8 Essential Steps When Buying a House
Buying a house can be stressful even in the best of circumstances, and in a highly competitive market it can sometimes feel almost impossible. While some details may vary, the basic buying process remains largely the same regardless of market conditions. Understanding these 8 essential steps can help you reach your goal and turn the dream of owning a home into reality.
Regardless of when you plan to buy, there are several things you need to know. On average, the process of buying a house takes approximately six months. In a 2021 anonymous survey of buyers, the average property search itself lasted between two and three months.
It is important to remember that buying a house involves much more than simply viewing properties. You will also need to assess your creditworthiness, find the right real estate agent, make offers and negotiate, arrange an inspection, prepare for the move and, finally, purchase your new home.
Where should you start when buying a house?
Some of the first things to consider when buying a house are how much you want to spend, where you would like to live and what matters most to you as a buyer.
Here are a few questions worth asking yourself:
How much house can I afford?
Will I need a mortgage?
How much have I saved for a deposit?
Can I afford to live in my preferred neighbourhood?
Are property values in the neighbourhood rising or falling?
How long will my commute to work be?
Are the local schools suitable for my family?
Once you have answers to these questions, you can begin your property search.
Here are the 8 most important steps to take when buying a house.
Step 1: Check your creditworthiness
Most buyers today purchase property with the help of financing. Whether you are buying a property as an investment or looking for a new home where you plan to spend many years, understanding your borrowing capacity is essential.
There can also be a significant difference between taking out a loan on your own and applying with a co-borrower or guarantor.
What is creditworthiness?
Who better than the Croatian National Bank to define creditworthiness? The CNB describes creditworthiness as follows:
“Creditworthiness is an assessment that shows whether a potential borrower is capable of assuming the obligation of regularly paying the annuity or instalment for a specific loan amount.”
Why is creditworthiness important?
As you can probably imagine, your creditworthiness is directly connected to the amount you may be able to borrow.
Greater borrowing capacity can give you access to a higher-value property. It is therefore extremely important to remain realistic when buying real estate. Our personal wishes are not always aligned with our actual financial possibilities.
Taking out a loan alone or with a co-borrower?
Taking out a loan is a major responsibility and a long-term agreement that ties you to a particular financial institution for many years.
The answer to whether you should apply alone or with another person depends heavily on your personal circumstances. Borrowing capacity may be higher when a bank approves a loan that will effectively be supported by two people.
There is no universal answer to this question, and every buyer needs to make an individual decision. Some buyers may have parents, partners or other people willing to act as co-borrowers or guarantors.
Before beginning the purchase process, buyers should determine their borrowing capacity and consider whether their mortgage application will include a co-borrower or guarantor.
Step 2: Determine what kind of house you can afford
Assessing your creditworthiness will give you an idea of the maximum amount you may be able to borrow. You should already have a general sense of what you can realistically afford.
A creditworthiness calculator can help you establish an appropriate price range by taking into account your income, existing credit obligations and preferred loan repayment period.
Prioritise your wish list according to your budget
Once you have an approximate budget in mind, create a list of the things you absolutely want or need in your new home.
Your financial capacity will probably influence the size, location and features of the property you ultimately choose.
Some things to consider include:
Number of bedrooms and bathrooms
Square footage
Outdoor space
Preferred location
Type of property
Layout, features and finishes
School district
Pet-friendly features
Distance from work
Step 3: Find a real estate agent
Most buyers find it extremely helpful to have a professional real estate agent guide them through the entire process of buying a house, which can sometimes become quite complicated.
In many transactions, having an experienced professional involved can make the process considerably easier for the buyer.
Here are some of the areas in which an agent can help:
Market insight: identifies property value trends, new developments, buyer demand and overall market conditions
Pricing: assesses the value of a property and recommends a competitive starting offer
Negotiation: understands when there may be room for a lower price and how to negotiate additional costs, repairs or other terms
Local knowledge: provides valuable information about the neighbourhood in which the property is located
Professional recommendations: can recommend reliable lenders, lawyers, contractors and other professionals
Experience: simplifies the process by dealing with potential problems, monitoring deadlines and overseeing documentation
Naturally, you want to make sure you choose the right agent.
A 2022 survey by a major US real estate company found that 24% of homebuyers said they were not satisfied with their agent.
Fortunately, Eurovilla has more than 80 experienced agents with excellent client reviews. You can meet our team here.
