Buying a new home can be complex! For most lenders, from the time you find a new home to the time you actually purchase the home and get the keys, it can take 30 to 45 days. Tomo Mortgage moves quite a bit faster (saves you time and money that way), so that we can close in as little as 14 days.
But what actually happens in that time? What do you need to do, and when? Here’s a guide to help you understand what’s happening at each step so that you know what to expect.
Step 1: Are you ready to buy a house?
Think about your current financial situation when you are thinking “What are the steps to buying a house?” You will want to make sure your credit score is at least a 580 if you are considering a FHA loan, or around a 620 if you are looking into a conventional loan (see our FHA vs. Conventional Loan Guide). You can get a free credit report from Annual Credit Report (the only website permitted by the federal government to give you a free annual credit report).
Buying a home is a big commitment, of course, but it’s generally a good idea to buy sooner rather than later. Most people keep a home for about 8 years, for example—you don’t need to focus on your “forever home” right away. And that might mean you have different options available to you, such as a smaller home with a lower down payment cost.
So, while it can be daunting to think about home ownership, it’s generally a good financial move. And you’ll have a lot of people who can help you out at every step—your “buyers’ agent” and your mortgage loan officer, for example, have a ton of experience helping people figure out all the steps.
Step 2: Figure out how much house you can afford
After you establish your credit is in a purchasing range, we recommend that you check out this affordability calculator, so that you can get a feel for what your monthly payment might look like, and what price range you will be able to afford. This calculator factors in the same things as your pre approval will, your credit score, income, debt to income ratio, and location to show your purchase price point range. You also want to consider savings for your closing costs, estimate a 2-6% of your total purchase price.
Step 3: Start your home search online
Use online real estate search platforms like Tomo Mortgage to explore houses on your own to get a feel for what is out there and the general price ranges in different locations. This can be fun if you let it! Envision yourself in the spaces.
Part of the online search experience is about figuring out what you really like—is it an open concept, for example, or a place with a great kitchen. Do you need all the bedrooms, or just a smaller office space?
One of the most important is where you want to buy. Think about local schools, commute times, the community you’ll be joining. You might have two or three areas that meet your needs, but the more you can pin down “where” the more efficient and effective your search will be. Most real estate agents “work” a specific geographic area—that’s where they’ll show you the homes available and have the most knowledge of what’s available and what’s a fair price.
Step 4: Create a must-have list for your home
Think: What do you really want in a home? What can you not live without and what are you flexible on?
Write down your top priorities, like the number of bedrooms, proximity to work, or a big backyard. Then, make a list of “nice-to-haves” that you’re willing to compromise on. This list will help you stay focused during your search.
Step 5: Get pre-approved for a home loan
It’s fun to shop around online—even if you don’t plan to buy just yet—but when you start talking with an agent and touring homes you’ll want to make sure you’re in a realistic position to buy.
Getting pre-approved for a loan is critical when shopping for a new home. It will show sellers that you are a serious and capable buyer. And you’ll want to have a strong pre-approval in hand when it comes time to make an offer on a home.
To get pre-approved – simply complete these forms online. It only takes about 15 minutes. You can get a pre approval letter the same day (if you submit late in the evening, we will have it to you first thing in the morning)!
Step 6: Find an agent in an area you’re interested in
Interview at least three agents to find someone you actually like and trust. Start by asking friends, family, or coworkers if they know a good agent—word-of-mouth referrals are usually pretty solid. When you chat with agents, get curious about their experience in the neighborhoods you’re eyeing and check if they’ve helped buyers in your price range. You can do this by going on a couple home tours with different agents, to see if they show you homes in your budget, and with the features that you have expressed matter to you.
Schedule viewings with your agent and take notes during each tour. Most people don’t buy the first house they tour, or even one of the first three! That is why the more tours you are able to take the better, as you are continually informing yourself of what you like and don’t.
Pro tip, things like carpet, weird wall colors, or furniture are much easier to fix to your liking than unusual layouts, being short of a bed or bathroom, or lack of natural lighting.
Always ask your agent to give you information on if the home is in a homeowners association, and if so, what types of fees they typically charge. Our personal advice would be to stay away from homeowners associations in general, so that you don’t get roped into fees or regulations unexpectedly. However, homeowner’s associations can be useful for buyers who would like less maintenance, especially if you are buying a condo and utilities or landscaping are included.
