DEBT | Aug 14, 2023

7 Steps for Buying a Home

The prospect of buying a new home can be exciting. But for many, the process seems complex and overwhelming. They are not sure what steps they are to take and when. As stewards of God’s resources (Matthew 25:14-30), we are compelled to make wise purchase decisions. And given that a home purchase is often the largest purchase a person will make, it is important that they have a good understanding of the process to go about it wisely. To simplify the homebuying process, here are six steps for buying a home that you need to know:

Step 1: Determine your budget and get a pre-approved.

Before you start searching for a home, you must determine how much you can afford. Skipping this important step can result in purchasing a home that is too expensive, resulting in increased financial stress, decreased financial flexibility, and decreases generosity. As a rule of thumb, it is recommended that you are able to make a 20% down payment on the home and have a mortgage payment of no greater than 30% of your monthly income.

Once you have determined your budget, you will need to get a preapproval letter from a lender. This lets sellers know that you can access the funds needed for the purchase. But be careful with the approval amount. The amount approved is the maximum amount the lender is willing to lend, not the amount you should spend. More often than not, the amount you should spend is lower than the approved amount.

Step 2: Determine your must-haves.

Identify your wants and needs in a home. Your needs may include the number of bedrooms and bathrooms, a certain location, and a yard. Wants may include a certain kitchen décor, a specific neighborhood, and desired square feet. List your want and your needs and prioritize both lists. This will help you filter homes and reduce your search time.

Step 3: Start house hunting.

To get started, you can use online tools like Zillow and Redfin to search for homes based on location, price range, and other criteria. You can also set up alerts to be notified when new homes are listed that meet your search criteria. You can also drive through neighborhoods that interest you and get an overall feel for the area to which you are moving.

However, you will eventually want to work with a real estate agent. Real estate agents help you find homes that match your must-haves and provide guidance throughout the home buying process. They usually have a good knowledge of the local market and the homes for sale. They also help you navigate the negotiations and paperwork involved in buying a new home.

Be patient when house hunting. Finding a home that meets you needs at a price you can afford typically takes time. Rushing to make a purchase can either leave you with a home you don’t like or a debt burden that is too large. Of course, it is possible that you don’t find the perfect home and must compromise on some wants.

Step 4: Make an offer.

Once you have found a home that you would like to purchase, you must make an offer to the seller. If you have a real estate agent, they will help you determine a good offer amount and submit the offer for you. The seller may accept the offer, reject the offer, or provide a counteroffer. If both parties are able to come to an agreement, the home becomes under contract.

Step 5: Get a home inspection.

As part of a typical contract, several contingencies are included to protect the buyer and the seller. A home inspector will examine your home for any issues that you need to be aware of. The inspector will check the roof, electrical, plumbing, HVAC, appliances, and other parts of the home. Once the inspector has examined the house, he or she will present you with the findings. If they determine that costly repairs or replacements are needed, you can make the covering the expenses as part of the negotiation with buyer. As “as is” offer skips this part of the homebuying process. Such an offer puts the buyer at risk and is usually not recommended.

Step 6: Get an appraisal.

An appraisal determines the value of the home. If you are using a lender for the home’s purchase, they will likely require an appraisal. The lender wants to make sure that they are not lending more than the home is worth and that the loan-to-value is accurate. If the value of the home is lower than expected, you will either need to renegotiate the purchase price or bring more money to the table for the purchase.

Step 7: Close the sale.

There are other contingencies in the contract, like a clean title and ensuring that funding is in place. Once everything checks out, the buyer can close on the house. Often, the buyer’s real estate agent and an attorney are present at the closing. There also may be others present. The closing agent ensures that all documents are signed and recorded, that any fees are properly distributed. Once everything is complete, keys are given to the house's new owners.

*Images used with permission. *

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You were meant for more. Your money was meant for more. You and your money are meant for an exciting, adventurous, and satisfying purpose. You were designed to live and give generously. And deep inside you know this and want this.

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