Before you can become a homeowner, you not only have to go through a lot of preparation of finding the right home and making an offer, but you also have plenty of steps for arranging financing and completing the closing process before you can get the keys to move in. While it usually takes at least a few months, your home buying timeline will vary by your preferences for housing, the current market, your financial situation and more. Understanding what goes into each step can help you set expectations, so take a look at what the home buying process will involve.
Read More: Buying a House for the First Time
Doing Initial Home Buying Research
Even as far as several months before you plan to start shopping for homes, you'll need to do some initial research to both get an idea of what your home goals are as well as decide whether you're ready for the costs involved with buying and owning a home.
During this stage, you might take a look at real estate websites like Zillow and Trulia to see what the houses in the market look like and how the purchase price ranges for what appeals to you. You might start to write down your list of must-haves such as the number of bedrooms and bathrooms you need as well as preferences for things like the kitchen, yard, garage and extras like a pool. You'll also need to consider the option to have a custom-built home if you prefer something brand new and want the most flexibility.
You'll need to keep in mind that buying a home can require having a significant amount of money saved for your down payment and closing costs. Also, you'll need to make sure your monthly budget can handle the mortgage payment, any homeowner's association fees, utilities and typical repair and maintenance costs. Emergencies can happen that lead to large surprise expenses, so you'll want to consider whether you have a financial cushion to allow for that.
Read More: What Are the Costs When Buying a House?
Exploring Financing Options
Depending on your situation, you can spend several days to several weeks going through your financials to assess home affordability and then explore different mortgage programs and lenders. To get an idea of an affordable home price or mortgage amount, start with gathering data about your income and debt and inputting it into a home affordability calculator. You can experiment with different mortgage lengths, interest rates and down payment amounts to see how that affects the maximum loan or home price and look at your budget to lower the numbers to something you feel most comfortable with.
You can then either start researching mortgage options on your own or go ahead and start working with a lender who can offer personalized help during the process. As you research programs, pay attention to requirements for things such as down payments, debt-to-income (DTI) ratios and credit scores since these vary and you'll need to find an option for which you qualify. Here are some examples of mortgage options and who they target:
- Federal Housing Administration (FHA): Government-backed FHA loans can appeal especially to first-time home buyers with lower credit scores and lower cash reserves, and they don't have income limits to deal with. Down payment requirements are 3.5 or 10 percent based on your credit score.
- Conventional: Homebuyers with good credit scores and at least 3 percent saved for a down payment can go with the conventional mortgage option. There are also special income-based programs like Freddie Mac Home Possible that offer perks for homebuyers with low to moderate earnings. Conventional programs can allow for higher DTI ratios with a good overall financial profile.
- U.S. Department of Agriculture (USDA): If you seek rural housing and fall within the area's income limits for this program, USDA loans can help you avoid a down payment and substantial cash reserves when you finance a primary residence.
- Veterans Affairs (VA): Qualified past and present military service members – plus qualified spouses – may be interested in VA loans that eliminate the down payment requirement and offer flexibility for credit and DTI ratio requirements.
Keep in mind your state likely has additional home buying programs that can provide access to down payment grants or loans.
Read More: Buying a Home With No Money Down
Getting a Mortgage Pre-Approval
Before house hunting with a real estate agent, you should take some time to go through the mortgage pre-approval process with a lender to provide assurance your financial situation will allow for buying a house at this time and what price you're limited to. While not a guarantee, the pre-approval does provide some confidence to sellers. You can usually do this step within just a few days, so it's possible to shop around and submit requests to a few different lenders to try to get better interest rates and compare loan terms.
For this step, you'll fill out an initial application to provide financial details so the lender can get an idea of your income, cash savings, current property, credit situation, loan preferences and preferred house price range. You'll probably also show documents to verify some of this information too, such as pay stubs for income and bank statements for cash reserves.
If you qualify, the pre-approval will expire in two or three months, so this will give you plenty of time to shop for homes before you'd need to renew. If you don't qualify, you might return to the step of evaluating your home buying decision or look into options to improve your finances so that you can qualify eventually.
Read More: What Credit Score Do I Need for a Mortgage?
Choosing a Home to Buy
With a mortgage pre-approval, you're ready to get a real estate agent who will help you look for and choose a home. You can usually get an agent within one week if you ask around for recommendations, but you'll want to take time to find someone who has expertise in the area where you're shopping and get to know the agent before deciding. You'll share with them your price range and criteria for a home, and they can help you look through listings, schedule showings and attend open houses. An agent can also keep an eye on upcoming listings so you have a better chance of getting to make an offer before it sells to someone else.
The amount of time to explore houses and choose the right home will depend on whether the property you want becomes available on the market. This can depend on the time of year, economic conditions, competition and how specific your requirements are. When you do find the right house, your agent will help you prepare the documents for making a suitable offer with an estimated closing date and then present it to the seller for their consideration.
The offer and negotiation process can take as little as one day if you're lucky to have your first offer accepted, but it can stretch many days with competing offers or the need to make counter-offers. Special circumstances can also apply. For example, in some cases, someone else might get their offer accepted but bail out of the deal, so the seller may offer the home to you as a backup.
