Whether you’re buying your first home or your 10th, the process can be a little daunting — or maybe even totally terrifying. Markets change, interest rates fluctuate, sellers use new tools and the buying process itself never seems to stay the same — so how can you know what to expect?

The good news is that, even though the journey to a brand-new home looks a little different for everyone, there are a few steps you can always count on. Let’s go through the process, from the very first daydream to the moment when you finally take the keys to your perfect property.

Do you think you’re ready to buy a house?

It’s one thing to think about buying a house — imagining what color you’d paint the walls, where you’d put the doggie door, which flowers you’d plant along the front walkway — but it’s another thing to actually do it. That’s why the first step in buying a house is to make sure you’re ready for everything the process entails.

Before you buy

Don’t reach for that home search app until you’ve asked yourself these questions:

• Could my financial habits support any long-term mortgage option?
• Am I ready to settle down in one area?
• Do I want to be responsible for repairs, maintenance and other household expenses?
• Are my career and salary reliable enough for a large expense?
• Does the economy make this the right time to buy a home?

If you can answer a resounding yes to all of these questions, congratulations — you’re ready to become a home buyer.

If, however, you hesitate in one of these areas or more, it’s time to sharpen your favorite pencil and do a little more homework. This doesn’t mean you have to give up on your dreams of homeownership — just do research on finances, the real estate market and the economy until you know what’s causing you to hesitate and how you can overcome it.

Understand the finances

Once you’ve decided that you’re ready to jump in with both feet, your next step is to make sure your budget is on board. Here are a few things to know about the costs of buying a house and how to prepare yourself financially.

Income

How much money should you be making to buy your first home? That depends on a number of factors, including:

• The local real estate market
• Mortgage rate
• Manageable mortgage payment
• The square footage you’re looking for
• The property size you want
• How long you plan to stay in your new home

If you’re looking for a “forever home,” you’ll have plenty of time to make changes and renovations until every detail feels like you. That means you can buy a fixer-upper or a house in need of a few updates — you’ll get the property cheaper and you won’t have to worry as much about resale value. This is a good way to get a comfortable house even with a lower income.

If, however, you’re looking for a starter house or just don’t want the work and worry of renovations, a Bungalo home is the perfect fit. Bungalo homes get all the necessary face-lifts before ever hitting the market — which means you can start living your dream life the minute you walk in the front door.

Savings

According to Forbes, you should have enough savings to comfortably make a 20% down payment. That means being able to handle your mortgage payment every month without having to stress about unexpected expenses — for example, a hospital bill or a mechanical fix for your car.

Also consider things that could dip into your savings over time, including student loans, credit cards or that awesome little takeout place you just can’t get enough of. Ideally, owning a house shouldn’t put other parts of your financial life in peril — so take all of your money habits into consideration when deciding how much house to buy. 

Real estate agents

Although you don’t have to work with a real estate agent during the homebuying process — in fact, with Bungalo, you get 1.5% cash back when buying direct — they can be a helpful resource throughout the home purchase. This is especially true if you’re uncertain about the details or feel you need an ally to protect you legally and financially. (More on that later.)

At this stage of the buying process, don’t worry about deciding on an agent — what you need to know is how much an agent’s commission adds to closing costs.

Generally, agents make between 5 and 6% of the sale price on a home. For reference, a house that sells for $300,000 would come with an $18,000 payday for your agent. This isn’t a budgeting tragedy, though — the commission comes from the total you pay as a buyer, which means it won’t be tacked on as an extra fee. Also keep in mind that the seller takes this money and pays it to their listing agent, who splits it with your agent.

However, if you have a home to sell before you can close on a new one, you’ll have to think more like a seller when it comes to commissions — meaning that about 6% of what the buyer paid will be split between both agents. No matter how a real estate agent factors into the deal, make sure you take them into account when considering costs.

The home inspection

A home inspection is a big part of the real estate game, especially if you end up seriously considering multiple houses. They can make or break a deal — but they can do the same thing to your budget.

According to the Department of Housing and Urban Development, home inspections can range from $300 to $500, but may go higher depending on the square footage of the home and any special circumstances. That may not be a big deal if you only have one house inspected — but if someone swoops in with a higher offer and you end up going to your second choice, you’ll have to pay for another inspection.

Also keep in mind that home inspections are considered confidential. When you pay for one, it belongs to you — so even if someone else made an offer on your dream house, had an inspection and then backed out of the deal for separate reasons, you can’t benefit from that report. You have to pay to have another one completed.

Mortgage and loan considerations

As you consider whether you’re ready for home buying, you don’t yet need to worry about specifics like mortgage rates or what type of home loan is best for you. It’s more important to do the math and find out how a mortgage would impact your overall financial health.

Take, for example, your credit score. According to Experian, applying for a mortgage loan temporarily hurts your credit. This happens in two stages: first, lenders are checking your credit, which can make the score drop by around five points; second, once the mortgage is opened, your score drops again until you prove you’re able to make payments on time.

After the mortgage has been open and your payment habits are established, one of two things will happen. If you make every payment on time, your score will start to improve — and the longer your mortgage lasts, the more you’ll round out your credit history. Miss payments or pay late, however, and your score will drop.

While this may not seem like a big deal — after all, you’ll have already closed on your house — it can hurt you in the future. You’ll have trouble making big purchases or refinancing existing loans — so manage that mortgage carefully.

