Steps To Buying A House!  Part 1

Last Updated 07-09-2019 By Rico Castillo

Steps to buying a house can be scary, but exciting and costly, if you're not careful!  If you're ready to buy a home, then keep reading.  You've come to the right place!

Steps To Buying A House - Told in a Story 

So, you've finally decided to buy a home!  Congratulations!  

You’re excited!  Your mind is racing and you’re thinking of the beautiful and fun get-togethers you’re going to have with family and friends during the holidays and special occasions… Then it hits you.  Can I do this?  Where do I begin?  What do I need to do first?   

You tell yourself, "I wish I knew the steps to buying a house before contacting a pesky real estate agent."

Want to know the steps to buying a house?  Continue reading and save money.


What do I need to do next?  You recall someone telling you once before when you were just thinking about buying a home, but now that you’ve definitely decided to buy, you can’t remember who it was and you just can’t seem to remember anything.  Ugghhh!

You tell yourself that you want to get this process right…  the first time!  You want to save money (or to not lose money)... You certainly do not want to be one of those horror stories you’ve heard about when buying a home.

Our Story Begins...

This is a fictional story about The Stark’s journey in learning the steps to buying a  house in Folsom, California, where I live.  But this could be anywhere in California or in the US.  The paperwork may be different in other parts of the country, but the process is pretty much the same.

Our buyers - we’ll call them Ned and Catelyn Stark.  They have a 3 year old daughter named Arya and another one on the way.  A son, who they’re going to name, Jon. (Yes, I’m having Game of Thrones withdrawals - so the GOT story continues - sort of - in this article)

They live in San Ramon, California.  Ned works in the tech industry in San Francisco and Catelyn, a stay-at-home mom, works even harder taking care of Arya, as well as herself.

Though Ned does very well and is able to support the family, they can’t seem to save enough... Buying a home there seems out of reach.  Prices of homes are just too high and they’re tired of making their landlord’s mortgage payment every month. 

“Why are we helping our landlord get rich... Why can’t we make our own mortgage payment?” she asked Ned one Sunday evening when they were going over their finances.

They could probably squeeze by and get into a small home and buy something a little further away, but they’re thinking about their quality of life.

“So many people live beyond their means.” they thought.  They didn’t want to do that!  They didn’t want to work just to pay the mortgage...  they didn’t want to work - just for their house.

There had to be a way.  Maybe buying a home out of the area...  No matter where they go, they know they have to learn the steps to buying a house.

BY ACCIDENT or WAS IT FATE

Catelyn was up later than usual one evening.  The baby, Jon, was pretty active inside her.  And the thought of buying a home that has more room for their growing family was front and center on her mind.  

She decided to do a little web surfing and came across an article, which she thought was about San Ramon, but it turned out to be about Folsom, California. Read the article here.

The article captivated her.  She really liked the website as well. 

The article was a quick read, but written in a fun, light-hearted way... and site was full of good information.  It talked about the Folsom real estate market and why it’s a very desirable area to live in.  She liked that it offered many amenities and fun activities for the family, which is what she wanted for her family.

She appreciated the sites many tips, guides and insights into buying a home from both the buyer and seller sides.  "Hmmm!  I think I this is an article where I can learn the steps to buying house."

She thought the city compared very well to where they are now - good neighborhoods, great schools and close to lots of shopping, etc.

She was hooked.  She was excited.  Buying a home could be a real possibility!

She decided to talk to Ned about the possibility of moving there since it’s also a pretty techie town.  He can transfer there.  Intel has a large corporate office there on Prairie City Road just off of Highway 50.


Intel is the largest employer in Folsom.


They decided to look into it and get more information.  They decided to give me a call hoping I could consult them in the steps to buying a house.

THE CALL - THE FIRST STEP

I received a call from Catelyn.  She said she really enjoyed my article and my website.  She proceeded to tell me about their situation and she wanted to know what buying a home would entail... I listened.

During our conversation, Catelyn said she was a little nervous.  She's heard so many horror stories about buying a home.

I asked Catelyn if it was okay if I ask her a lot of questions. I told her the more I know about their situation, like a doctor, the better I can give them the right diagnosis and offer the best advice.  She agreed!  Some of the questions I asked were...

