Home Buying Guide
Introduction
Buying a home is one of the most significant financial decisions you'll make. Understanding the steps involved can help you avoid common pitfalls and make the process smoother. This guide will walk you through every phase of the home-buying process—from getting pre-approved to closing day—and provide a detailed comparison of loan options, a moving timeline, and essential information on closing documents.
Step 1: Get Pre-Approved
Why Pre-Approval Matters
Getting pre-approved is the first step in the home-buying process. It gives you a clear understanding of how much house you can afford and shows sellers that you're a serious buyer.
How to Get Pre-Approved
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Choose a lender – Research different lenders and loan types.
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Provide documentation – Common requirements include:
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Proof of income (W-2s, tax returns)
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Bank statements
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Credit score and history
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Employment verification
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Credit Check – Lenders will check your credit to determine loan eligibility and interest rate.
Pre-Approval vs. Pre-Qualification
Pre-Qualification Pre-Approval
Estimate based on self-reported financials Verified by lender through financial documents
Less reliable in competitive markets Strengthens your offer with sellers
Step 2: Meet with a Real Estate Agent
Benefits of Using an Agent
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Market Expertise – Agents understand local market conditions and can provide valuable insights.
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Negotiation Skills – An experienced agent will help you negotiate a competitive offer.
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Guidance Through the Process – From showings to closing, your agent will handle the details.
How to Find the Right Agent
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Ask for recommendations from friends and family.
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Check online reviews and professional associations.
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Interview potential agents to assess experience and communication style.
Step 3: Find a Home
Factors to Consider
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Location – Proximity to work, schools, amenities, and public transportation.
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Property Condition – Consider age, maintenance, and potential repairs.
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Future Resale Value – Look at neighborhood trends and planned developments.
House Hunting Tips
Make a list of must-haves vs. nice-to-haves.
Attend open houses and schedule private showings.
Take notes and pictures for comparison.
Step 4: Make an Offer
Components of an Offer
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Purchase Price – Based on comparable sales and market conditions.
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Earnest Money Deposit – Shows the seller you're serious (typically 1%–3% of purchase price).
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Contingencies – Protect your interests with conditions like:
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Financing contingency
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Home inspection contingency
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Appraisal contingency
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Negotiation Strategies
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Start with a competitive offer.
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Be prepared to adjust terms based on feedback.
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Work with your agent to determine when to walk away.
Step 5: Inspections
Why a Home Inspection Is Crucial
A home inspection ensures the property is in acceptable condition and identifies potential problems.
Typical Inspections Include:
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Structural integrity
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Plumbing and electrical systems
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HVAC
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Roof and foundation
After the Inspection
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If issues are found, you can:
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Negotiate repairs or credits
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Request a price reduction
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Walk away (if the contract allows)
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Step 6: Appraisal
Purpose of the Appraisal
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Confirms that the property’s value aligns with the purchase price.
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Protects the lender from over-lending.
If the Appraisal Is Lower than the Offer:
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Renegotiate the price.
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Increase your down payment.
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Request a second appraisal.
Step 7: Title Commitment
What Is a Title Commitment?
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Ensures the property has a clear title (no liens or claims).
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Title insurance protects you and the lender against future claims.
Title Review Process:
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Title search
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Verification of ownership
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Resolution of any outstanding liens or disputes
Step 8: Other Documents
Essential Documents Include:
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Loan Estimate – Outlines estimated loan terms and costs.
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Homeowners Insurance Policy – Required before closing.
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Mortgage Commitment Letter – Confirms final loan approval.
Step 9: Closing
What Happens on Closing Day:
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Final Walkthrough – Ensure the property is in the agreed-upon condition.
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Closing Disclosure – Review all loan terms, interest rates, and closing costs.
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Sign Documents – Key documents include:
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Mortgage Note
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Deed of Trust or Mortgage
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Closing Disclosure
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Pay Closing Costs – Typically 2%–5% of the purchase price.
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Get the Keys – Once the funds are transferred, you’ll get the keys!
Loan Comparison Chart
Loan Type Minimum Down Payment Credit Score Requirement Mortgage Insurance Other Requirements
VA 0% 580+ None Must be a veteran or active-duty military
USDA 0% 640+ None Property must be in an eligible rural area
FHA 3.5% 580+ Required if <20% down Allows higher debt-to-income ratios
203K 3.5% 580+ Required if <20% down Allows financing for repairs/renovations
Select Smart Plus 3% 620+ May be waived May offer down payment assistance
Conventional 3%–20% 620+ Required if <20% down Better terms with higher down payments
Moving Timeline
Timeline Tasks
4 Weeks to Move
- Finalize financing
- Set up utilities
- Schedule movers
3 Weeks to Move
- Start packing non-essentials
- Confirm moving date with movers
- Transfer medical and school records
2 Weeks to Move
- Begin packing essentials
- Notify postal service of address change
- Arrange for pet care
1 Week to Move
- Finish packing
- Confirm final walkthrough
- Pack an essentials box for the first night
Closing Day Documents in Detail
1. Closing Disclosure
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Provided at least three days before closing.
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Lists:
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Loan terms (interest rate, monthly payment)
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Closing costs
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Cash needed to close
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2. Mortgage Note
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Legal agreement to repay the loan.
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Outlines payment terms and penalties for default.
3. Deed of Trust (or Mortgage)
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Secures the loan with the property.
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Grants lender the right to foreclose if you default.
4. Title Transfer
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Transfers ownership from the seller to you.
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Includes recording fees and taxes.
5. Homeowners Insurance Policy
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Required by the lender.
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Must be active before closing.
6. Loan Estimate vs. Closing Disclosure
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Closing Disclosure should match the Loan Estimate.
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Report discrepancies to your lender immediately.
Closing Costs Breakdown
Fee Type Typical Cost
Loan Origination Fee 0.5%–1% of loan amount
Appraisal $300–$500
Title Search and Insurance $500–$1,500
Recording Fees $100–$250
Prepaid Taxes & Insurance Varies
Home Inspection $300–$500
Attorney Fees $500–$1,500 (if applicable)
Conclusion
The home-buying process can seem overwhelming, but breaking it down into manageable steps will help you stay on track. By understanding your financing options, working with a knowledgeable agent, and preparing for closing day, you'll set yourself up for a successful and stress-free home purchase. Happy house hunting!