Jul 1, 2022

The Home Buying Process Explained

Manny Cominsky

The home buying process has the unenviable distinction of both being one of the largest and most important transactions of most people’s lives, while also being a largely misunderstood (or at least not clearly understood) process. That’s why here at the Sunbound Blog we’re committed to helping people understand the home buying process through all our helpful articles on the basics of the real estate process, from choosing a home to moving to your final close and move-in. Today we’re helping to explain the housing buying process at a high level, noting all the big events along the journey as well as some important things to think about along the way. If you want more information on a specific topic, check out the real estate section of the Sunbound Blog where you can find a host of more specific articles explaining all things relocation and real estate. 

Determining your home buying budget

The first step in the real estate process, like with just about any other transaction in life, is to start thinking about how much you can spend, or want to spend, on your home. What makes buying a home unique from buying many other things is that often times buying a home will require you to take out a mortgage. This will often require the step of seeking mortgage pre-approval in order to find out how large of a loan you can take out, and therefore what your home buying budget is.

Before you start looking for homes, make sure you have a home-buying budget that makes sense for you.

During the mortgage pre-approval process you will submit information to a lender for them to determine how much they are willing to lend you to purchase your home. A pre-approval is different from a pre-qualification, which is merely an estimate of what the lender would be willing to give you. While a pre-qualification can certainly still be helpful when starting your home-buying search, pre-approvals are generally more useful to house buyers as a mortgage pre-approval generally will not change its material terms (mainly, the amount of your loan and its interest rate) without some unforeseen changes. So while pre-approvals are not guaranteed, they often allow you to make your most competitive and strongest bids for a home.Mortgage providers will offer a variety of rates for their loans, and it’s best to talk to multiple lenders and shop around to try and find the best rate before you commit to any lender. As always, consulting a real estate or financial planning professional is often a great first start when making important financial decisions like taking out a mortgage.

Another thing to consider when assessing your available funds is whether you currently own a home and, if so, whether you will be selling it in conjunction with your home purchase. If you are going to be selling your home just before or just after your home purchase, consider getting a home valuation done to know roughly how much additional funding you can expect. In fact, Sunbound was founded to help people in this exact situation by helping them to secure and move into their new home while simultaneously selling their old home.  

Finding the right real estate agent

Speaking of shopping around for help, another foundational early piece of the real estate process is finding a good real estate agent. While legally you are not required to use a real estate agent to buy or sell a home, there’s a reason so many people consider using a real estate agent a necessary step for buying a home. Realtors play a variety of incredibly helpful roles throughout the home buying process, not only do they help you by making sure that you are completing all of the right mechanics in the process like the paperwork and inspections, but also by providing helpful insight into things like neighborhood and market conditions, or high-quality local service-providers like contractors or painters.

For these reasons, finding the right realtor can be especially important if you are buying a home in a new area, like if you’re relocating for your retirement, as the right realtor can serve as an invaluable guide to your new location by helping you to find all the best neighborhoods for buying a home that you might not know as an out of towner. And one you’ve found our home and moved in, nothing helps getting acclimated to a new area like a local tour guide who you’ve been working with and who already knows all your tastes and interests.

Making an offer on a home

Once you’ve made a budget and picked a realtor, it’s time to start seeing houses and learning what’s on the market in your price range. Once you’ve found the home (or, depending on market conditions, the several homes) that you want, it’s time to make an offer, which is your formal proposal to buy the seller’s home. Generally an offer will discuss three important elements: your price, your contingencies on purchase, and your timeline. Once an offer has been submitted, the seller can either accept or reject the offer, or offer a counter proposal. Often buyers and sellers will go through several rounds of negotiations, touching not only on the obvious things like price but also things like contingencies or required maintenance to the property. 

Once an offer has been accepted, you and the seller will finalize and sign a sales contract at which point the house will be deemed “under contract.” It is during this process that you may (and indeed, probably will) make an earnest money deposit to let the seller know that you are a serious buyer. An earnest money deposit generally is roughly 1-2% of the purchase price of the home depending on the market. While you’re always free to walk away from your offer after making it and before you close, this often means losing your earnest money deposit. Once your house is under contract, however, you’re still not quite to home ownership as you will now begin the inspection and due diligence process, which generally takes roughly 30-45 days before your home sale becomes official and you are ready for move-in.

Doing your new home due diligence 

So what exactly is going on in those roughly 30-45 days before you officially become a homeowner? Well this is the time that you will generally be taking care of all the contingencies and inspections you negotiated with your seller, making sure that the house lives up to your expectations when you made the offer and that you still want to go through with the sale. It also gives the seller time to make any repairs or do any other agreed-to modifications to the property.

A home inspection and appraisal ensures that the home that you are buying lives up to everything you expected when you made your offer.

This is also the time where you will go through the process of finalizing your financing with your lender in order to buy your new home. This will generally involve having an appraisal and inspection of the home so that your lender can confirm both the value of the house and your ability to pay back the loan. In addition, you will likely also have to make various submissions to your lender as well as fill out various documents. Because each lender will have their own specific requirements, make sure to keep in careful contact with your real estate agent and loan officer during this process to make sure that you are on top of all your required paperwork. One main concern during this part of the process is that the lender may conclude that the value of the home is actually lower than you might have thought, requiring you to go back to the seller and negotiate a lower final price. 

The final closing process

Once you’re through all the above steps it’s finally time for the big moment: closing and officially becoming a homeowner. This is the final stage of the transaction and the point at which you will sign all the required documents, like a mortgage or deed of trust, and formally confirm the home buying process. Along with finalizing all your documentation, you will probably also need to pay closing costs which are usually about 3-5% of your loan amount and, depending on the terms of your loan, may also need to make a mortgage payment as well. Otherwise, this marks the end of the home-buying process, and the beginning of the home-enjoying process!

With the home-buying process behind you, it's time to move in and start the home-enjoying process!

While this article should give you a great sense for all of the most important parts of buying a home, the easiest way to buy or sell your new home is to let Sunbound handle the whole process for you! If you have any questions about buying or selling a home, or about real estate or relocation more generally, please reach out to us at info@sunboundhomes.com, or check out our services page to see all the ways that we can help you with your real estate transactions. Whether you’re relocating across town or across the country, we want to help you get from point A to point B as easily as possible. 

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