  • What made you decide to buy a home?
  • Why now?
  • Where do they want to live?
  • What price range are they looking to buy?
  • Have they spoken with a loan officer yet or are they paying cash?
  • What’s their motivation to move here?
  • Do they have a home to sell before they can buy?
  • What are they looking for?
  • And many, many, many more questions…

It took a good 30 minutes talking to her about their situation and what they wanted.  I told her the very first step in the many steps to buying a house is to  know where they currently stand financially so they’ll know what the best NEXT step to take... they needed to talk with a couple of very good loan officers. 

I suggested they speak with a couple of different types of loan officers - one from their local bank and one who works for a wholesale or direct lender.   The loan officers who work with the wholesale/direct lenders have their own money or can broker or shop their loan package around to get them the best rates and terms.

I told them it’s best to do this so they can compare the “numbers” and save money.  When I said "numbers" I told her that I meant "...to make sure you’re comparing apples to apples." 

“What does that mean?”  she asked.

I didn’t want to confuse them.  They were already nervous about starting the process of buying a home.  I didn't need to confuse them too.  So I told them to look at how much the lenders are actually charging them and compare the estimates line by line.

I also said to make sure that you compare the initial numbers with the final and see if there are any substantial changes.  There shouldn't me a large discrepancy between initial and final.

With that said, I gave them a couple of phone numbers of some local loan officers whom I’ve had a great relationship with and have done many transactions with over the years.  I trust them and I know they’ll take care of Ned and Catelyn Stark well.

THE PREAPPROVAL

They were approved for a certain amount - much higher than they thought they’d be approved for.  They were elated and happy to know that they’re taking the right steps to buying a house.


Want to save yourself some headaches?  Get a PreApproval!

Photo by David Goehring


They called me and gave me the good news.  I was very excited for them and I told them that I would set them up to start receiving listings of homes that met their criteria... and up to the amount that they’re approved for.

I then asked them if they felt comfortable with their monthly payments at that price range.  They said they could handle it, but it would be better if they have a lower payment...  I did not like the hesitation on her voice.  So, I said...  

“Well, it’s up to you to go up that high, but if you want to have a lower payment I’ll call your lender and see what price range we should be looking into to have a monthly payment that you’re comfortable with and still find the house that you want and love… If we don’t find anything at that price range, then you can decide to start looking in the higher range!”  "How does that sound?"

They agreed and they appreciated that I cared enough to asked them about their level of comfort regarding their monthly payment.  I told them that I wanted to make sure they don’t work just for their house.  They have to have a life too.

It’s important to note that your agent knows what type of loan you have.  Is it an FHA loan, a government insured loan?  A VA loan, a conventional loan, etc?   

Your agent needs to know to determine the best way to structure an offer… they need to know if the property needs to qualify as well in terms of condition, etc.  VA and FHA loans, needs the property to qualify for the loan as well….  A conventional loan cares mostly of your qualification and not so much the property. 

Look into other ways to finance a home.

THE SEARCH

Catelyn did most of the online search.  I set them up so they could Save the homes that they liked and reject the ones they didn’t.  I told her when they’re ready to come up to view homes, they can tell me a day in advance and I’ll be able to set up our viewings just by looking into their Saved homes... They won't have to give me the addresses of the homes that they like.

They had a lot of homes Saved, but I narrowed it down to just 6 to 8 homes that they can view for the day.  I went over the homes with them over the phone to make sure we have best 8.  (Viewing 6 to 8 homes in a day could get tiresome and they all run together in your head, unless you take very good notes.  There are exceptions, but it’s best to keep it at a manageable number).

THE TOUR

In the steps to buying a home, it can be argued, but touring homes has got to be the most fun.  I asked Ned and Catelyn to please not rely on their memory.  I asked to please make sure to take very, very good notes as they go through each home.  It would also help if they rank or rate each home.  It will help them tremendously after our tour.

They were really looking forward to visiting Folsom and looking at the homes in different neighborhoods.  We looked at a few homes in El Dorado Hills, a nearby city, just so they’ll have an idea as to what’s available there.

Our tour began by first driving around town... We went through Sutter Street in Old Town Folsom, then went over the Rainbow Bridge and drove towards Beals Point and then turned around and made a left on Folsom Lake Crossing towards Empire Ranch. 


Click on the map below to go to full view


It was a perfect day to drive through Folsom Lake Crossing because water was being released on the Folsom Dam. 

We went through the old and new areas of Folsom before we finally started looking at homes.  They loved the tour and agreed that this was definitely their favorite part in the steps to buying a home.