Know your options

If you’ve gotten this far, it means you understand the costs of buying a house and are still ready to start the process. That’s good news — because now the fun part begins.

The home buying process looks different for everyone. Deciding how it’s going to look for you is where you get control over how you spend your money, what approaches you use, which deals are best and what your house-hunting story will look like. The good news is that you have plenty of options — so no matter what you want in a home, there’s a way to get there.

Real estate agents: Should you get one?

Remember that childhood game “the floor is lava”? Well, that’s what it’s like trying to navigate the housing market right now — and sometimes, a real estate agent is just the ally you need to navigate through that kind of heat. Other times, it may be better to go in alone.

Here’s what you need to know.

Real estate agent vs. real estate attorney

Real estate agents help you with every step of the house-hunting process, from finding the right property to signing the paperwork. They’re experts at reading the market, and sometimes they can even help you decide which house fits your income.

A real estate attorney, on the other hand, is all about the law. They won’t help you find your dream home, but they will help you read and sign all the forms that come with it. They know how to protect you from legal loopholes and financial fiascos, and they’re good allies in a seller’s market (which is the case just about everywhere right now).

Do you need representation?

You don’t have to have an agent or attorney when buying a home. In fact, skipping this step might save you money in the long run. However, if you’re worried about all that legalese — or if you don’t want to face an experienced seller on your own — you may want to consider finding a partner in property-buying.

Here are some things to ask yourself:

• Am I confident in finding my own home, or do I need help searching?
• Can I organize my own home tours?
• Do I have experience reading and understanding legal paperwork?
• How familiar am I with the real estate market?
• Am I a good negotiator?
• Do I know what the best price is and how to get it?
• Can I make my terms stand out to sellers who may be fielding multiple offers?

Choosing an agent

Choosing the right real estate agent comes down to your unique needs as a buyer. As you begin your search, keep these things in mind:

• Experience isn’t everything.

Finding a reliable, experienced agent is important, but it’s not the only thing you should consider. Someone who’s been in the business for 20 years may be stuck in their ways, while someone newer to the real estate world might see new approaches and be able to navigate the modern market with more flexibility.

• Keep your options open.

According to Forbes, it’s best to interview at least three real estate agents before making a final decision. This helps you broaden your horizons and have something to compare against as you talk to each candidate.

• Make personal connections.

Agents can do a whole lot more than show homes. They’re also your guide through local neighborhoods, school districts and more — as long as you take the time to connect with them on a personal level, that is. This is especially helpful if you’re moving from out of town or you’re a little nervous about relocation.

• Be sure they’re good communicators.

A good real estate agent needs to be in frequent contact with you. In the beginning of the home search, they need to update you about new listings — but as the journey continues, communication becomes even more important. For example, say you’ve just made an offer on a house and are eagerly waiting to hear back. If your agent doesn’t bother answering your texts or emails, you could be left in the dark for a whole day or longer — and that’s plenty of time for sellers to receive other offers.

Obtaining a mortgage

Choosing a new home is the fun part. Paying for it — not so much. Luckily, there are ways to simplify the process of understanding and obtaining a mortgage, and it all begins with one little step called preapproval.

Step 1: Preapproval

Mortgage preapproval is like the fast line for anyone buying a house. It shows sellers that you’re close to securing the necessary financing to buy their home — and it might just make your offer stand out from the crowd.

To get preapproval, you’ll need a few things:

• An acceptable credit score
• Proof of identity
• Employment history
• Pay stubs or income statements
• Lists of accounts and liabilities

Once this information is in hand, you’ll fill out a 1003 form for one or more lenders you’re interested in working with. If they preapprove you, there’s no guarantee that you’ll actually get the loan — but the lender is saying they’re interested, and the process will be faster and easier later.

Step 2: Understand your mortgage options

When it comes to choosing a mortgage, you have a few options — and your biggest considerations are type and terms.

Type

According to Forbes Advisor, there are two loan types to choose from. The first is a conventional loan, where you borrow directly from a private lender and agree to their terms. The second is a federal loan, including the FHA loan and VA loan, that is insured by the government — which, in turn, makes the lender more comfortable taking a risk if your credit score is low.

Terms

You also need to consider the terms of each loan. For example, a long-term home loan may make your monthly payment manageable — but it’s also forcing you to pay interest for a longer period of time, meaning that the total cost will be far more in the long run. Short-term loans, on the other hand, have higher monthly payments, but will be cheaper overall if you can manage them.

Step 3: Research interest rates

According to the Consumer Financial Protection Bureau, lenders determine the interest rate on your mortgage by taking a few factors into consideration:

• Your credit score and history
• Your monthly income
• Your loan type and terms
• The total price of your new home
• The location of your new home
• The percentage of your down payment

Different lenders also offer different interest rates, which means you should shop around and make sure you’re getting the best deal before signing anything.

Step 4: Know your responsibilities

When choosing a mortgage, you’re also choosing some new responsibilities that will follow you for decades. That’s why it’s smart to know exactly what’s expected of you from day one.

Here are a few things that will be on your plate:

Homeowners insurance

Homeowners insurance financially defends your new home and the people who live or visit there. That’s why it’s required by lenders: They’re protecting their investment. Luckily, you have options for securing homeowners insurance, so you should be able to negotiate terms that benefit your budget.

This is much easier when you choose a Bungalo Certified home. Bungalo certifications mean that a house is solid, safe and free of costly issues — which means you won’t have to worry about using that homeowners insurance.

