In the often-complex world of real estate, homebuyers and sellers are naturally curious, and agents are trained to help them navigate it. If you're a first-time buyer or a repeat buyer who needs a refresher, you may have some questions about how deals are done.

Generally speaking, the entire home-buying process should take between four and six months. While that might seem like a long time, depending on a number of variables, including how picky you are about where you live, how competitive your local market is, and more, it might be shorter—or longer.

Step 1: Check your credit

Average time: 1 day to 2 weeks

Is my credit score good or bad?

To qualify for a mortgage from the Federal Housing Administration (FHA), you must have a credit score of at least 580. In most cases, lenders require 620 or higher. The higher your credit score, the better your chances of getting a loan. If your credit score is on the lower end, you might have a harder time getting a loan approved or you might be charged a higher interest rate to cover the lender's risk.

How to improve your credit score?

Credit scores can be improved in a few ways, but changes take time. Note any errors in the report and fix them. Your last payment might not have been saved by a department store, for instance, or you might not even know you owe it. Avoid taking on any further debt as much as possible, and pay off the smaller bills. Whenever you receive a credit offer, be careful. Obtaining a new credit card also results in an inquiry into your credit history.

Calculating the required downpayment

More equity in your new home results from a higher down payment, which reduces your mortgage payment each month. Depending on the sort of loan you take out, a larger down payment can allow you to eliminate the requirement for mortgage insurance. 

Step 2: Choose a Lender

Average time: 1 to 2 weeks

While looking for a loan program, you should compare the lenders who offer it. The best "fit" for you might just be the loan officer you interact with, as many banks and mortgage companies provide rates that are equal to one another. A knowledgeable salesperson will put you at ease while carefully detailing each sort of package that their organization offers.

Mortgage Terms:

30-Year Mortgage - The most common loan term is this one. reduced monthly payment is achieved by spreading the principal and interest component of the mortgage payments over a thirty-year period.

15-Year Mortgage - Gives fifteen years to pay off the principal and interest. The payment is consequently raised. 15-year mortgage interest rates are frequently lower, despite the fact that the loan is repaid more rapidly.

Fixed Rate Mortgage - The loan will have the same interest rate for the duration of its life, which means each month's payment will be the same.

Adjustable Rate Mortgage (ARM) - After the initial period, which is a set amount of time during which the interest rate is fixed, the mortgage's interest rate might go up or down. The mortgage payment is then changed to reflect those changes. ARMs are frequently provided at interest rates below those of fixed-rate loans. It might eventually catch up to and possibly overtake the fixed interest rate product, though, if the mortgage market results in higher interest rates.

Step 3: Find a Real Estate Agent

Average time: 1 to 2 weeks

If you're a buyer, you should look for counsel from a buyer's agent. A buyer's agent just represents you and looks out for your best interests. Just so you know, a seller's agent or listing broker is in charge of representing the seller. This entails that they look into any potential issues with a home you're interested in buying and negotiate the sale on your behalf to secure a reasonable price.

You might have your own preferences for an agent in terms of their personality and communication style.

Understanding the Many Buyer's Agent Agreements

While appointing a real estate agent is remarkably quick—you meet, and then you sign a contract approving the agency's representation - three different types of contracts of majority function under these types:

Non-Exclusive/Not for Compensation - This shows that the agent is aware that the buyer might consult with other agents to find the appropriate home. The buyer has the legal right to demand a single agency, which means they can anticipate the agent to represent them alone and not the seller, even though they are not legally obligated to pay the agent.

Non-Exclusive, Right to Represent - If the initial agent didn't show the buyer the property before the sale, this provides the buyer with the choice to buy a different house from a different agency. The buyer has the right to a single agency, although the agent can earn a higher commission if the seller agrees.

Exclusive Right to Represent - This means that the buyer's agent may be represented by just one agent. The purchaser has the right to a single agency. Changing the commission is possible. The buyer might not be responsible for the commission if the seller pays it. The agent may be entitled to a higher commission if the seller agrees to make a larger payment.

