get to work and what’s the commute like? Do you work from home and have special home office needs? If you have kids, is being in a top school district important for you? Or if your kids are in a private school, how close is the school and where do your kids’ friends live?
- What amenities would you want nearby? Would you like parks, playgrounds, trails or paths close to your home? How about golf, tennis, or a gym? Think about access to the grocery store, shopping and restaurants. How far are you willing to drive or walk to get to these places?
- What’s your home style? Do you want a home that’s a fixer-upper or one that’s move-in ready? Historic bungalow or new construction? Established or new development? City center or away from traffic? Traditional or modern?
- What home features are absolutely essential? What would be nice to have, but aren’t necessarily essential? And what features are deal breakers - things you definitely do NOT want your home to have?
Other Questions to Consider:
- Do you want a pool? A garage? Or a 3-car garage? What about extra storage?
- How many bedrooms and bathrooms do you want and need?
- Do you want a bigger home, where everything can have its own space? Or is that just more space to clean?
- Do you want a yard or do you want to avoid yard maintenance?
- Do you want a fence for your kids or the dog? Or a spacious backyard?
- Any special furniture or needs? I.e., does your spouse play the piano?
- Do you need a walk-in closet? Or his and hers closets? Separate vanities in the bath?
- Do you want a formal living room and dining space? A dedicated playroom for the kids?
- Do you like wood, tile or carpet flooring?
- What about light, dark or neutral tones?
2. Put together a preliminary budget
How much house can you afford? This is where you start to answer this question. In future steps, you’ll be making decisions on things like mortgage loans and down payments where you’ll be able to nail down a more specific budget. For now, you just need to get a general notion of what you can afford to spend every month. As a starting point, consider how much you’re currently spending on rent or housing.
As a general rule, lenders often recommend that you look for a home that costs no more than 3-5 times your annual household income. This assumes that you plan to make a 20% down payment and have a moderate amount of other debt.
If you don’t have a great credit score, you may have to budget more than 20% as a down-payment. This is also the time to look into whether you qualify for any special grants or programs for first-time home buyers, veterans or other groups.
There are so many different types of loan products available — adjustable vs. fixed rate mortgages, 30 vs 20 vs 15 year terms, etc. Do your preliminary research now and get down to the details in the next step when you speak to your mortgage broker to determine more exactly what kind of home you can afford.
3. Speak to a mortgage lender
Specifically, how much house can you afford? This is the time to refine your budget assumptions by firming up the details with a professional.
Your mortgage lender will help you take your monthly budget and translate that to a purchase price.
They’ll do this by taking into account factors like property taxes and home insurance as well as your own personal financial information, such as your income, debts, savings and investments. They’ll assess how different factors such as interest rates and the amount you put down can impact your purchasing power.
Once your information has been reviewed, you will get feedback on what kinds of mortgage loans are available to you, so you can better calculate a price range for the home you can afford.
Note: There is a difference between getting prequalified vs. preapproved for a loan. Prequalification is a preliminary step that is based on the information you provide your mortgage broker, without verification. This may or may not involve a credit check, depending on their policies.
Preapproval is a more involved process, which includes submitting paperwork to substantiate your financial situation. Whether you’re getting prequalified or preapproved at this stage, your credit is only good for 60-90 days.
In summary, the goal for this step is to talk to your mortgage broker, get an idea of the price range you can qualify for, and then get either preapproved or at least, prequalified.
4. Refine your home search
The next step is to start searching and make a short list of potential homes. At this stage, you’ve assessed your priorities as a homeowner and have the information needed to come up with a budget for your home. Next, It’s important to consider both the upfront and long-term costs of home ownership.
- Upfront Costs can include: down payments, closing costs, appraisal fees, legal fees, and moving and home inspection costs.
- Ongoing Costs can include: mortgage payments, homeowner’s insurance, property taxes, association fees (if applicable), utility costs, and maintenance fees.
Use these short and long term factors to help establish a price range. Then, use this price range, along with other factors you’re considering, to refine your search.
Note: you may need to experiment with changing other factors such as the “number of bedrooms”, “square footage” or “location” to see what impact these changes will have on your search results.
Ultimately, the end result is a short list of specific homes that meet sufficient “Dream Home” criteria and fit in your budget range.
5. Start touring homes
It’s time to schedule some house tours!
Until now, you might have attended open houses on your own, but now it's time to start actively touring.
To get started, you can book tours online of any home with Toura. If the home is a self-tour property, you can quickly request a tour on your schedule and go see the home on your own once the tour is approved. For all other homes, a toura partner real estate agent will meet you at the home to let you inside.
In preparation for attending the home showings, you may want to pull out the answers to the questions from step 1. This way you can see how each home measures up to the characteristics you initially defined. You might also want to keep a record of all the homes you’ve visited and things you love about them as well. This will be increasingly helpful as you visit more homes because they may start to run together and you might now remember which homes had which characteristics.
Another pro-tip: take a tape measure, camera and writing utensil. Measure and take notes, photos and even videos of key parts of the house to capture all of the priority information about each home you visited. You’ll be glad you did this when it’s time to finally make a decision on your favorite house.
6. Make an offer
You’ve made a decision on the best home, given your needs, preferences and budget. Now, the time has come to make an offer! This is where an agent becomes especially handy in helping you figure out all the different elements that go into your offer including:
- Offer Price
- Expiration Date of Offer
- Good Faith Deposit (1%)
- Inclusions to the sale (i.e. Appliances, furniture)
- Financial terms
- Inspection Period
- Closing Date
- Other terms and contingencies
- Optional: Personal Letter to the Seller
When you tour a home with Toura, we make it easy for you to connect with an agent to ask questions, give feedback, and make an offer when you're ready.
7. Prepare for closing
You’ve made your offer and it’s been accepted by the seller. Finally, it’s time to get ready for closing. There are two parts of this step: things you need to do and things that are going to get done on your behalf.
Things you need to do before closing
- Make your good faith deposit: your contract will specify when this payment needs to be issued.
- Schedule a home inspection: your agent can recommend a good home inspector. Your agent can also help you revisit the offer if needed, based on the results of the inspection.
- Complete your mortgage application: submit all of the financial documents required to your mortgage broker. Talk with them about the possibility or pros and cons of locking your mortgage rate.
- Talk to your insurance provider about homeowner’s insurance.
Things done on your behalf before closing
- Your mortgage broker will order an appraisal.
- Your closing attorney/agent will order a title search and put together your title insurance policy. They will also help coordinate all of the necessary paperwork and documentation before closing.
8. Close the sale
Once you’ve completed all the paperwork and gone through the steps above, it’s closing time! It usually takes about 35-45 days to go through this process, after which you can move in on the day you close.
The closing itself typically takes place at an attorney’s office or closing agent’s office, where you’ll sign all the paperwork and finally pick up the keys to your new home.