11 Steps To Buying A Home In 2022

Buying a home is a dream for everyone. But, owning one isn't easy as it may sound or as smooth as it may look. 

And that’s the purpose of this blog, to help you with the step-by-step process of purchasing your dream home. These steps will walk you through how to purchase the right home at the right price with the help of the right realtor.

1. Get your Personal Finances Ready 

If you’re considering buying a house, you’ll want to take a careful look at your finances to ensure you’re ready for this new commitment. In fact, your finances are so important that you’ll want to start working on them.

You have to take a look at some documents to evaluate your ability to pay the monthly mortgage payment associated with your home purchase.  

In preparation, you should check and gather a few documents around these specific areas of your personal finances. Your Income, Debt, Savings, and Credit. 

2. How Much Home you can Afford?

To figure out how much you can afford, it’s time to start planning your actual home purchase and mortgage. The best place to start in this determination is you calculate your debt-to-income ratio (DTI). It measures your outstanding debt as a percentage of your income before taxes — is used by lenders as another way to gauge your ability to repay your mortgage. Also calculated by adding up all your current monthly debt payments (think student loans, personal loans, credit cards) and your proposed mortgage principal, interest, taxes, and insurance payments, and then dividing that number by your gross monthly income (your income before taxes and other deductions)

3. Save for your Down Payment and Closing Costs: Bigger is Better

Once you have determined the amount of monthly mortgage payment you can afford, it's essential to begin saving for a down payment and closing costs. A bigger down payment means you'll own more of your new home from the start. This makes you a lower-risk borrower in the eyes of lenders and usually translates into a lower interest rate on your home loan. 

Another reason to put down more cash is to avoid private mortgage insurance or PMI. Most lenders will require you to buy PMI — which protects the lender in case you default on your loan — if your down payment is less than 20% of the purchase price of your home. 

In addition to a down payment, you will also need to save for closing costs — these are fees for getting your mortgage. There are a variety of factors and services that determine what you will pay in closing costs — title insurance, fees, credit reports, appraisal, escrow costs, property tax payments, etc.

4. Get Preapproved for a Loan

Getting pre-approved for your mortgage is advised before you start your house hunting. Lenders want to assess whether you’ll be able to pay them back. They’ll check to see that you have a steady income and look at how much cash you have available to cover a down payment, closing costs, taxes, and other expenses. 

Different lenders may look at different things when checking your finances, but the goal is the same — to help decide whether to risk lending you money and how much interest to charge. 

You will then get a pre-approval letter that states the mortgage loan amount that you are approved for and help you to find homes within your budget. This gives you peace of mind and strengthens your capability when you submit an offer.

5. Begin Searching for your Perfect Home

In this step, your real estate agent will be your representative. Your agent will help search and identify homes that meet your criteria, get you showings, write offers, negotiate, and generally watch after your home-buying interests and preferences on your behalf. 

Considering the type of environment you want to live in — city, suburbs, or rural. What type of home do you want — single-family, townhouse, condo, or apartment? 

It’s possible to buy a home without a real estate agent, but it’s not recommended. It's not cost and time efficient. These experts will help you to navigate a relatively complex real estate market, submit legally viable offers, and avoid overpaying for a home. 

As you can see, finding an experienced real estate agent is essential to the home-buying process. A good real estate agent can help you determine whether your wish list is realistic. If it’s not, you may need to compromise.

6. Make an Offer to your Chosen Home

Once you’ve found that ideal home, you need to work with your real estate agent to make an offer. Before you approach the seller, you’ll need to decide how much to offer, what contingencies you want, and how much earnest money you’ll deposit. This offer will be presented in the form of a formal letter.

The homeowner may accept, reject, or counteroffer in response to your offer. This typically kicks off the negotiations process, which is not unusual and another area where your real estate agent becomes invaluable.

7. Get an Appraisal and a Home Inspection

Home inspections and appraisals are key steps in the home-buying process. 

An appraisal is an assessment of how much a home is worth. You must have an appraisal done with a mortgage loan because a lender can’t lend more than the home is worth. Therefore, it’s important to have your home appraised for at or slightly more than what you offered. This is another reason that using an experienced real estate agent is important. 

Inspections are different from appraisals, with a home inspection, the buyer can use anything that needs to be fixed, replaced, or repaired as leverage to negotiate with the seller before the sale is finalized. 

Home inspections are not required and function primarily to give the buyer peace of mind or actionable insight into the state of the home and to ensure that there are no surprises after closing.

8. Ask for Repairs or Seller Concessions

If, after your inspection, there are any significant issues you can ask for the seller to correct or compensate you for the necessary repairs. This can be accomplished by having the seller fix the problems before you close on the home by discounting the price of the house or by paying some of your closing costs. 

If you're considering doing so, make sure it's a smart time to do so and pay attention to what the market tells you. Because if the sellers are anxious to get a second mortgage off their hands or are highly motivated to sell the home, this could be a perk they're willing to throw in to seal the deal. 

On the other hand, if market conditions favor sellers and there are likely to be multiple offers over the asking price, requesting this can irritate a seller no matter how good your offer is. 

Again, this is a point for negotiations.

9. Do your Final Walkthrough 

Always do one final walk-through of the home before you close. Typically, you'll do the final walkthrough after the seller has moved out, about 24 hours before closing. You can't raise new issues during the final walkthrough that are not already part of the sale contract. You've already worked through the inspection and any contingencies earlier in the process. 

At the final walkthrough, it is your opportunity to ensure that your new home is still in good condition and that any repairs that you have requested have been completed to your satisfaction. 

10. Close on your New Home

The final step in buying a home is Closing! At this point, you’re almost a new homeowner. The final few steps in the process are to review your Closing Disclosure 3 days before closing. This document will tell you exactly what you need to pay at closing and summarize all of your loan details. 

To make sure everything runs smoothly, you’ll need to bring a few things to your closing appointment. You’ll need to bring your ID, a copy of your Closing Disclosure, and proof of funds for your closing costs. During this meeting, you will sign a settlement statement, your mortgage note, the mortgage or deed or trust, and pay your down payment and closing costs. 

Once you’ve knocked out these steps, you’ll be able to move into your new home! 

11. Maintain and Enjoy!

As a new homeowner, it’s important to enjoy all the benefits of owning your own home, as a fruit of your labor. But it’s also important to protect your investment. This is as simple as making your monthly mortgage payments and completing regular maintenance checks and identifying opportunities for improvement—such as adding a dishwasher, applying a fresh coat of paint, or increasing storage space—you can begin to add value to the property.

If you do this, your house is sure to be filled with incredible memories and grow in value for many years to come!