Step 7: Make an offer on a home
Once you find the home you love, it’s time to make an offer. Work with both your agent and your loan offer (the person who helped you get pre approved) to craft an offer that’s competitive but still within your budget. Many lenders unfortunately don’t take the time to help people craft a winning offer, so if you’re not getting much in the way of guidance that can be a big red flag. If you’re not getting this kind of support we strongly recommend reaching out to Tomo to help you through this critical process (your financial story can be the difference between winning and losing your dream home).
Of course, be ready for counteroffers and decide in advance how much you’re willing to negotiate. It’s important to know if you’re in a buyer’s or seller’s market. In a seller’s market, where inventory is low and competition is high, you might need to make a higher offer to stand out from the crowd. Conversely, in a buyer’s market, you’ll have more leverage to negotiate since there are more homes available and less competition.
Your agent will guide you on market conditions, but you can also get clues yourself. If homes you’re interested in are disappearing quickly and there doesn’t seem to be much available, you’re likely in a seller’s market. On the flip side, if you notice homes sitting on the market for a while or see price reductions, you’re probably in a buyer’s market (which is good news for you – yay!).
Step 8: Apply for your mortgage
Once you get an accepted offer on a home, it’s time to officially apply. You’ll need to submit more financial information and provide added documentation to get you approved for the loan and “clear to close.”
By this time, the interest rates may have changed from your pre-approval (they change constantly), but you still have time to decide what rate you want to “lock in” and the rate points or upfront fees you want to factor into the overall cost of the mortgage.
Step 9: Schedule a home inspection
Schedule a home inspection from a licensed home inspector to give the property a thorough check-up. You want someone who’ll dive into everything—think structural issues, mold, or outdated systems. This isn’t just about peace of mind; it can save you from costly surprises later. Your agent will be able to help you set this up.
Also, don’t forget that your lender will need an appraisal to make sure the home’s value lines up with the loan amount. This is a must-do to make sure you’re not overpaying. Make sure both the inspection and appraisal are done before you commit, so you’re fully in the know. Your lender will order the appraisal for you, so that is a responsibility you can take off of your plate, and the fee will be included in the closing costs on your home loan.
Step 10: Shop for homeowners insurance
Get quotes from multiple insurance providers and compare coverage options. When shopping for homeowners insurance, make sure your coverage matches your needs, here are some examples:
- For a home that is lower priced: Choose replacement cost coverage to rebuild the whole house if needed. Avoid actual cash value, which is deducted for depreciation.
- For a bigger home, with custom features: Get extended or guaranteed replacement cost coverage to cover rising costs for materials and labor.
- For a historic home: Look for specialized coverage that accounts for unique materials and restoration needs.
- For a condo: Ensure your policy covers any upgrades you’ve made, like new appliances, and check how it fits with the building’s master policy.
Also, review coverage for personal belongings based on what you own and consider liability coverage to protect your assets. If you live in an area prone to floods or earthquakes, you may need extra policies to cover those risks.You’ll need to have your insurance in place before closing.
Step 11: Review closing disclosures
Carefully review the closing disclosure from your lender, which lists all costs associated with the loan. Check for discrepancies between the loan estimate and the final costs. Don’t hesitate to ask your lender to clarify any fees that seem off.
Step 12: Conduct a walkthrough
Is everything as it should be? Schedule a final walkthrough of the home the day before or the morning of closing. Make sure all agreed-upon repairs have been completed and that the home is in the condition you expect. Test appliances, lights, and plumbing one last time.
Step 13: Time to Close
On closing day, you’ll need to sign all necessary documents and pay your closing costs. Make sure to double-check everything before signing—don’t rush through it. The typical closing process usually takes 30-60 days, but here at Tomo Mortgage, we typically close in about half that time. Keep this timeframe in mind from the moment you place your offer until you close, depending on the lender you choose. Your lender should give you an estimated close date once your offer is placed. It is also important to note that not all lenders close on time, in fact most lenders don’t! So having accommodations in place that are flexible, until you are officially closed will give you peace of mind. (Tomo Mortgage closes on time 98% of the time)! Once you’ve signed, the home is officially yours, so start prepping for the move!
Congrats, you now know what are the steps to buying a house! If you have questions about these steps or are curious to get started, please give one of our pre approval advisors a call or text at: 737-510-2523.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
