People always ask us “How long does it take to buy a house?” Truthfully, there’s really no set time. With our first property, it took us years to find the right place but we closed 30 days after finding it. With our second property, we found it the first weekend we looked, but it wasn’t until 3 months later that we finally had an offer accepted and had closed.
While there isn’t necessarily an average length of time it takes to buy a house, there are some pretty standard steps and phases you’ll go through. To take a closer look at what’s involved, I’ve broken out the process into 3 phases: the pre-work, the home search, the closing process.
The Pre-Work
At this stage in the game, you’re just at the very beginning of the (exciting) home buying process. Depending on how certain and decisive you are, this phase can take no time at all or it can take years. This phase took Jordan and me years the first time around and just a week or so the second time.
There are 5 steps that you should go through as you go through this phase:
Decide that you’re actually ready to buy a home
I know, obvious. But this first step takes a lot of reflection, research, and discussion. If you’re not ready emotionally or financially to buy a home, stop here. One of our favorite tools to use as we just started toying around with the idea of buying a home was the NY Times rent or buy calculator. While this calculator only deals with the financial piece of the decision, it was beyond helpful to easily put some real numbers to my daydreaming about buying a house of our own.
Calculate how much you want to spend
Notice that we’re not saying calculate how much the bank will lend you. That, in my opinion, is a secondary concern. The first thing you want to consider is how much you feel comfortable paying. Your mortgage is likely going to be your largest monthly expense and it’s an expense that lasts for 30 years. Figure out what you’re comfortable spending (including insurance, tax, and maintenance) each year and then figure out if the bank will lend that to you. Need help calculating the monthly payment? Use this tool from Nerd Wallet.
Narrow down the wants and needs
At this point, you’re feeling pretty excited about the fact that you’re about to start looking for a home. Awesome. But before you log hours visiting open houses, try to start making a list of the areas you’re interested in and what your wants and needs are for a home. When we started, our search was so broad that it became overwhelming quickly. In the city or out? 1, 2, 3 bedroom? Parking? Schools? Street noise? Walkability? Proximity to the freeway? Once we got focused on neighborhoods and what we really needed out of a home, we zeroed in on some great properties really quickly.
Find a great real estate agent
Once you find a home you like, you’ll want to move quickly, so having a good agent already lined up will mean you can write an offer right when you need to. When you’re choosing your agent, consider these:
- Is the agent familiar with the area that you’re looking in? What are some recent home that they’ve helped a client buy or sell in the area?
- Are they busy? Being busy is great, but being too busy for you is going to be frustrating. If they pass you off to an assistant, that might be a signal they won’t have time for you.
- Do they have good references? Have any of your friends or family had a great experience with them?
- Do you feel like they are actually listening to what you want? Do you feel comfortable with them?
Shop around for a mortgage and get pre-approved
We didn’t spend as much time doing this and I really regret that. We were so excited to start the process, we immediately went to open houses, fell in love with one on the first day, and then attempted to rush an offer. This meant we picked a bank that looked good enough and had them pre-approve us as quickly as possible. We missed out on that house because we couldn’t get the pre-approval quickly enough and then we still didn’t do additional research on the right mortgage for us. Lose, lose. Learn from our mistake and do this early.
Phase 2: The Home Search
Now you’re ready for the fun (or frustrating) part – viewing open houses and trying to find the right home. This phase also includes 5 steps.
Tour and research like a pro
When touring homes, things can get blurry really quickly. You may see dozens of homes in a week and keeping the details straight isn’t easy. Make sure you take a notebook with you to make the most of viewing homes. One of the best things we did during our long search process was to keep track of neighborhood comps. I had an epic spreadsheet running with months of data that included the list price, sale price (if applicable), time to close, square footage, bedrooms, bathrooms, and other notes. When it came time to make an offer we felt really comfortable using this spreadsheet to come up with an offer that was fair and was accepted. It also helped us to spot homes that went for far too much, compared with neighborhood comps, so we felt better about losing out on them.
Read disclosures
Before you actually make an offer, your real estate agent should send you a disclosure package. Only ⅔ of states require them, but you should ask for one regardless. The disclosure package will spell out any defects or considerations that the seller is aware of. What turns up in the disclosure package will affect what you ultimately offer, so sift through the less than exciting papers carefully.
Decide on contingencies
Contingencies are the terms that you’ll put into your offer that allow you to cancel the deal, if necessary. These are really helpful to protect you legally if something about the house doesn’t check out. Contingencies often include home inspection, financing, home appraisal, and title. Our seller already had a home inspection completed, but we weren’t satisfied with everything inspected. When writing our offer we included a contingency for the foundation, roof, and chimney inspection, which ended up giving us negotiating power later on. Be sure to think about all of the contingencies you really need and set a reasonable timeline for clearing these contingencies (it’s your responsibility to do so).
Make an offer
Now for the nail-biting part of this: it’s time to make your offer and see if the seller will accept it. Your agent will draw up a purchase offer with all of the details you’ve decided on: the offer price, closing date, contingencies, earnest money deposit, and any work that you’re requesting to be completed. Once you sign this you are legally bound to its terms, so read carefully! Before choosing a closing date, ask your bank how long they will need to close on the mortgage.
