Buying a home isn’t the equivalent of a quick trip to the mall. It’s a long, complicated process which can drag out for months. Before starting your home buying journey, do your homework and understand everything involved before diving in.
Here are eight steps to buying a house in Utah. For advice specific to your situation, talk to a local real estate agent.
Step 1: Evaluate Your Current Financial Situation
The first step could put a halt to the whole process. Can you afford a house?
Take a good, honest look at your financial situation. Even if you’ve saved up a 20% down payment, which isn’t always necessary if you’re a first-time home buyer, there are other considerations. Closing costs, including appraisal fees and home inspections, will add to the expense of buying the home.
Your current financial picture will also give you a good idea if you can qualify for financing options. Is your credit score high enough to qualify for a mortgage? Lenders will be reluctant to approve you for a mortgage if they’re unsure of your ability to repay. If you have any doubt, try getting pre-approved for a mortgage.
And once you’ve moved in, what about the costs of homeownership? You’re not just swapping a rent payment for a mortgage payment. As a homeowner, you have to budget for maintenance and repairs. Homeowner’s insurance possibly private mortgage insurance, and property taxes will also drive your costs higher.
Don’t forget that homeownership is also a commitment. You’ll need to have a stable income stream, a bit of life stability, and be planning on staying in the same place for several years. To learn more, read 7 Requirements You Need to Meet Before You Can Buy a House
Step 2: Find a Great Utah Real Estate Agent
If everything checks out financially, it’s time to find a great Utah buyer’s agent. A buyer’s agent works on your behalf to find you the best home for the best value.
They’ll scour the MLS for homes that meet your criteria or find out about homes not yet on the market in their network. When you’re ready to tour a home, they can schedule showings. Clever agents offer on-demand showings to fit your schedule, too.
Real estate agent commission fees are paid by the seller, which means that a buyer agent’s services are essentially free to you. Clever Partner Agents offer an additional benefit, a Home Buyer Rebate. If you work with one of our agents, you’re eligible for $1k back from their commission to help you cover closing costs.
For more information, read our article What Does a Real Estate Agent Do for a Buyer?
Step 3: Read Up on Local Real Estate Market Trends
When you buy a home, the month or season can have a huge impact on how much you end up paying for it. Homes sold in May and June typically command a premium over the rest of the year, so as a buyer you might want to avoid those months.
If the best time to sell a home in Utah is the spring, that’s probably not when you want to be shopping. You’ll face fierce competition, though you will have access to more inventory. Utah’s rapid population growth over the past ten years has driven up home prices, and median home values are now $340,600. Values grew 13.5% last year, and are expected to grow another 7.5% in 2019 so you might not want to wait too long to buy.
It’s hard for someone who isn’t deeply involved with the housing market to know how to time it properly. If you have a strict budget and want to squeeze every penny, work with an experienced, local agent who can help you time your purchase to get the best possible price.
A buyer’s market means that the power in the home buying process is with you, in a seller’s market it’ll be tilted towards the seller. Which kind of market can you expect in 2019? Read Will it Be a Buyer’s or Seller’s Market in 2019?
Step 4: Get Pre-Approved for a Mortgage
If you didn’t get pre-approved for a mortgage when trying to figure out if you could even qualify, now is the time. If you’re in a seller’s market, you could end up in a bidding war. If you’ve been pre-approved for a mortgage and the other buyer hasn’t, it will swing the competition in your favor.
Mortgage pre-approval with a bank is a less-involved process than a mortgage application. The bank will request documents such as W-2’s, pay stubs, and tax returns to verify your income. They’ll also probably pull your credit score and perform other checks. After going through the process, the bank will tell you how much you qualify to borrow for a mortgage.
Home sellers like this assurance because it lessens their risk. If you’ve been pre-approved, they know that you can afford their house and likely qualify for a loan. There is less chance of the deal falling through.
Some home buyers may choose to get pre-qualified, instead. The main difference between the two is that you self-report your income with a pre-qualification. But if you’re concerned about the impact of a hard pull on your credit report, this could be a good option.
We’ve got a more detailed breakdown in our post, Pre-Approval vs Pre-Qualification: What’s the Difference?
Step 5: Start House Hunting
Many eager first-time home buyers make the mistake of jumping to this step. After all, touring homes is a lot more fun than filling out applications! But you could find yourself wasting time if you’re not ready.
Before scheduling your first showing, get clear on your needs and wants. If you hate scraping off a car in the winter, you probably need a two-car garage. A fireplace in the living room would be cool, but it’s not a deal-breaker. It’s not enough to know that you want to buy a house, you must know what kind of house and what features matter most to you.
Of course, your budget could dictate some of the items on your list. Let’s say you’re dying for mountain views. The Salt Lake City suburb Draper is known for them, but the median home value is $516,300, which could be outside your budget. Bountiful also has mountain views, but homes are a much more affordable $363,200.