Mortgage insurance

Lenders typically require mortgage insurance if your down payment is less than 20% of a home’s total price. Private mortgage insurance protects the lender in case you can’t make your payments regularly or on time.

Payments

Speaking of payments, the good news is that all these responsibilities and insurances are usually calculated into your monthly bill. The rest of your monthly mortgage payment amount is determined by details like interest rate, loan terms, type of loan and more.

Step 5: Finalize

Once you’ve checked everything off the list, it’s time to get one step closer to buying a house by finalizing your mortgage. This is when you actually sign on the dotted line and a potential lender becomes your financial partner. Congratulations — you’re about to take the keys to your very own piece of real estate.

Closing costs and more

Closing costs are usually the final hurdle between you and your new home. Buyers and sellers have different responsibilities when it comes to closing costs, but both parties have something to pay for. Here are some things you’ll be responsible for as a buyer:

• Appraisal fees
• Property taxes
• Mortgage origination fees
• Title insurance

Luckily, you usually don’t need to worry about paying agent commissions when buying a home. That’s generally part of the seller’s closing costs — meaning they pay both their own agent and yours.

One more thing you’ll need to consider in your calculations is earnest money. This is a payment you make to show the seller you’re serious about their property and you’re able to secure the necessary funds, and it’s paid early in the process. If everything goes as planned, earnest money goes toward your down payment or closing costs once the deal is finalized. However, if anything falls through, you usually get that money back from the seller.

After that last dollar is paid, the closing process can take between 30 and 60 days — and then the keys are yours.

Make buying a breeze with Bungalo

If you haven’t even pulled out the moving boxes yet and you’re already feeling overwhelmed, don’t worry — stress just means there’s an easier way to do what’s worrying you.

When it comes to finding your dream home, that “easier way” is working with Bungalo. Certified houses listed exclusively on an all-in-one home-buying platform where all the tricky stuff is taken care of for you? It doesn’t get much better than that.

Start browsing with Bungalo today and see how easy it is to get home.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.

Are you ready to take the leap from renter to official homeowner? The home buying experience can seem overwhelming at a first glance and sometimes even confusing. However, as a buyer, searching and buying for a house should be an exciting time — after all, it signifies a new chapter in your life.

At Bungalo we’re striving to help home buyers streamline their process through our all-in-one home buying platform. Our Bungalo team is comprised of dedicated experts who inspect and renovate each home to make sure it meets your needs and standards.

Just as we guide users through each step from searching to financing to closing, we also hope to help inform and prepare potential buyers for each step to buying a home. Read on and discover what you need to start your journey as a soon-to-be homeowner.

Is now the time to buy real estate?

As most real estate agents will point out, your home buying experience will depend mostly on when you choose to start your search for a new home. Housing market conditions will always have a big impact on prices, the number of houses on the market and other real estate factors.

With all of that in consideration, is 2021 a good time to buy a house?

The answer depends on your personal home goals for the year.

According to Newsweek, mortgage rates are historically low, which is beneficial for new homeowners who want to apply for a mortgage. However, the current demand for housing keeps increasing, which is driving up home prices in most areas. This probably means that consumer price inflation is not going to return to a normal rate in the immediate future, especially as COVID-19 adds pressure and uncertainty to the market.

Due to the high demand for houses, first-time home buyers will also have increased competition from cash buyers and quicker turnaround as homes leave the market almost as fast as they enter it. This will mean that new home buyers will need to know exactly what they want and what they don’t want, to make faster decisions before their potential dream home is sold to someone else. To improve the odds of homebuying, a buyer will probably also have to be open to submitting multiple offers just to stand a chance in a high-demand, low-supply housing market.

Yet homebuyers shouldn’t despair. As mentioned previously, mortgage rates are historically low, as are interest rates. This can be extremely beneficial to new home buyers, as it can allow them to increase their potential budget for buying a house with a low-interest loan from a trusted lender. Then, with a wider price range available, buyers will have improved options in their search.

A first-time buyer also has the option to get additional financial help from state programs, tax breaks and federally backed loans. If you and/or your family qualify as first-time homebuyers, as defined by the Department of Housing and Urban Development, make sure to visit their website to learn more about your financing options.

If soon-to-be homeowners stay within their search budgets and are approved for their preferred financing option, the investment can be incredibly worthwhile as the property grows in value over time.

Remember: If you’ve saved and prepared for buying a home, the housing market will affect your search, but it shouldn’t derail your plans. If you’re ready to buy a home, then now is the time to do so.

8 steps you can expect as a home buyer

The best way to prepare to buy a house is to make sure you have a deep understanding of each step that leads up to closing on your future home. This means you’ll need to do some research.

Learn and follow our recommended steps to streamline your home buying experience:

1.  Determine if you’re ready to buy a home

This might seem like an obvious step, but it’s surprisingly one of the most important factors to consider before you start searching for a new home.

To determine if you’re ready to buy a home, potential buyers need to look beyond whether they want to own a home and take the time to consider all of the finances that will be needed to become a homeowner. Here are the top questions to ask yourself:

Will your financial health (income, employment status, credit score, etc.) enable you to buy a home?

Steady employment and income are critical if you are seeking financing. Lenders will need documentation that not only proves you have enough money, but also that you have a reliable work history and consistent source of income. If you’ve worked steadily for the past two years, then you’ll probably be asked to show your recent pay stubs and W-2s.