Step 4: Get pre-approved for a mortgage

Average time: 2 days to 2 weeks

Getting a loan pre-approval is a smart idea before moving on with the house-buying process in any way. It suggests that a lender has screened your credit history in front of your real estate agent and potential buyers. If you submit an offer on behalf of a bidder whose creditworthiness has not yet been determined or confirmed, you will be given far less consideration than if you submit an offer directly to the seller.

A mortgage pre-approval is a letter from a bank outlining the maximum loan amount you are eligible for. Although it's not the lender's final commitment—that comes later—it will help you set your budget and demonstrate to sellers that you have the means to buy a home.

You will require the following paperwork to obtain preapproval:

Borrower Identification - A current passport, state-issued driver's license, and or photo ID cards are required for all borrowers and co-borrowers.

Tax Returns - Your W-2 forms and two years' worth of tax returns are required if you work for a firm. If you're self-employed, you'll require your most current balance sheets, federal tax filings, and profit and loss (P&L) statement. You might also need to provide a letter from your accountant or a copy of your business license.

Pay Stubs  - The most recent P&L statement or the last 30 days' worth of pay stubs must be presented.

Bank Statements - Your most recent bank statements for the last two months are necessary. Add blank pages to your declaration as well. a copy of each and every bank statement you have from your brokerage, 401k, IRA, Roth, 403b, savings, checking, and other accounts.

Other Documents - Depending on the lender and your particular scenario, you may be asked to provide a mortgage gift letter, bankruptcy discharge paperwork, divorce decree, pension statement, Social Security/disability statement, and House Owners Association (HOA) Statement. If you own other homes, you can also be requested to provide current mortgage statements and a homeowner's insurance declaration.

Keep in mind that most mortgage pre-approval letters come with an expiration date of 30, 60, or 90 days. It’s advisable to negotiate for a 90-day term so you have a buffer should the entire process take longer.

Step 5: Search for Homes

Average time: 3 days to 3-plus months

The best part of buying a home is looking at potential properties! Finding a house is now easier than ever thanks to the widespread online advertising of homes that are for sale. Buying a property, though, might seem overwhelming given the wealth of information accessible.

Talk to your realtor about your "wants" and "needs" for a new home, as well as the location and features you're looking for, in order to reduce your options. Does the age of the house matter? What number of bedrooms are required? Do you want a big backyard? While moving, do you favor a specific area or a busy street? one garage, or a number of them? Because most listings are available online, why even bother having this discussion? Well, not all homes for sale are listed online. "Pocket-listed" homes are those that have not yet been made public. Properties that aren't yet listed by your agent may be suggested.

You may get a great sense of a property without ever going inside thanks to the abundance of virtual tours and 3D renderings in today's real estate listings. This is a great time saver, and although some buyers might feel at ease making an offer before seeing the property in person, the majority will use virtual tours to decide which properties they want to see in person. Once you have identified those deserving candidates, inform your real estate agent so they can arrange your house showings.

Step 6: Make an Offer and Negotiate

Average time: 3 days to 3 weeks

Any price can be listed for a home by its owner. That does not automatically indicate that it is in line with what the market will bear, of course. Your real estate agent could help you develop a realistic, data-driven purchase offer by investigating the pricing of previously sold, similar homes in the neighborhood using their local Multiple Listing Service (MLS). You may find that the asking price is either overly optimistic or reasonable. On the other hand, recent sales information may show an asking price that is a bit on the low side, which may be a great deal.
Offering to put down additional earnest money is one technique to entice sellers to accept your offer. Earnest money, which normally runs from 1% to 3% of the home's worth and is kept in an escrow account, is a deposit that nearly all buyers make to essentially take the house off the market. Without it, bidders can make numerous offers on houses, leaving sellers in a bind. The earnest money will be applied to the down payment or closing costs once the deal is finalized. To sellers, you appear more committed the more money you can put down. Don't skimp on this step, either, as you might not receive your deposit back if the purchase fails.

