How to Buy a House in 2021: Crash Course Buyers Guide

The housing market is red hot in 2021 with more people working from home than ever before. People are changing the way they buy homes and most importantly, where they buy homes. 

Learning how to buy a house is not necessarily an easy task and it’s one of the most stressful things you’ll ever do. But, being prepared and knowing what to expect can help ease your nerves as you go through the journey. 

This crash course in home buying should help you enjoy the process a little more.

Factors to Consider 

Before we even dive into the steps you’ll take to buy a house, we should first ask ourselves a couple of questions. 

Is now the right time to buy a house? 

It has been a crazy year for the real estate market. Interest rates are hitting all time lows but are starting to creep up as the market heats up. It’s predicted by industry experts that the rates will continue to go up throughout 2021 so now is the time to buy if you can move quickly. 

You’ll also want to look away from the market and ask yourself if it’s the right time to buy. Do you have your affairs in order? Have you decided on a location? Do you have a specific price-range in mind? Is your family accepting of the move? 

These are all important questions to ask yourself that have nothing to do with the current housing market. 

Do I need a pre-approval? 

Another thing you’ll want to ask yourself is if you’ve secured financing yet? It’s recommended that you get a pre-approval before shopping for homes for a few reasons. First, the real estate agent you decide to hire will take you more seriously because he or she will see that you’re ready to make an offer if the right house comes around. 

Plus, in a hot market like we’re experiencing now, houses are going quick. This means that a house could hit the market today and be gone tomorrow. If you’re not financially prepared to make and offer, the house may be long gone before you ever get a chance. 

How to Buy a House in 2021: Step-By-Step

If you’ve decided that now is the time to buy and you’re ready to get rolling on the process, this step-by-step breakdown will help you get started. 

1. Get Your Credit and Finances in Order  

You’ll want to check your credit and ensure you have enough to cover the down payment and closing costs on a house. Right now lenders are generally looking for a credit score that is no lower than 640 with a positive credit history and three years of consistent work history. 

Of course, these factors can change dramatically from month to month so the lender you work with may have different requirements. 

You’ll also want to establish your down payment. What percentage do you plan to put down? The benchmark for a conventional home loan is 20% so you don’t need mortgage insurance. Keep that in mind. 

2. Get Pre-Approved 

You’ll want to get pre-approved before hiring a real estate agent. We talked about it a little but the importance is very high with this step. It’ll show agents that you’re serious, ready to make an offer, and not going to waste their time. During a hot housing market, some agents may not even work with you until you get pre-approved. 

3. Hire an Agent 

Now you’re ready to hire an agent. Ask around for referrals and try to find an agent that suits your personality and desires. If you’re a first time home buyer, you will want someone who works with a lot of first timers. If you’re looking to downsize, you’ll want someone who specializes in that. 

4. Be Patient When Looking 

We all want to jump at the first house we see because we’re anxious to move and excited about it but patience is key. Remember that most mortgages are 30 years so you’ll be living in this house for a while even if you sell it before it’s paid off. The key is to see enough houses to make a decision. 

5. Make an Offer 

Time to make an offer. Your real estate agent will help you put together an offer package with the price, pre-approval, proof of funds, and any contingencies. The seller may then counter your offer and you can choose to accept it, reject it, or counteroffer. 

Once the offer is accepted you’ll complete a purchase agreement with all the financial information and prospective closing date. This is where you’ll pay your earnest deposit which usually equals one or two percent of the overall purchase price. 

6. Get a Home Inspection 

Most mortgage companies and lenders will require a home inspection before lending you the money. This is something that all real estate agents should suggest when buying a house. The best real estate team should be able to provide recommendations on inspectors because it’s important that you identify any structural or mechanical issues that you can use in negotiations. The typical cost of a home inspection is around $400-500. 

7. Secure Financing and Walk-Through

Keep in mind that just because you got a pre-approval doesn’t mean you’re guaranteed financing. It can take up to 30 days to secure financing and you as the buyer need to provide all the necessary documentation in a timely manner to prevent delays. 

You’ll need to be able to provide bank statements, tax returns, proof of income, and gift letters explaining and financial help you may have received from friends or family. 

Once you’ve secured financing you’ll want to take a final walk-through the house before closing on it. This is your last chance to pinpoint any issues you have before they become your responsibility. This is also when you can address any repairs that were not handled properly from the home inspection. 

8. Close 

If you’re happy with everything, you’re ready to close. The lender will issue a clear to close and you’ll receive all the closing documentation with annual percentage rates, loan types, and fees you need to pay at closing. Be sure to review everything carefully. 

When everything is signed you’ll receive the keys to your new house and the real fun begins. Moving. Good luck!