Meanwhile, you should also verify that your credit score is good. Your eligibility for a home loan will mainly depend on this factor. In fact, Rocket Mortgage recommended that potential homebuyers have a minimum credit score of 620, as that is the least you can have to be approved for the majority of loans. Not only will your credit score affect whether you can qualify for a loan, but it will also determine your interest rate. The better your credit report, the lower your interest rate will be.

If you don’t have a great credit score, you’ll most likely need to spend time improving your credit before you start the process of buying a new home.

Can you commit to a 30-year mortgage?

Buying a new home isn’t just a major financial investment — it’s also a major time investment.

Not all mortgages are 30-year-long commitments. But the majority are long-term, multi-year financial obligations. If you can’t see yourself spending the next few years (possibly decades) in the same house, it might not be the right time for you to buy a home. Once you purchase a home, you’ll have much less flexibility when it comes to moving, unless you’re in the market for a second home or looking to sell this one.

Depending on your financial situation, career goals and family obligations, take some time to determine whether you’re ready to make such a long-term decision. The choices you make based on these factors will also help you narrow down where and when you want to buy a house in the future.

2.  Save for the buying process

Affording a new home takes a large chunk of savings, so make sure you understand any and all additional expenses that may pop up during the home buying process.

Down payments

The largest portion of your savings will probably go to the one-time down payment to the lender. Common home buying rhetoric tells new buyers that the standard down payment is about 20% of the total cost of the home. However, that’s not the case for many — especially first-time buyers.

Depending on the first-time home buyer program or loan type that you choose, your down payment could potentially be as low as 3% to 5%. If you’re interested in exploring additional down payments and financing options, consider this resource list as provided by Investopedia:

• Department of Housing and Urban Development’s resource list
• Your IRA’s options
• Local and state programs
• Indigenous loan options

However, it can also be beneficial to choose to make a larger down payment if it’s within your budget. This can increase your mortgage options so that you can acquire the right home loan for your financial situation.

If you need help breaking down your down payment options, check out our step-by-step guide here.

Closing costs

Closing costs are additional fees that are due alongside the property’s agreed-upon purchase price. Generally, experts recommend that potential buyers save for closing costs within 3% to 6% of your purchase price. So if your potential new home costs $200,000, you’ll want to save between $6,000 to $12,000.

Closing costs must be agreed upon by both parties, so you shouldn’t be blindsided once you start the buying process. Additionally, your costs will always be unique to the loan type and/or lender that you choose. Once you and your lender come to an agreement, they will provide you with a closing disclosure document, which will outline exactly what your closing costs will be.

Additional costs

Don’t forget to save for any other surprise expenses that may come up as you begin the home buying process. For example, some loans require that you pay for the house to have additional inspections for pests or defects before closing. These last-minute fees should be included in your budget as you begin the search for your new home.

3.  Get preapproval for a mortgage

Once you have your budget and have evaluated your savings, it’s the perfect time to get a mortgage preapproval.

This is when serious home buyers will stand out against the crowded housing market. If you start your search already preapproved for a mortgage, sellers will be more likely to seriously consider your offer as you’ve proven your financial commitment.

There are many types of loans to look into when you’re shopping for mortgage preapproval, including:

• Conventional loan
• FHA loan
• VA loan
• USDA loan

Depending on your individual financial situation, you’ll want to choose a lender that will get you the best deal and loan estimate based on your credit, assets and income.

Once you’ve chosen your lender and loan type, the process to get preapproved is straightforward. Each mortgage broker will typically ask you questions regarding your income and assets, and run a credit check. This credit check does appear as a “hard inquiry,” which can hurt your credit score in the short term. Due to this, it’s important that potential buyers only apply for preapprovals when they’re officially ready to start searching for a home.

If preapproved, you will receive a preapproval letter that verifies how big a loan you’re potentially eligible for. This process can take anywhere from one to 10 days and each lender should be able to give you a clear timeline for the preapproval.

If you’re working with a real estate agent, be sure to show them your preapproval letter so that they will help you find homes that fit your budget.

Important reminder: Preapproval letters do have expiration dates. If you don’t progress to the next step (final mortgage approval), you will need to apply for a renewal or seek a new preapproval. Each lender will have their own expiration dates, so reach out to them and verify exactly how long your preapproval letter is valid.

4.  Find and choose how you want to search and buy

Your first instinct may be to start searching for a real estate agent. But with Bungalo’s simple and transparent process, you can find, tour and buy a home without using an agent. Instead, our experts work with you throughout the buying process to ensure a simple and direct experience. You can also still choose to go with a real estate agent.

If you start looking for a real estate agent, you’ll probably start seeing online advertisements and front yard signs for potential agents everywhere. However, your best bet is to ask people you personally know for advice. If you have family or friends who’ve recently purchased a home or know an experienced real estate agent, that’s the best place to start.

If you can’t find any personal recommendations, you can also ask your lender if they’re affiliated with real estate agents who can help you with your home search. The best practice is to reach out to two to three real estate agents and then narrow down and pick the best one for you.

Once you have your options, ask them for references. Speaking with past clients will truly show which agent is best for your search.

Finally, if you’ve followed the above tips, don’t forget to trust your instincts. Your real estate agent is your guide through the entire home buying process. They will help you find available homes, choose appropriate offer amounts and finally buy your new home. Don’t commit to an agent just because they’re the easiest or quickest option.