When you are ready to submit an offer, your agent will create a standard Residential Acquisition Agreement (RPA), a legal agreement that tells the seller in writing of your intent to buy the home

Repair Contingency - Thanks to an inspection-contingency clause, you can have the home's condition evaluated by a professional before the sale is closed. Inspectors will check the integrity of the building's structure and internal systems a few days after the contract is signed.

Appraisal Contingency - If you plan to finance the purchase with a loan rather than paying cash, your lender will require an appraisal of the home's value. While a lender has the right to deny a loan based simply on the valuation of the home, all properly worded offers include an appraisal contingency. In other words, you can cancel the transaction if the appraisal is low and the financing is approved.

Counter Offer - Do not be surprised or upset if the seller makes a counteroffer despite the fact that you feel you have made a fair offer for the home. This is usual and happens regularly.

Earnest Money Deposit - As a sign of your sincerity, you have included an earnest money deposit with your offer. It will also provide you more time, if necessary, to finalize funding. If your offer is accepted, the deposit will be added to your down payment. If your offer is rejected, your money will be returned in full.

But, if you later withdraw your offer for reasons not covered by the purchase contract's conditions, the seller would normally keep the money. The down payment is stored in a trust or escrow account with a third party that is impartial. Finally, the seller sends the title paperwork to the escrow business while the buyer makes a deposit. The money and documents are secured there and won't be released until the transaction is complete.

Step 7: Closing Escrow

Average time: 3 days to 3 weeks

You have arrived at the goal line! The procedure culminates at the home closing, where all parties gather to sign the necessary paperwork and formally transfer the title of the property.
During the closing phase, all the elements of a real estate deal come together. Closing costs, or the fees and taxes related to real estate transactions, are shared by the buyer and seller.

Opening Escrow - The process of "closing" begins with the buyer making a good faith deposit (earnest money), followed by requests for services like inspections and appraisals.

Seller Disclosures - Any known issues in the property, as well as any alterations like remodeling work, must be disclosed by the seller.

Appraisal - The current market value of the property is determined by a certified appraiser. As was already mentioned, lenders will insist that the house is worth what you are paying for it.

Inspection - Although they are not often required by law, inspections highlight parts of the property that need to be repaired. Topics that buyers and sellers may discuss include what needs to be repaired and who will be responsible for doing it.

Homeowner's Insurance - Prior to purchasing, compare rates and coverage. Make sure you are familiar with the policy's exclusions from coverage. Any damage to the house will normally be covered by standard insurance, although the majority of providers insist on having supplemental coverage for earthquakes and floods.

Home Warranty - A house warranty is a service contract that covers the upkeep, repair, or replacement of a home's mechanical systems and appliances for a full year. Sometimes buyers and sellers split the cost of a warranty; this can be discussed during the negotiation phase.

Contingency Removal - Once each repair or modification has been completed, the buyer will take the contingencies out of the contract. It also commits the buyer to purchasing the home. If the buyer backs out at this point, the seller receives the earnest money deposit.

Final Walkthrough - The buyer has one more chance before closing to inspect the property to make sure the sellers have done what they stated they would do to prepare it (repairs, all personal items removed, etc.)

Closing Day - Closings take place at the law firm, the title/ escrow company, or both locations. At this stage, the title, bill, deed, and associated documentation are all signed. After all the paperwork is finished, the seller receives the money. Ask if a remote closing is an option.

These are just some of the steps involved in the home-buying process. Depending on the specific situation and location, there may be additional steps or considerations to keep in mind. Working with a knowledgeable real estate broker and a mortgage lender can help ensure a smooth and successful homebuying experience. That is where I can help you. Have a question? Schedule a quick phone call or text. We want to be your go-to resource to assist you with your real estate questions.