Offer acceptance or more negotiation
The seller will respond to your offer in one of three ways: they’ll decline your offer, they’ll accept it, or they’ll counter-offer. Once you have an accepted purchase offer you can move to phase 3.
Phase 3: The Closing Process
Congratulations! Your offer has been accepted and you’re now in the final phase of the home search process. When you get to the closing process thing speed up. All of a sudden you’re juggling very real deadlines with reading very big documents. While you may have thought the hard work is done, this is not the time to hit cruise control. There are 12 steps you need to get through in the next 30-60 days before you can walk across that threshold and call that house your home.
Deposit earnest money into an escrow account
Remember the earnest money that you included in your offer? Now’s the time to take that and deposit it into an escrow account. Depending on the state you live in, you’ll use either a real estate attorney or an escrow agent to facilitate the close on your house. You’ll send the earnest money to them right after your offer is accepted and they’ll hold it until the closing.
Book any inspections
If you listed any inspections as part of your contingencies, you’ll want to get those booked asap so that you have time to clear review the reports and clear the contingencies before the expiration date in stated in your offer. Work with your real estate agent to find thorough, trustworthy inspectors.
Request a Loan Estimate Form from the lender
Take that signed purchase agreement and send it to the lender you have chosen, so they can send you back their Good Faith Estimate (GFE). This is where spell out the terms of the loan and break out any fees that come along with what they’ll be charging you. Take the time to go through this in detail to make sure that you understand all of the charges you’ll be paying. As you’re reviewing, use the US Department of Housing and Urban Development’s Settlement Cost Booklet to help you understand what should be on the Loan Estimate Form.
Remove Contingencies
At this point, your inspectors have hopefully issued formal reports to you. Take the time to read them thoroughly. This is your chance to make sure that everything with your house is as it seems. Missed items here can cost you thousands down the road. If the inspection reports came back with costly issues that need to be addressed, this is the time to have that discussion with your agent and the seller. You may be able to negotiate a decrease in purchase price or ask to have them repair the issues before you remove the contingency.
Have the property appraised
While your work to get the mortgage may be done (since you submitted most of the documents required in the pre-approval phase), your lender is now going through all of their work. One big piece of the closing? Getting the home appraised. This part can be troubling for some who have offered a sales price of more than what the property is worth. If your appraisal comes back with a significantly lower value on the house, you’ll need to make up the difference. For example, let’s say you’ve made an offer on a home for $500k. It’s a very hot market, so you decide to go in with a high offer. The appraisal comes back saying the home is only worth $475k. The lender will not lend you more than the house is worth, so you’ll need to negotiate a lower sale price with the seller, get a second appraisal, or make up the $25k difference in cash.
Shop around for homeowners insurance
You are required to have homeowners insurance on the property before you close, so now’s the time to shop around for the best policy. Get at least 3 quotes to make sure that you’re getting the best policy at the best price. Be sure to provide all details for the listing, ask them how you can qualify for discounts, and check their credit rating.
Title search and title insurance
Another one of those contingencies that you put in your offer now needs to clear: your title contingency. The title officer and either the real estate agent or escrow officer (depending on your state) will perform the search and make sure that you’re buying a property that the seller actually owns and is clear of any liens. You’ll receive a preliminary title report that will list out all information on the property. If the report comes back clear, you’ll get two types of title insurance (an owner’s and a lender’s policy) just in case there were any mistakes in the search. The contingency can now be removed. Hooray!
Closing Disclosure Form
Three days before closing, your lender should send you a closing disclosure form. This form breaks down all of the terms and closing cost details of your mortgage. Most of these items should be the same as what you saw on the loan disclosure form, so take the time to read this carefully and ensure there are no errors.
Transfer final funds
This is where you have to part with your money. Check with your agent, escrow agent, or real estate attorney to confirm where you need to transfer your money. This will be a large amount of money (your deposit plus all closing costs), so check with your bank to see how you can get this transaction done easily. Remember, these funds need to clear by closing so don’t wait until the last possible minute to send the funds.
Perform your final walkthrough
It has likely been weeks since you’ve seen your soon-to-be new home, so you’ll want to do a final walkthrough to make sure that everything is still intact. While it may seem natural to treat your final walkthrough casually (you’ve seen this place before, right?), take the time to really go through things thoroughly. This is your last chance to spot any issues. Be that person walking through the house turning on lights, faucets, and flushing toilets. If any issues are noted, talk to your agent immediately about negotiating to have these repaired.
Sign closing docs and get the keys!
This is where you and the seller finally seal the deal. After a long journey, it all ends here. If you live in a state where you attend closing in person, you’ll have a set date and time to sign the docs. Checks for the funds and documents will physically exchange hands. Your real estate agent and attorney will be present. If you don’t have to attend the closing in person you can sign the papers wherever convenient for you, as long as they are notarized and sent to your escrow agent. The documents will then be legally recorded with the county and you’ll get the deed to the property.
Home buying can be a long process, but knowing where you are (and what lays ahead of you) can make it feel like less of a black hole.