5.  Start searching for your new home

You’ve decided you want to buy a home, you’ve saved, chosen your financing options and found a real estate agent. Now, it’s time to start searching for potential homes.

You should plan to answer the following questions to narrow down your search:

• Where do you want to live? (A specific area, neighborhoods, etc.)
• What kind of home are you looking for? Do you have set expectations for the number of bedrooms and bathrooms?
• Do you have any deal-breakers? (Must be in a good school zone, must have a large backyard, etc.)
• What is your budget? Is there flexibility?

To get started searching for your future home, check online listings and drive through ideal neighborhoods to see houses for sale. Don’t forget to also let your friends and family know what you’re looking for — they can help find options, too.

Once you have your initial list of homes, you can then start going to open houses (preferably with your agent, if using one) and viewing potential properties.

6.  Find a home and make an offer

When you’ve found a home that fits your most important deciding criteria, it’s time to make an offer. In the current fast-paced housing market, there are more buyers than sellers, which means you’ll probably make more than one offer during your home buying journey.

In the traditional process of making an offer, offers must be submitted to the home sellers in writing as a letter. Your letter must include:

• Your full name
• Current address
• Your payment offer
• A deadline

The deadline in your offer letter refers to the date when the seller must either accept or reject your offer by. In most cases, your real estate agent will write the letter on your behalf and will then submit it to the seller.

This offer letter usually also requires an earnest money deposit, which is about 1% to 2% of the home’s purchase price. The earnest money deposit is a sign of your commitment to the property and will be added to your down payment and closing costs if your offer is accepted by the seller.

You should also include home inspection and home appraisal contingencies in your offer letter and negotiations. These contingencies will protect you if it’s revealed that the home needs major repairs or is worth less than your offer.

However, Bungalo has streamlined this process to make it as easy as possible: simply click “make an offer” on the home listing page on our website.

In the standard process, the seller will either accept your offer, reject it or give you a counteroffer. If the seller gives a counteroffer, you will have to go through every detail of the changed offer, such as the purchase price or terms of the sale, and begin negotiations. That’s why Bungalo’s service includes no-hassle offers — you won’t have to deal with counter offers with any Bungalo home listings.

Buying a home is a huge investment and you shouldn’t make any rash decisions if you feel doubts regarding the price, terms or house’s condition. Walking away is a natural part of finding your right home, so don’t feel pressured to commit if it doesn’t feel right.

On the other hand, if your offer is accepted or all counteroffer negotiations are agreed upon, you can proceed to the next step.

7.  Secure a home inspection and a home appraisal

You should always schedule a home inspection once your offer is accepted for a house. The house may have looked perfect during your walkthrough, but an expert will know exactly what to look for in terms of damage or potential issues in your future home.

Most accepted home offers include a contingency where buyers can back out of a purchase — or negotiate repairs — if the home inspection highlights major issues with the house.

This is why every home on our platform has been Bungalo Certified so that new homeowners feel comfortable knowing that their home not only meets but exceeds their standards. Our dedicated team of experts inspects every inch of each home and certifies that they’re in good condition, including HVAC and electrical. In fact, we even offer 90-day post-close protection, meaning we’ll cover anything that doesn’t meet our Bungalo Certified standards for 90 days.*

When the home has been fully inspected, you can then schedule a home appraisal. Mortgage lenders require that you have a home appraisal to identify the property’s current value. Only after the appraisal has been completed will you be able to secure your loan to purchase the house.

However, a potential issue is if the home’s appraised value is less than what you offered to the seller. If that is the case, you will not be able to secure your home loan as lenders can’t give more than what your home is worth. This is a major reason why you should include an appraisal contingency in your offer.

If both the inspection and appraisal go smoothly, you can move forward with the step: closing on your new home.

8.  Close on your new home

Closing is the final — and quickest — step in your home buying journey. At this point, your mortgage lender will provide you with a closing disclosure document, which will explain exactly how much you need to pay and each detail of your loan.

After going through the disclosure, you’ll have a closing meeting to officially pay your down payment, closing costs and sign the mortgage note.

Once this meeting is done, you’ll have officially bought a house and become a homeowner.

Common missteps to buying a house

Now that you understand all of the steps you need to take to successfully buy a house, it’s time to also consider the steps you should avoid when buying a house.

Buying a home can be a complicated and emotional process, which can pressure you to rush through it. Here are some mistakes to avoid:

Not saving enough money for a down payment

Although it’s a myth that you should put down a 20% down payment by default, it’s still important that you save as much as you can to pay as much upfront as possible.

As previously stated, the larger the down payment, the smaller the mortgage loan. If you can afford a larger mortgage, you’ll be able to save on interest in the long term.

Not getting a mortgage preapproval

Getting preapproved for a mortgage shows sellers that you are invested in purchasing a new home. It’s a sign of commitment that will make you stand out from other buyers and their offers.

If you attempt to make an offer without a mortgage preapproval, you may seem less serious to sellers, and in an already crowded market, you’ll be far less successful in your home buying journey.

Buying outside of your budget

A dream home can quickly become a nightmare if you’re not able to keep up with your monthly mortgage payment. If you end up in a position where you can’t pay your mortgage, you’ll most likely have to end up selling your home or risk majorly harming your credit score.

If you plan out your budget beforehand and stick to it, you’ll be able to avoid this difficult situation and enjoy your new home purchase.

How long will it take you to go from buyer to homeowner?

