Ultimate Guide on How to Buy a House

It’s important to understand the neighborhoods you are looking at and their surroundings. We encourage you to drive and walk through the neighborhoods you are considering. Is there a school nearby? Do you feel safe? Can you walk to things like restaurants or shops? While some of these things might not be important to you, they may be important to a future buyer if you ever sell your home so it is always worth taking note of.

Buying a home is often the largest financial transaction you will make in your life. It requires a lot of research and preparation. One thing that’s important to remember when looking for homes is to try and only make one big “life change” at a time. Want to buy a new car? Maybe wait until after closing. If you have other priorities, that’s important to think about when determining the best time to buy a house.

While HGTV has made it seem like there are perfect homes out there, that is just not the case. Every home has some kind of issue whether it’s cracks in the driveway, missing paint or scratched floors. You name it – even in new builds. It’s important to remember that most of these things don’t need to be deal-breakers and can in fact be fixed fairly easily. Issues with foundation or other structural issues are a different story. If you are looking at new homes, you might not run into as many issues but you might also have a larger upfront cost. If you are looking at older homes, you might have a lower upfront cost but more issues that need to be addressed. Either way, listen to your realtor, trust your gut and remember that nothing is perfect.

If you are ready to buy a home, it’s a good idea to keep up-to-date on current real estate market trends. Is it a buyer’s or seller’s market? What is the average time on market? What neighborhoods have high activity? Knowing these things will help you make an informed decision on the best time to buy your home, where to buy and what a potential timeline might look like. If you have a good realtor, they will help you stay informed to make sure you are making a smart decision. We encourage you to really assess what you want – compromise is a given when buying a home but we don’t want you compromising on the wrong things.

It’s so important to communicate thoroughly about your wants, needs, deal-breakers and intentions. If you are a first-time homebuyer looking to buy a starter home, it’s important to disclose that so your realtor can make sure to add “resale value” as a focus point. If you are looking to buy a forever home, make sure you communicate all your “wants” so that your agent can work off a comprehensive list of desired features and amenities. Communicate your timeline so that you and your agent can work efficiently to meet your goals. We can’t emphasize it enough – communication is key!

In order to determine a budget, you first have to have your target neighborhood(s) and some wants identified. For example, if you want a big backyard in the heart of the city, your budget is going to be different than if you wanted a multi-family unit in the suburbs. Research your desired neighborhood and properties that have recently sold in it. This will help you get a sense of the property value in a given neighborhood and help you make a more informed decision regarding your budget.

Mortgage Loan Officers help you get pre-approved for a loan as well as help you get the final loan and set up your mortgage payments. It’s a good idea to consult with an officer before you start looking at homes, as your pre-approval letter will help determine your overall budget. Plus, if you find a home you like on your first showing, then you at least have a letter to prove you are qualified to purchase. If you already have a realtor, chances are they will have some recommendations or referrals for you. If you work with us, we will definitely connect you with great people to work with. We often consider pre-approval the first step in how to buy a house.

Depending on the circumstances, you may be eligible for or want to consider different types of loans. There are 4 common types of loans – Conventional Fixed Rate, Federal Housing Administration, Adjustable Rate Mortgage and Veteran’s Affair Financing. You’ll want to explore the Conventional Fixed Rate (CFR) loan because it locks in an interest rate and monthly payment for the duration of the loan which helps give you more stability and consistency long-term. The other most common type of loan, unless you’re a veteran, is the Adjustable Rate Mortgage (ARM) which allows you to start with small payments and a lower interest but it is subject to change after a certain amount of time. First-time home buyers tend to finance using CFRs.

After you decide what type of loan you’d like to explore, consult your mortgage loan officer with a budget structure you want to maintain. They will run numbers including a credit report and income assessment and write you a pre-approval letter with a certain loan amount. The pre-approval number is established by judging someone’s capacity to make monthly payments, capital and cash reserves including all accounts, collateral and credit. You will need to provide all of this information to the loan officer in order to get pre-approved.

Once you have done your research on the homebuying process and determined a budget through pre-approval, you are officially ready to start looking for a home!

When you are buying a home, especially for the first time, it’s easy to get caught up with the bells and whistles of new-buildings or charming old homes. While we understand your excitement and desire to “have it all,” it’s important to establish a wants versus a needs list. For example, if you have two dogs and a ton of outdoor gear (like most Coloradoans do), you’ll probably want to prioritize a backyard and garage over the ensuite bathroom or all hardwood floors.

