Purchasing a home is a major financial decision. It’s important to come prepared. While the length of time it takes buyers to get from point A to point B may differ, the ideal timeline for buying a house remains the same. As long as you follow steps in the correct order, navigating the home buying process will remain relatively uncomplicated. Use this recommended timeline to prepare for your first adventure into the world of real estate.
This should be the longest step in the entire process. In order to buy a home, you have to be financially prepared for such a large purchase. The amount of time it takes to prepare will differ according to each person’s financial situation. This time should be spent repairing your credit score, saving up money for a down payment, and budgeting for the added expenses that come along with home ownership. This could take anywhere from six months to five years, or even longer.
Experts agree that living expenses shouldn’t exceed more than 30% of your total budget. This includes a mortgage as well as utilities, maintenance, etc. Prepare your finances to meet this goal.
In order to avoid paying for private mortgage insurance (PMI), you’ll need a down payment equaling 20% of the purchase price. It can be challenging to save this much money as a first time buyer. If you want a $200,000 home, you’d need $40,000 up front to avoid PMI. However, down payments as low as 5% are offered through various mortgage options. You can also utilize a specialized savings program through your preferred financial institution to build up a respectable down payment.
Once you feel financially ready, get pre-approved for a mortgage before touring available homes. Getting pre-approved only takes a few days. A pre-approval letter from your chosen financial institution will tell you the amount of money they feel comfortable lending to you. This will help you narrow down the budget of your home search. It will also help sellers take your offers seriously. Your offer will have a better chance of acceptance if the sellers know you have already secured the necessary financing.
Getting pre-approved will make the whole process move faster. Since you’ve already completed much of the required loan paperwork for a pre-approval, you’ll have less paperwork to fill out before closing. Pre-approvals expire after a specific period of time, usually 90 days. If your housing search takes longer than this designated period, you’ll need to obtain a new letter from your financial institution.
Check out our tips for getting pre-approved on the first try here.
Especially if you’re a first time buyer, it’s important to work with a licensed real estate agent for your house search. They can help you understand your local housing market and negotiate the purchase price and contractual agreements involved with buying a home.
Make sure you know what your priorities are before you start your search. How many bedrooms do you need? What location do you need to be in? You will probably have to compromise on at least one bullet point of your wish list, but making these lists will narrow down your search considerably.
The time it takes to search for a home depends on your wish list and the current market. You may find the right home after just a week of looking, or it could take months for your dream home to come on the market. It’s okay to take time to decide – this is one of the largest purchases you’ll ever make!
Once you’re ready to take the next step, you’ll make an offer on a home. Your real estate agent will handle these negotiations. There may be counter-offers made by the sellers, but overall the offer should either be accepted or rejected within a few days. If it is accepted, you can continue on to closing.
Once your offer is accepted, you’ll set up an official date to close on the home. Closing on a home involves a ton of paperwork and moving pieces. The majority of these tasks will be handled by other professionals. Closing on a normal sale, not a short-sale or foreclosure, averages less than 40 days. Before closing the following will be completed.
The inspection will tell you of any major or minor issues in the home. We recommend you attend the inspection to get a full list of projects to take on once you move in. It will also alert you to any serious issues that should be addressed before closing or would make you withdraw your offer entirely.
An appraiser hired by your lender will calculate the value of the property. If it appraises for much less than the listing price, the financial institution may revoke their financing. They don’t want to fund a loan for a property if it isn’t worth the cost of the loan.
You will be required to bring proof of insurance to closing. Use this period of time between the offer acceptance and the closing date to secure insurance. Many people look to their current auto insurance provider for discounts by bundling plans together.
Various professionals, like mortgage underwriters, will draft up the required paperwork for closing. During this period, you may have to provide additional paperwork to your financial institution to secure the loan.
The last step is to sign all paperwork at closing. This will officially complete the home purchase.
The timeline to buy a house differs for everyone, but the most important step is that you’re prepared. Continue your research by downloading our FREE first-time homebuyers guide! Read it now for more advice on how to navigate the home buying process. Get it here.