The answer to this question is unique to each homeowner. Consistently, once you reach the closing step of buying a home, the process suddenly speeds up and you can find yourself a homeowner after a one- or two-hour meeting on your closing date. For an all-in-one timeline for first-time home buyers, check out our article here.

However, the process of saving for a home, finding a real estate agent and then making offers on potential homes vary widely. The best advice is not to rush through the steps to buying a house.

Buy your future home with Bungalo

Now that you’ve done your research and understand what’s needed to become a homeowner, it’s the perfect time to take complete control of the home buying process with Bungalo Direct. Through our platform, users are guided through every step of buying a home, whether you choose to search by yourself or with a real estate agent, we’ll work with you. Discover how we can help you close on your future home here.

The fact is that buying a home shouldn’t have to be stressful or complicated. Our interactive platform allows potential buyers access to convenient self tours, transparent pricing and pre-inspected homes. Learn more about our all-in-one service to help you smoothly transition from buyer to owner.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.

^*Some limitations apply. See full list of Covered Items.

Buying a new home gets complicated pretty quickly. From chasing down all of the documents you need to finding a house that actually checks off all of your must-have features, closing can feel like an ever-moving finish line.

Good news: You can take off those running shoes and stop sprinting toward the horizon. We’re about to replace your high-intensity cardio day with a leisurely stroll around the furniture store.

Whether you’re a first-time buyer or a longtime homeowner, learn how Bungalo can help you seal the deal and close on the home of your dreams — no race to offer or bidding war required.

How to prepare to buy a house, part 1: Your credit report

It can be tempting to dive headfirst into the home-buying process, but there’s one important step to take before you can start exploring the listings in your area: getting your credit report.

Your credit score plays a major role in the mortgage process, as lenders will use it to get a complete picture of your finances. While your score is a key component of getting your loan approved, lenders will also look at several other factors, including your income, current property, assets and any outstanding debt.

For the majority of lending decisions, your mortgage lender of choice will use what’s known as your FICO score to determine your eligibility for a loan. Your FICO score is calculated by the data analytics company Fair Isaac Corporation, and it’s based on data from all of your credit reports over time.

Although your FICO score is not the only credit score available, it’s the most widely used and many of the largest lending institutions will ask exclusively for it over other credit scoring systems.

Understanding what your FICO score means

To your lender, your FICO score represents the degree of risk they’re taking on by allowing you to borrow. The higher the score, the less risky the home loan.

If you don’t know where your credits stand at the moment, you can get a report from any of the three major credit reporting agencies: Equifax, Experian and TransUnion. While you can request your report for free every 12 months, you’ll need to pay if you’re checking more frequently. Some authorized organizations (like your credit card provider) will also give you monthly updates at no charge.

The exact formula behind your FICO score is proprietary information held by Fair Isaac Corporation, however, the National Association of Realtors (NAR) has outlined the five most important financial categories and how they each contribute to your overall score:

• Payment history — 35%: Think of this as your permanent record. Your credit history represents all of your past payments and whether they were paid on time.
  
  
• Amounts owed — 30%: If you have outstanding credit card debt or student loans, don’t stress: You won’t automatically be disqualified from purchasing a home. What matters more than the amount of debt you owe is that you’re on top of payments and utilizing your credit responsibly.

• Length of credit — 15%: This one can be tricky for any first-time buyers or young professionals. It takes about six months to begin building your credit score. After that period, the longer you have good-standing credit the better your score will be.
  
  
• New credit — 10%: The more credit inquiries made in the past 12 months the lower the score, so don’t open new accounts too quickly. Your personal credit checks will not hurt your score, however.
  
  
• Types of credit in use — 10%: If you manage a mix of different loans and lines of credit, lenders will view you more favorably as that indicates a lower risk for them.

Now that you know how your score is calculated, it’s time to answer the big question: What score do you need to buy a home?

First, the short answer: According to the NAR and other major institutions, prospective home buyers should aim for 620 or higher.

The longer answer: It really depends on your unique financial history and the lender you decide to borrow from — we’ll get into that in a second, though.

If you’re not at 620 just yet, don’t worry. Even if your credit record isn’t squeaky clean, with so many different types of loans available you’ll still be able to find one that works for your unique financial situation. Plus, you can always put a temporary pause on your search to build up your credit score a little more.

How to prepare to buy a house, part 2: Loan options

Once you know your credit score, you can start to research your options when it comes to loans. Each lender will have their own eligibility requirements, but aside from your credit score, some may also dictate the location of your home as well as the type of property you can purchase.

By getting pre-approved for a loan in advance of your home-buying search, you can get ahead of the game. Not only will you be able to demonstrate to sellers that you mean business, but you’ll also have a clearer understanding of your budget, helping you to narrow down your search.

We know all things finance can get a little tricky, but generally loans can be broken down into two simple categories: fixed or variable.

For fixed-rate loans, you sign on to pay the same interest for the entire duration of your mortgage. Although rates are gradually increasing, the NAR has noted that they still remain at historic lows as of 2021, so signing on for a fixed plan may make the most sense —  especially for buyers who appreciate a bit of predictability.

A variable loan is basically the exact opposite of that. With an adjustable-rate mortgage, your interest is variable, meaning that your lender can change it as the market fluctuates. So, if you’re going for the safer bet, we’d recommend a fixed-rate mortgage.