Following Through With Accepted Offer
Once you've finished negotiating the home offer and the seller has accepted, the real estate agent and lender will have you go through a series of several steps regarding the property and related finances. These usually span over 30 to 45 days and include:
- Handing over earnest money: The buyer will want you to hand over the earnest money deposit you agreed to in the offer as soon as it gets accepted and signed. You can write a personal check or get a cashier's check for this step, and the real estate agent puts the cash in an escrow account so that the seller gets the funds when the final sale takes place.
- Getting a home inspection scheduled: Usually in the first week after the offer gets accepted, you'll need to find a home inspector and schedule an appointment for them to look at the interior and exterior of the property. Your lender or real estate agent may have recommendations on suitable inspectors, especially if you need someone affiliated with a certain mortgage program with specific requirements. The inspection time varies by home size and can range from one to four hours for most properties.
- Getting an appraisal done: Your lender will have an appraisal arranged to make sure that the loan you're taking out aligns with the market value for the property. Alongside physically inspecting the property, the appraiser looks at data such as comparable sales when valuing the property. The process usually takes up to a few hours, and you can usually see a copy of the report in one week or less.
- Shopping for home and title insurance: You'll need homeowner's insurance to protect your property and possessions, and title insurance is needed in case a problem with the title comes up later after you've purchased the property. You can find both companies within one day, and often the real estate agent can get you in touch with a title insurance company they recommend to save you some work. In the case of the associated title check, it will happen in the background alongside the other processes.
- Completing the mortgage underwriting process: You'll have to stay in communication with your lender to get a final mortgage approval so that you can close on your new home. Your lender usually does a final credit check, asks for documents to verify both your income and the funds you plan to use for your closing costs and down payment as well as considers your home appraisal results. They will ensure that you qualify for the loan and that your property meets any requirements for the chosen mortgage program and has a suitable value for the loan you're taking out.
Read More: What to Do When an Earnest Money Check Bounced
Doing a Final Walk-Through
A day or two before the closing process finishes, you can expect to do a final walk-through of the property, and this usually takes no more than one hour. This step allows you to make sure that the property looks in the condition that the seller agreed on and that any required repair work determined during the inspection stage had been completed.
You'll want to check your home purchase agreement during this step and use it as a guide. If you notice any issues, you'll want to deal with the seller and have them make arrangements before you agree to proceed to closing.
Attending the Closing Meeting
Once you get the final mortgage approval and have completed all the other steps for the home buying process to complete, you'll get to attend the closing meeting. This appointment involves signing important documents and can involve many entities such as the lender, real estate agent, attorneys and the escrow and title insurance companies. You can expect to attend the meeting one day and not spend more than a couple of hours in most cases. However, other parties might sign documents electronically over the weeks before the scheduled date.
At this meeting, you handle the final financial tasks such as paying for any upfront costs like your closing costs and down payment. You'll also become officially liable for the mortgage for which you got approved. You should get an estimate of how long before you can move into your new house, and this can vary depending on the seller's situation.
Moving in Your New Home
After the closing process completes and the seller has finished moving out, you can expect to get the keys and start moving into your new place. You'll want to make sure to handle arrangements with utility companies, arrange for any services you'll need like lawn care and make any changes to documents that warrant an address change. Also, you'll need to start making your mortgage payment on the agreed date and stay in touch with your lender if anything happens that affects your ability to pay.
- Redfin: The Ultimate Step-by-Step Guide to Buying a House
- Trulia: How Long It Really Takes To Buy a House
- Chase: The First-Time Homebuyer Timeline
- U.S. Department of Housing and Urban Development: Common Questions From First-Time Homebuyers
- Consumer Financial Protection Bureau: Closing on Your New Home
- State of Connecticut: What to Know When Shopping for a Mortgage to Purchase a Home
- Consumer Financial Protection Bureau: What Is a Mortgage "Closing?" What Happens at the Closing?
- Indiana.gov: Home Buyers Guide
- Consumer Financial Protection Bureau: Schedule a Home Inspection
- HomeLight: It’s Time For Your New Home’s Appraisal: How Long Will It Take?
- Consumer Financial Protection: Consider Whether It's the Right Time for You To Buy
- Consumer Financial Protection Bureau: Find the Right Home
- Consumer Financial Protection Bureau: Decide How Much You Want To Spend on a Home
- Freddie Mac: Home Affordability Calculator
- Consumer Financial Protection Bureau: Understand Loan Options
- LendingTree: Minimum Mortgage Requirements for 2021
- Consumer Financial Protection Bureau: Get a Prequalification or Preapproval Letter
Ashley Donohoe has written about business and technology topics since 2010. Having a Master of Business Administration degree, bookkeeping certification and experience running a small business and doing tax returns, she is knowledgeable about the tax issues individuals and businesses face. Other places featuring her business writing include Zacks, JobHero, LoveToKnow, Bizfluent, Chron and Study.com.