Use online tools like Zillow Research to find median home values within your budget, and to assess an area’s long-term outlook. Sites like schooldigger.com offer information about local school districts, and many counties disclose crime statistics on their websites.
Once you’ve found a few neighborhoods and homes that look good, set aside a weekend or two to look at homes and attend open houses. While open houses are great, not all homeowners have them, and it can be overwhelming trying to squeeze into a small bathroom with a few other potential buyers. Before making an offer, it’s always a good idea to schedule a private showing.
Unless you have an agent, it will be hard for you to do this. When you think about it, would you want a stranger tramping through your living space? Having a licensed realtor with you reassures the sellers.
Your local agent will be an invaluable resource during this process. They’ll know the premiums that certain items on your list add to a home’s selling price. If you’re having a hard time narrowing down your priorities, they have years of experience to draw upon when asking questions and helping you define your goals.
Take a look at our Free House Hunting Checklist to start making your list.
Step 6: Make an Offer
Congrats, you’ve found your dream home! Now it’s time to make an offer. Set aside some quality time to talk things over with your agent, because an offer is much more than a number.
The price you’re offering to pay for the house is only a piece of the offer. A suggested closing date, whether or not you’re pre-approved, if you’re willing to cover any of the seller’s expenses, these can all be included in an offer.
Once you’ve decided on a price, your agent will call the seller’s agent and find out if there are any other offers on the table. If so, you might have to come in higher or offer other incentives to sweeten the deal. Your agent will draft an offer letter outlining your terms, and you’ll have to write an earnest money check.
The earnest money check will be an amount from 1-3% of the offer price, and you can stipulate that it be refunded if the seller refuses your offer or the deal falls through. The agent will present the offer letter, earnest money check, and your mortgage pre-approval letter to the seller for them to consider.
The seller typically has a few days to a week to look over your offer. Expect there to be some negotiation on the price and other items in your offer. The seller could ask for more money or simply another week to move out of the house.
Drafting a competitive offer letter is an art form. The letter should include and touch upon all the points that are important to the seller, and possibly convince them that you’re the perfect person to live in their home. An experienced agent will be able to help buyers draft a competitive offer letter that’s more likely to be accepted.
For a deeper look at this process, read How to Make an Offer on a House.
Step 7: Inspections and Negotiations
Unless you’re in a true seller’s market, desperate to own a house, and willing to take your chances, your offer will likely include a clause stating that it’s contingent upon inspection.
Your offer likely set forth a period of time during which you had to schedule a home inspection. You’ll have to call and set up an appointment with a home inspector, but your agent will have recommendations.
The home inspector will spend a few hours in the house examining the home’s structure, mechanical and electrical systems, and foundation. They’re looking for issues that could be costly repairs, hidden problems, or just general information that you should know about the house.
Once the home inspector has given you their findings, typically there is another round of negotiations. You may want something fixed before you move in, such as a leaky faucet or malfunctioning garage door. This is where your agent is a huge help.
Most people don’t have the negotiation skills to handle the give and take of bargaining down a price or asking for concessions for repairs. Experienced agents are expert negotiators and know what to look for and how much to push back with the sellers. The amount of leeway you’ll have will depend a lot upon the current market conditions/level of competition for that kind of home in particular.
A home inspection prepares you to own this home but also gives you negotiating points. Learn More about why a home inspection is a step in buying a house that you shouldn’t skip in 3 Ways Inspections Help Home Buyers Get Better Deals.
Step 8: It’s Closing Time!
Expect to be completing a lot of paperwork during the closing. Whether you’re signing in a title company’s office or completing an online form, the closing can take a few hours. You will be signing and initialing a lot of forms.
And expect to either have to bring a check or sign forms to have closing costs rolled into your mortgage. Closing costs can cover property taxes, mortgages fees, setting up an escrow for homeowner’s insurance, and more.
According to a recent study by Bankrate, the origination and third-party fees in Utah average $1,891. And this average doesn’t include many of the fees listed above. Overall, closing costs are often approximately 3% for the buyers.
If you bought a home at the median home value in Draper, for example, your closing costs could be over $15,000. In Bountiful, a little lower at $10,000. You should take these into consideration when deciding where to concentrate your home search because they can add a lot to your final buying price.
Closing costs vary between markets and situations and can be hard to pin down. An experienced real estate agent will be able to help set accurate expectations in terms of what fees/costs to expect come closing time. Before heading into your closing, read 4 Things Buyers Need to Know Before Closing on a House.
If you’re slightly overwhelmed at the thought of buying a home, reach out to Clever to be connected with a local real estate agent in your area. Having an expert guide you through these steps makes the process much easier and much less stressful.