Once you decide between fixed or variable, you have several loan options to consider depending on your current financial situation:

Conventional mortgage

If you have a credit score at or above 620, private loans from the financial institution of your choice will likely be the best option for you. And, by putting a larger down payment forward, you’ll be able to get a better interest rate.

Be sure to give yourself the time to shop around. Look for a lender who has a competitive mortgage rate and the right payment plan for your needs.

A conventional loan is by far the most popular form of lending as it doesn’t have as strict of regulations on income, home type and location as other options out there. Traditionally, you’ll be paying either a set or variable interest rate on top of a monthly principal for about 30 years.

Interest-only

Interest-only loans are a unique type of mortgage in which borrowers only pay the interest rate for a set period of time. Often, this term expires in about five years, at which point you’ll need to pay for the interest and the principal, which about doubles your monthly mortgage payment.

If you are moving to an entirely new location and are looking to settle into a new job, an interest-only payment plan can help you build your finances back up after the initial move. Just be sure to keep an eye on the calendar so that you’re ready to pay the full amount when your interest-only term expires.

Government-backed

For those who qualify, the government offers several different types of loans to help make buying a house a little easier. Before working with a private lender, be sure to check whether you’re eligible for one of these federally insured mortgages, as they often come with much more accessible down payment requirements:

• Federal Housing Administration: FHA loans offer both lower down payments and more flexible credit requirements for those who meet or are below a certain income threshold. The lowest score the FHA accepts is a 500 with 10% down, and you’ll also need to prove your employment history over the past two years.
  
  
• The Department of Agriculture: The USDA offers loans with no down payment —  the only catch is that you’ll have to reside in an eligible rural area and have a minimum credit of 640. You can check on the USDA website to see if the market you’re interested in is eligible.
  
  
• Department of Veterans Affairs: Veterans, active service members and qualifying spouses can potentially be eligible for a VA loan. These typically offer low-cost mortgages and less strict credit requirements. For Native American veterans, there are also direct loans available for building or renovating on Federal Trust land.

If you plan to use a government-backed loan, it’s especially wise to start the loan approval process in advance. This way, you know if you’ll need to be searching for a home with any specific geographic limitations.

With all of the options available for home buyers when it comes to getting a loan, you’ll be sure to find the right payment plan for your unique financial needs. And, once you do, Bungalo is happy to work with your preferred lender so that you can move ahead with confidence.

How to prepare to buy a house, part 3: Closing the deal

Congratulations! You’ve been approved for your loan, you’ve found your dream home and your offer has finally been accepted.

So … now what?

While the exact timeline may vary, first-time buyers are often surprised to learn that closing can take anywhere from one to two months. Although being pre-approved helps to speed things along, there are still a few important steps (and costs) to manage before you can actually move in:

Home inspection

Home inspections are conducted by a certified expert who looks for any potential hazards around the property, such as bad wiring or major structural issues.

The average price for an inspection of a single-family house comes in around $300 to $450 dollars. However, depending on the size of your home and any unexpected complications (translation: mold or termites), that rate can quickly go up.

Although there’s no law that requires a buyer or seller to conduct an inspection, many lenders will include it as a contingency in the loan. Plus, if you catch any major issues before move-in day, you’ll often be able to work with the sellers to ensure the cost is fairly managed. Without one, you can expect to foot the full bill later on.

If you’re looking to skip this cost, we can help. At Bungalo, all of our homes receive top-to-bottom inspections so that you don’t have to worry about any unexpected surprises. Move in with the confidence that your home has been expertly certified and use $500 toward something more fun — maybe that dining set you’ve been eyeing or a new game room setup?

Closing costs and other expenses

Closing costs represent all of the additional fees and charges you’ll need to pay to finalize the sale of your new home.

In addition to paying for your home inspection, closing costs also include:

• Appraisal: Your lender will require that you verify the value of your home to ensure that the loan is priced correctly. Having a certified appraiser come to the property and conduct their inspection can cost anywhere from $300 to $400 dollars. Similar to your inspection, this rate goes up depending on the size of the house.

• Loan-related fees: There are several additional charges that are tied up in your loans. While these can vary depending on your lender agreement, they often include an application fee, any pre-paid interest requirements and the attorney’s fee if your state requires a lawyer to be present at closing.
  
  
• Mortgage fees: Depending on how large of a down payment you make and whether your home is insured by a government-backed agency, you’ll likely have to pay for additional mortgage insurance.

On top of all of this, your total closing costs will also include property taxes and title fees.

Still with us? We appreciate it. That grocery list of expenses can definitely get overwhelming pretty quickly.

To make a long story short, when it comes to how much cash you’ll really need to close on your home, the NAR says a homebuyer should expect to pay on average between 2% and 5% of the total loan amount.

Alternative real estate options and the home buying process

There are definitely more than a few hurdles to jump before you can close on your new house and finally move in. While the traditional path to purchase can be a tricky one, it doesn’t have to be like that anymore.

That’s why we created Bungalo. Because we think finding and buying a home should be as simple as possible.

With Bungalo, you can tour a house from the comfort of your couch, no appointment required. Once you do find the home of your dreams (we know it’s out there), all you have to do is click to create your digital offer. And that endless list of closing fees? Navigate it like a real estate pro with our step-by-step checklist.

As your partner in all things real estate, Bungalo is here to take the confusion out of buying a home so that you can move in as soon as possible.

Check out our blog and learn more about homeownership.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.

