Buying a home can be a daunting prospect. After all, it is the biggest purchase in your life. Many buyers I talk to put off buying, because they don’t feel they are “ready”.
In many cases, they are ready and they would be foolish by putting off their search. Let’s take the mystery out of it. Here’s everything you need to know about buying a home:

Loan Approval

Every buyer has their dream home in their dream neighborhood. You know, the mansion by the lake in Lincoln Park. Let’s get real-maybe you can afford that but probably not.
The first step in defining your goals is speaking to a loan officer about how much you afford and what your monthly payments would be in certain situations.

This is the Come to Jesus moment for most buyers, who may have been online searching for a dream home for months or years. The loan officer examines your credit and finances, and tells you in clear terms what you are approved for. Sometimes you are approved for a lot more than what you want your monthly payment to be. The loan approval process quickly gets to the bottom of what you are willing, or able, to pay for a home. At this stage, you only need to talk to one bank since you are looking for a Fannie Mae conforming loan, or in some cases a FHA government loan. The guidelines for these products are almost universally the same from bank to bank, so save the “rate shopping” for after you are under contract.

Establish your Game Plan

Once you determine what you are willing or able to pay, you need a buyer agent to set some realistic goals for you. A seasoned buyer agent knows the ins and outs of the market and what the price points are in different areas, so tell them what your ideal home is and show them your loan approval letter. The agent will tell you if those goals are realistic, and if not, suggest some alternatives. Put another way, the most efficient way to search for a home is to look at your finances first, then work backwards from there. In addition to helping you set goals, the buyer agent will describe the process, the role of each party involved, the timeline, etc. Interview a few and select one that you are comfortable with. If you can find one, some buyers choose “exclusive buyer agents” that work with buyers only. They are generally more focused on the buy-side of real estate and you won’t have to worry about conflicts of interest (such as agents working both sides of the fence).

Home Search

Once you have hired an agent and have a realistic game plan, the fun starts. The buyer agent will set up a home search on the multiple listing service (MLS) to provide an initial list of prospective homes that match your goals, and this is updated daily when new homes are listed. Since you have probably been online searching for while on aggregators like Zillow, you can send any ideas to your agent to get him or her up to speed. The buyer agent will ask you for your schedule, then set up showings for both of you to attend (usually in 30 minute increments). You can tour each home and ask questions about what you saw. A seasoned buyer agent will have formed an opinion already, since they have been inside thousands of homes. Pick his brain, that is why you hired the agent.

Finding your Dream Home

In any given price range and area, there are a handful of properties that rise above for different reasons. It is your agent’s job to get you inside those homes quickly. It is my experience that there is one home that will really jump out at you. Screaming “buy me”. We call this the gem or diamond in the rough. You probably will be excited and want to make an offer. Your seasoned buyer agent will tell you to slow down (assuming there is time) and conduct some due diligence. The agent will present any questions you have to the list agent and prepare a report on comparable homes in the area, so you have an idea if the ask price is fair and what your offer might be. Decide on a number and some other key points like closing date, and your buyer agent will prepare and present an offer for you. The loan approval letter is attached so the seller knows you are able to follow through on your offer when they take their home off of the MLS pending the sale.

Negotiating a good deal

Once the offer is presented, most negotiations are on the phone. Your agent should make a phone call to the listing agent along with emailing the offer, to review key points of the offer and gauge their reaction. A seasoned agent will employ several negotiation tactics to get the deal done as close to your offer as possible. There is usually a counteroffer or two made by the seller (over the phone, email or text). In the end, it is your money and your decision to settle on a price with most buyers following the advice of their agent. This is why the interview/hiring process is so important, a buyer agent will have some sway over you in your emotional state and you should trust them.

Due Diligence

The sales contract will have some contingencies which allow you to apply for a loan and take a closer look at the property. Only after these are satisfied will you proceed to closing. You will have limited amount of time to hire an attorney, conduct a home inspection, review condo documents, and apply for a loan. This is usually routine but if anything comes up, a seasoned buyer agent can tell you what he has seen before and how it was handled. The agent is there at this stage to “put out fires”. If repairs are needed, the buyer agent will work with you and your attorney to negotiate that with the seller.

Closing

Once these contingencies are met, proceed to closing, sign papers for an hour, and accept the keys to your new home. You will do a brief walkthrough beforehand to make sure the property is still in good shape and that the sellers have moved out.

For More Detailed information, click here to get our complete home buyer’s guide!