Home Buying Process


The Home Buying Process: A Step by Step Guide

After much thought and contemplation, you are now mentally and emotionally prepared to buy your first property.  But where do you begin? Buying a home will likely be the most expensive purchase of your life. The process can be long and complicated without proper guidance, especially for first time buyers.  Here at RK Realty, we have simplified the process through a step by step plan that clearly describes what happens before, during, and after making a purchase.   While even the most organized and experienced Realtors cannot guarantee a hassle-free process, being properly prepared can eliminate many of the preventable obstacles.



This often overlooked step should be the first thing any serious buyer does BEFORE looking at properties.   A pre-approval indicates that you have spoken with a mortgage broker, and based on certain criteria (credit, income, debt-income ratio, etc.) you have been deemed a suitable candidate for a mortgage.   In previous years, just about anyone that applied for a loan would be approved. However, the mortgage business has drastically changed and banks have become stricter with whom they give loans.  Getting pre-approved is a must before searching for a home because:

  1. It will determine the maximum amount of money the bank will loan. There is nothing worse than falling in love with a home only to find out that you cannot afford it.   By getting pre-approved, you will know the price range you can afford as well as the terms of the mortgage (down payment amount, interest rates, and length).
  2. Almost all sales will require a pre-approval letter before the seller considers the offer. Having a pre-approval letter ready will expedite the process of submitting an offer.  This is especially important when working with a property that has multiple offers.

If you will be making a cash offer, than you will need to show proof of funds (POF) to accompany the offer.  This will show the seller that you have the funds to make the purchase.  POF can be accomplished by a recent bank statement, letter from a banker, or sometimes just a screenshot of your current balance.


Now the fun begins. Time to start searching for that dream home!  Once you determine the desired location, it is highly recommended you find a Realtor to work with.  Most buyers only purchase 1-2 homes in their lifetime, but a Realtor has usually been through the process many times and can prove to be an invaluable asset. Realtors have access to the Multiple Listing Services (MLS) which is the most up to date database of market activity.  Best of all, there is usually no charge to the buyer; Realtors typically get compensated through the commission paid by the seller. There are many websites that attempt to assist buyers, but much of the information on those websites are not accurate. 


You have found the perfect house! Now what?  This is when working with an agent really comes in handy.  The sale contract is the legal document that will be the blueprint of your purchase.  It will include all deadlines, contingencies, tax proration’s, mortgage requirements, and more.  It is crucial that the contract is written by a professional, as a mistake can be quite costly.  Each contract is tailored according to the buyer’s situation – are there multiple offers? If so, how can we make the offer more desirable to the seller? What contingencies must be included? Do you need to sell your property before purchasing?   It is also highly recommended to hire an inspector as well as an attorney to represent you.  Your Realtor should be able to recommend reputable professionals in these areas.


This step of the process differs from deal to deal.  We have highlighted some items commonly found in the contract that must be taken care of before closing:

  • Earnest Money (EM): This is the money a buyer puts down to show a seller that they are serious about the purchase. There is no set amount, but it typically ranges from 3-5% of the purchase price.  It is then deposited into an escrow account. If the buyer cannot fulfill a specified contingency, he/she must to notify the seller before the deadline in order to get his/her deposit back.  If the deal does close, the EM will go toward closing costs.  An attorney should always be consulted for questions regarding the EM.
  • Home Inspection: This is a very important step in most transactions. A home inspector will test all major systems of the property to make sure they are in working condition. This usually includes, but is not limited to, the heating/AC system, electrical panel, roof, appliances, windows, and water pressure.  They will also test to see if there is any active leaking in the home.  Minor details are often inspected as well.  Following the inspection report, a buyer has the option to proceed, back out, or ask for repairs or a credit.
  • Secure Financing: This contingency is imperative for all sales unless purchasing with cash.  Your mortgage broker should guide you through the process, which usually includes filling out an application, signing forms, and obtaining necessary documents such as tax returns, income verification, and bank statements. A lender will order an appraisal of the property to confirm they are not lending more than the property is worth.  If financing cannot be secured by the contracted deadline, you should contact your attorney to request an extension or write a letter of termination.


This is probably one of the most overlooked yet crucial steps in the process.  The final walk through (FWT) is usually done within 24-48 hours of closing to ensure that the house is still in the same condition as when it went under contract.  What if the home flooded during the interim?  Maybe one of the appliances stopped working? Maybe movers knocked a hole in the wall while moving heavy furniture? Perhaps the sellers agreed to remove or include certain items in the sale.  The final walk through gives the buyer a chance to make sure everything is still working and in proper condition before closing and that everything was removed or included.  If there is in fact an issue, you must immediately notify your attorney so arrangements can be made before closing.


You made it!  All contingencies and terms of the contract have been completed.  A closing location has already been agreed upon by both parties.  If you are unable to make it to the closing, you should notify your attorney ahead of time and you can usually give him power of attorney (POA) to sign the closing documents for you.  The closing costs are usually wired prior to the closing but it is recommended to bring a checkbook, state ID, and PATIENCE.  Your attorney will go through the closing statement (also called a HUD 1) with you which itemizes all credits and debits of the transaction.  You could request a preliminary HUD from your attorney prior to closing so you know what to expect.  Any additional paperwork that has not been filled out or signed is completed at the closing table.  Once the wire has been confirmed and the closing is complete, you are given the keys to your brand new home.

Mission accomplished!