Step 4: Start your search
Searching the properties available on the Eurovilla website is an excellent way to begin looking for your new home.
In today’s digital world, 95% of buyers use online resources during their property search. Start by looking at properties in your preferred area, then filter the results by price and your other requirements.
Your agent can also send you recommendations based on your preferences and arrange property viewings.
Try to remain flexible
You may need to adjust your criteria as your search progresses.
For example, you might decide that sacrificing an additional bedroom is worthwhile if it allows you to live in your preferred neighbourhood.
Experiment with your search parameters and see what your budget could buy if you make small adjustments to your wish list.
What should you look for during a viewing?
Once you begin viewing available properties, pay attention to the overall “health” of the house so you can get a better understanding of any significant issues you may face if you decide to make an offer.
A professional inspection can ultimately provide you with a more detailed report on the condition and quality of the property, but during your initial viewings you should pay particular attention to:
Structural defects and cracks
Water pressure – turn on taps and showers
Electrical issues – test light switches
Heating, cooling and temperature retention
Roof and exterior condition
Noise from neighbours or traffic
Step 5: Make an offer
Once you have found the right house, your offer should be informed by a Comparative Market Analysis (CMA) prepared by your Eurovilla agent.
A CMA is an estimate of a property’s market value based on recent sales of comparable properties in the same area.
Using the CMA as a reference point, your agent can help you determine a fair offer price and decide whether you should leave some room for negotiation. This will largely depend on current conditions in the relevant property market.
It is important to remember that your offer may not be accepted.
This can be disappointing, but try not to become discouraged if you do not successfully purchase the first house you make an offer on. Many buyers need to make offers on several properties before successfully completing a purchase.
Step 6: Arrange an inspection
The vast majority of buyers inspect a house before completing a purchase.
Arranging a property inspection is one of the best ways to make sure that the house you are considering does not have major structural problems.
Your real estate agent should be able to recommend a reliable and appropriately qualified property inspector.
As the buyer, it is advisable to attend the inspection. This gives you an opportunity to better understand how the property works and to ask questions about its condition. Your Eurovilla agent will usually be there with you.
Once you receive the official inspection report, you can discuss the findings with your agent and decide how you want to respond to the seller.
If significant non-cosmetic problems are discovered, negotiations may be reopened. You could request that the seller resolve the problems before the purchase agreement is signed or agree on terms that allow you to carry out the necessary work after the sale.
One of the most common solutions in situations like these is an adjustment to the purchase price.
Step 7: Secure your financing
Even if you have already received an initial indication that you qualify for financing, you will still need to complete several additional steps before formally securing your mortgage loan.
Once all of the required steps have been completed and your application has been successfully reviewed, the bank can issue final approval for your loan.
Mortgage application
Applying for a mortgage can be a lengthy process, as your bank will require documentation before it can process and approve your application.
Every bank has its own requirements, but some of the basic documents commonly requested include:
Employer confirmation
Payslips, usually for at least the previous three months
Property valuation, which may also be arranged by the bank
Keep in mind that individual banks may request additional documentation.
Valuation of the house you want to buy
If your bank appoints its own property valuer, there may be very little you need to do yourself.
Your real estate agent should coordinate with the seller’s agent and the valuer to arrange access to the property.
Once the valuation has been completed, you and your agent can review the valuation report, which will show the estimated fair market value of the property and the methodology used to calculate it.
If the valuation matches your offer price: you should be in a good position to proceed with the purchase.
If the valuation is higher than your offer price: even better. This means you may be purchasing the house below its estimated current market value.
If the valuation is lower than your offer price: your bank or other lender may decide not to finance the full amount because, from its perspective, you are paying more for the property than its assessed value.
In that situation, you may need to cover the difference between the assessed value and the agreed purchase price yourself, or try to renegotiate the price with the seller.
If you believe the valuation is inaccurate, you may also be able to request another valuation from your lender.
Step 8: Sign the contract and move in
Many buyers choose to carry out one final viewing either the day before or on the morning of signing the purchase agreement.
The purpose of this final viewing is to confirm that the property is in the same condition as when you made your offer and that the seller has completed any agreed repairs, if applicable.
On the day the contract is signed, expect to spend some time reviewing and signing the required documentation.
Once everything has been signed and the sale has been formally completed, you will receive the keys.
The house is yours.
The final step is preparing for the move and gradually settling into your new home.