We always think that it’s better to be aware of all of your options before making a decision which is why we encourage you to initially look at every listing that falls into your budget range. Go through the listings and eliminate every single one that doesn’t match your “needs” list. This will make a large search concentrated and can help you narrow down your top choices. Generally, you’ll want to have 2-3 top choices at any given time, but you can expect to view anywhere from 5-20 homes depending on the market and your budget.

We know that it can be hard to give up control on such a large life event, but sometimes it really is better to leave it to the professionals. A skilled realtor will be able to direct you towards listings that suit your needs and fit your budget. They might even be aware of some listings that are not available on sites like realtor.com or zillow.com so it’s really important to make sure you are working with a reputable, trustworthy agent. They will conduct competitive research around your top listings to make sure that if and when you make an offer, it is competitive and appealing to the seller. After all, experienced realtors are the experts in how to buy a house. 

Housing markets are skyrocketing on a national basis which means that real estate is not as predictable right now as it sometimes can be. There are instances in which buyers put multiple offers in on multiple properties before one gets accepted or sometimes the offer is accepted but the transaction falls through afterward. Yes, buying a home is very exciting but we encourage you to reserve most of that excitement for after the negotiation phase.

Okay, so you’ve found a home! Now it’s time to make an offer.

The first step in making an offer is determining what you are actually willing to pay for the home. There are two different prices in real estate: the list price and the sale price. Homes do not always sell for their original list prices – sometimes they get sold for less, and in a market like Colorado, oftentimes they get sold for more. You will need to set a limit on what you are willing to spend, and you will also need to determine the type of loan you will be using to pay for it.

A purchase agreement indicates your intention to buy a property. It details things like earnest money, the down payment, method of payment (i.e., cash or financing) and any contingencies that might exist outside of an inspection, like keeping a piece of furniture or patio set in the backyard. If there are certain things you would like included in the property that would otherwise deter you from buying it, now is the time to bring those up to your agent and include them in the purchase agreement. It’s important to remember that the seller can always say no, so remember to circle back to your wants versus needs list.

If your offer gets accepted, it’s reasonable to want to move on a specific timeline. Therefore, it’s generally helpful to determine a timeline with your agent. Ask yourself, “When do I want to be moved into my new house?” If the answer is ASAP, your agent can indicate that in the purchase agreement or in conversations with the seller’s agent. Having a timeline helps keep things on track from getting your loan secured to the inspection scheduled and everything in between.

Offer accepted! Next step is closing – you’re so close to owning your new home.

Congrats, your offer was accepted! In that offer, you hopefully included an inspection contingency that requires the home be inspected by a third-party professional for mechanical, structural, safety and/or health issues. We highly recommend including this in your closing because not all seller’s will disclose the true condition of their home. Once the offer is accepted, you will need to get the inspection and appraisal scheduled – your realtor will help you with this. It’s best to start getting all relevant documents together at the beginning of the closing process so you feel entirely prepared.

Your future property will be appraised and inspected before closing is finalized. The appraisal will give you an idea of the estimated value of the home. This process is not very thorough and is intended to give a rough idea of the cost without assuming any issues with the property. The inspection is done very thoroughly and can often include sewer inspection and radon tests. Again, we highly recommend including this step as it will ensure the longevity of your new home. The inspector should always find at least some minor issues with the home; as we mentioned earlier, not all homes are perfect and if the inspection comes back totally clean, chances are it was not as thorough as it should have been.

After the inspection reports are completed, you will review these with your realtor to see which, if any, of the issues need to be addressed before the closing is finalized. If you would like things fixed, for instance a faulty light switch, you will need to include this in the purchase agreement that your realtor drafts. If the owner is okay with the contingencies, they will agree to that purchase agreement and move forward with the closing. If not, you can either walk away, propose a reduced price or come up with an alternative solution with your agent. Remember your wants versus needs list; if you can live with some of the issues and they aren’t deal-breakers, they aren’t always worth including in the agreement.

So, you have made it through the entire closing process, both parties have mutually agreed on the purchase agreement, and it’s time to get the keys to your new home. You will meet up with your agent to finalize all the paperwork, including the title agreements and transfer of ownership. Be prepared to sign a lot of paperwork maybe even bring a lucky pen! Sometimes you will even meet the previous owner at closing. This is a big and exciting day so don’t forget to take it all in!

Once you close, take those sweet new keys and start making that house your home! We hope this buying guide gives you the information you need on how to buy a house and start the process comfortably. If you are looking for a realtor in Aurora, Denver, or surrounding areas, please contact us today so we can help you find your dream home.