The search for that "one" home could take the longest time.  It could take several weeks to find that one you want to make an offer on.  Since most transactions take 21 to 30 days, YOU have to make sure you take this into consideration to determine what works best for your timeline.

Even if you find a home and get into contract, DO NOT give your 30 days notice until you close on that transaction.  There are many, many things that could happen during the transaction - even if you're doing everything right.

Keep in mind that the seller could change her mind for any reason or something could come up on your end that requires you to get out of the transaction.

Once you close, you typically will have an extra month before you make your first mortgage payment, so use that time to move in at your own pace and not be hurried.  It gives you time to also clean your current home or apartment so you can get your deposit back.


At the end of our viewing tour, there were a few homes that they really loved. They couldn’t believe the prices of the homes they looked at compared to the prices of the homes in the Bay Area.  They were excited that this could actually happen for them.

Before we parted, they said they’ll think about it and get back with me if they decide to make an offer on any of the homes we looked at that day or keep looking.

I was not surprised when they called me later that evening and said they wanted to make an offer on the #1 home on their Top 3 list.  They were all great homes and anyone of them would work well for them.  But I totally understood why the #1 home on their list WAS the #1 on their list.

MAKING OFFER - TERMS, PRICE, CREDIT OR NO CREDIT

The steps to buying a home can be overwhelming and part of it is the paperwork.  So I made sure that I explain the process of making an offer.

Here is what I told them…

… Before we make an offer, in order for us to structure the best terms and price so our offer has a good chance of getting accepted, I have to look at other “comparable” homes in the area that have sold.  This way, we…

  1. Are making an offer based on facts
  2. Won’t have an appraisal issue (the property has to appraised for the same amount or value that your lender is giving you.  They won't give you money for more than what the collateral is worth.)
  3. Can determine if there is room for us to ask for credit towards closing costs or not (if you need some closing costs assistance)
  4. Can determine ahead of time if the seller will have enough to cover any repairs that we may ask to be repaired.

Making an offer is one of the steps to buying a house and knowing the value of the property gives us more options and saves you money by not overpaying for the property.

However, there are exceptions…

When the market is crazy “hot” and it’s a seller’s market - meaning there are many more buyers fighting over a property - then the traditional way of doing business goes out the door.


Do not be fooled.  Just because you don't see other competitors making offers, they are out there.  It IS a competition.

Photo provided by Chris Lott


Here are a few scenarios that can happen when the above situation is the case (there are quite a few more, but these are the more common ones):

  • Frustrated buyers (those whose offers have been beaten time and again) will make an offer that is way above the asking price or what comparable homes have sold for - just to get their offer accepted.  If the property does not appraise, then they’ll deal with it then. (If the seller’s agent is wise, before accepting that offer, they should find out what the buyer would do if the property does not appraise at the offer price.  How would they come up with the difference, etc?)
  • Make an offer without an appraisal (cash) or without an inspection contingency (or both) and deal with the repairs themselves after closing.
  • Make an offer with a very short closing timeline.  This is good for the sellers who would like to close as soon as possible.
  • Make an offer with a combination of the above scenarios.

When it’s a normal market, however, then we have to do our due diligence as I outline above.

Another thing we have to consider when making an offer is to decide how much your Good Faith Deposit will be.  The Good Faith Deposit (or EMD, short for Earnest Money Deposit) is not your down payment.  It goes towards the overall amount of funds that you’ll have to bring to title at closing. 

The EMD is a way to let the seller(s) know that you are serious about buying her home.  

The Starks seemed overwhelmed.  "Yes, there's quite a bit more to buying a home than what everyone thinks." I said.  However, I assured them that I'll be here to guide them.  I just wanted them to know what the next steps were...  It was time to put the offer together. 

Continue to Part 2

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About the author: All of the articles in this site were written and provided by Rico Castillo (DRE# 01234643) with Coldwell Banker.  If any information is provided by another source, such as the local MLS or by Metrolist, then a disclaimer will be on that page.

Rico can be reached by cell at (916) 934-3146 or email at rico.castillo@cbnorcal.com.   Visit his YouTube Channel at https://bit.ly/3bAaZJs

My aim is always 100% client satisfaction by helping you accomplish your real estate goals and finding you the home you've Dreamed about in the area you and your family can feel proud and safe to live in!