Buying a home is one of the most significant decisions you'll ever make. The process can seem overwhelming, especially if you're navigating the real estate world for the first time. A conventional sale is the most common type of home transaction, where the buyer purchases the property from the seller with the help of a mortgage or cash payment. Understanding the steps involved can make the journey smoother and less stressful.
In this guide, we’ll walk you through the conventional sale process step by step, so you’ll know exactly what to expect as a homebuyer.
1. Decide on Your Budget and Get Pre-Approved for a Mortgage
The first step in the conventional sale process is understanding how much you can afford. This helps narrow your home search and ensures you're looking at homes within your price range.
Setting Your Budget
Calculate your monthly income, debts, and expenses.
Factor in other homeownership costs like property taxes, homeowners insurance, and maintenance.
Aim to keep your monthly housing payment (including mortgage, taxes, and insurance) around 30% of your income.
Get Pre-Approved for a Mortgage
Before you start looking for homes, you’ll need to get pre-approved for a mortgage. This shows sellers that you're serious and financially capable of buying. A pre-approval letter is essential, especially in competitive markets.
2. Find a Real Estate Agent
Having a qualified real estate agent is crucial during the conventional sale process. Agents are experts in local markets and can help you find homes that meet your needs and budget. They'll also guide you through the paperwork, negotiations, and closing process.
How to Choose a Real Estate Agent
Look for agents with experience in your desired area.
Check reviews, ask for referrals, and interview potential agents.
Ensure your agent understands your goals and has a good communication style.
Your real estate agent will help you navigate the complexities of buying a home, saving you time, stress, and potentially money.
3. Search for Homes That Meet Your Criteria
Now comes the exciting part: house hunting! With your pre-approval letter and a real estate agent in hand, you can begin searching for homes that meet your criteria.
What to Consider When Searching for Homes:
Location: Is it near work, schools, and amenities?
Size: Does the home have enough bedrooms and bathrooms for your needs?
Condition: Will it require significant repairs or upgrades?
Price: Is it within your budget, considering mortgage payments, taxes, and insurance?
Your agent can help you schedule home tours, attend open houses, and provide insight into the properties you're interested in.
4. Make an Offer on a Home
Once you've found the perfect home, the next step is to make an offer. Your real estate agent will help you determine a fair offer price based on comparable homes in the area, also known as comps.
Key Elements of an Offer:
Offer price: The amount you're willing to pay for the home.
Contingencies: Conditions that must be met for the sale to go through, such as a home inspection or financing contingency.
Earnest money deposit: A small amount of money you offer upfront to show you're serious about buying. This typically ranges from 1% to 3% of the home's price.
Closing timeline: Your proposed timeline for closing the deal, usually 30 to 60 days.
The seller may accept, reject, or counter your offer. If they counter, you can negotiate terms until both parties agree.
5. Conduct a Home Inspection
Once your offer is accepted, you'll enter the due diligence phase, starting with a home inspection. The inspection is vital to uncover any potential issues with the property before finalizing the sale.
What the Home Inspection Covers:
Structural integrity (foundation, walls, roof)
Electrical and plumbing systems
Heating, ventilation, and air conditioning (HVAC)
Pest and mold issues
If the inspector finds significant problems, you can negotiate repairs with the seller or ask for a credit to cover the cost. If the issues are too extensive, you may have the option to back out of the deal, depending on your contingencies.
6. Appraisal and Finalizing Your Mortgage
As part of the conventional sale process, the mortgage lender will require a home appraisal to ensure the property’s value matches the loan amount. The appraisal is an unbiased estimate of the home's worth, conducted by a professional appraiser.
Once the appraisal is complete, and if everything checks out, your lender will finalize the mortgage. This is when you'll lock in your interest rate and finalize loan terms.
7. Title Search and Title Insurance
Next, a title company will perform a title search to ensure there are no legal claims or liens on the property. The title search guarantees that the seller has the right to transfer ownership to you.
Title insurance protects you and the lender from any future disputes over ownership. While it’s a one-time cost, it offers long-term protection and is often a requirement by lenders.
8. Review the Closing Disclosure
A few days before closing, your lender will provide you with a closing disclosure. This document outlines the final details of your mortgage, including:
The loan amount
Interest rate
Monthly payments
Closing costs
Review this document carefully and ensure it aligns with what you previously discussed with your lender. If you spot any discrepancies, address them before the closing day.
9. Close on the Home
The final step in the conventional sale process is closing day. This is when all parties sign the necessary paperwork to officially transfer ownership of the home to you. On closing day, you will:
Sign loan documents and the deed of trust (a document that secures the mortgage).
Pay closing costs, which typically include loan fees, title fees, and any prorated property taxes.
Receive the keys to your new home!
Once the paperwork is signed and processed, the property is yours!
10. Move In and Enjoy Your New Home
Congratulations! After closing, you can move into your new home and start the next chapter of your life. Be sure to:
Update your address with the post office, utilities, and any relevant accounts.
Set up homeowner’s insurance and transfer any warranties for appliances or systems.
Final Thoughts on the Conventional Sale Process
Understanding the conventional sale process is key to making informed decisions during your homebuying journey. By following these steps, from getting pre-approved for a mortgage to closing on your dream home, you'll be well-prepared to handle the complexities of real estate transactions.
With the right planning and guidance from a skilled real estate agent, the conventional sale process can be smooth and rewarding. Whether you’re a first-time buyer or seasoned homeowner, this guide serves as a helpful roadmap to your homebuying success.