Picture this: you find your perfect house in the perfect city for the perfect price. Everything’s just like you always wanted it to be — but there’s a catch. This house is for sale by owner, or FSBO.

What do you do? Where do you turn? Are your dreams of a simple, stress-free purchase about to be dashed for good?

Actually, you’re not out of luck. Although the communication process is different when a home seller isn’t represented by a real estate agent, it is possible to buy a house from owner without complications, stress or legal trouble. It takes a little more work, but with the right information up your sleeve, you’ll be settling into your new place in no time.

Here’s everything you need to know.

Buying a home from the owner: breaking down the process

Different states have different laws when it comes to selling by owner. Knowing these laws is the FSBO seller’s responsibility, but it’s just as helpful for a home buyer to know what’s legal and what isn’t. Doing your research can also help you get a better deal in the long run.

Here’s how to buy a house from owner:

Finding a home

The first step in the moving process is to find a house you’re absolutely in love with. That can involve learning more about ideal cities, talking to local residents, meeting with real estate agents or just searching on your own. However, if you’re interested in “for sale by owner” properties specifically, you may need to take a few extra steps.

Because a home seller doesn’t necessarily have the same tools and connections as a professional real estate agent, they may list their property with criteria that your search engine doesn’t bring up right away. Keep this in mind when house-hunting and be prepared to look — and think — outside the box.

Creating a purchase agreement

Once you’ve found an interesting home and are ready to take the next step, it’s time to make an offer by creating a purchase agreement or purchase contract. This helps protect both you and the seller from legal loopholes or other unexpected disputes.

According to The Balance, this is where a real estate agent can be especially helpful. Navigating all that legalese yourself can be tricky — not to mention stressful. Real estate agents help you write and review offers that won’t back you into a corner legally or financially.

It’s also important to put a “backup plan” in writing. Adding contingencies to your purchase agreement allows you to back out of an offer if something goes wrong — for example, you find a serious issue with the foundation that would cost thousands to repair. The FSBO seller will likely have contingencies of their own, so expect to agree to financial stipulations (like getting mortgage approval before the deal goes through). 

Getting a home inspection

Home inspections are your chance to find out exactly what you’re getting into. Working with a licensed home inspector will keep you from stumbling into any trouble — plus, more experienced inspectors will know just where to look to make sure your future home isn’t hiding any nasty secrets.

Here are a few issues that might be revealed by a home inspection:

• Water damage
• Mold
• Structural issues
• Faulty wiring
• Plumbing problems
• Insects or other pests

If one or more of these problems is present in your future home, the specific wording in your purchase agreement determines what your options are. For example, if the issue is severe, you may be able to back out of the deal — or, if you’re still interested in the property, you may be able to get the home seller to pay for some or all of the necessary repairs.

Managing your money

In the traditional home buying process where everyone is represented by a real estate agent, sellers pay the agent commission for both parties. Since a home seller has chosen not to work with an agent of their own in a “for sale by owner” scenario, the rules are a little different — but the chances are, you’ll still benefit. Often, even for a FSBO property, the seller pays your agent’s commission, which means you save on closing costs.

However, that’s not the only way a FSBO listing could make it easier to manage your money. Depending on the local real estate market and the condition of the home, you could offer less than the listing price. Because home sellers aren’t experts and can be less comfortable negotiating costs, you’re more likely to get your dream home for a dream price.

Setting a realistic timeline

Buying a home is a delicate balancing act, especially if you’re selling your own home at the same time. To make sure everything goes according to plan, it helps to know how long each step will take. Here’s how a FSBO timeline compares to other buying processes:

Buying with cash

According to Forbes, buying with cash is your fastest option. You won’t have to wait for a mortgage company to review and approve your application, and there will be no back-and-forth as you negotiate terms or payments. In fact, this whole process might only take a few days.

Financing

Forbes also explained that closing on a house when financing is involved takes considerably longer — sometimes up to two months. Different loans have different timelines, too, so there’s a lot to consider.

For sale by owner

FSBO deals complicate the timeline estimation process. Because so many steps leave the ball in the home seller’s court, it’s up to them to decide how long it takes to close on the property. Knowing how to navigate each step — especially by writing due dates and time requirements into your purchase agreement — helps you make sure everything is done in a timely manner.

Pros and cons of buying a home from the owner

Pros

Many home buyers seek out FSBO properties because they hope the process will be simpler without the added complication of so many third parties — like real estate agents or a real estate attorney.

However, as a home buyer, you have the option to work with an agent or attorney even if the home seller doesn’t. That’s good news, because it means you can get paperwork and other legal steps taken care of and still have the seller pay your agent’s commission — which lowers your closing costs overall.

Cons

Home sales involve a lot of steps — and when sellers take each of those steps without recommendations or guidance, mileage may vary. For example, experienced sellers could create a smooth, stress-free home sale because they know the ins and outs of the market, legal language, process and more. However, first-time home sellers may not have all the information necessary to navigate each step, resulting in wasted time and potential legal issues.

When considering a FSBO deal, make sure to know what you’re getting into — and, most importantly, know how to protect yourself legally and financially.

Financing your home purchase when buying from owner

Watching home values

To make sure you’re getting the best deal when buying from owner, it’s important to keep an eye on the local real estate market. Know the prices houses are selling for in your area so you don’t end up paying too much.

When looking for comparables, consider things like:

• Condition of home
• Location
• Square footage
• Property size
• Number of bedrooms
• Number of bathrooms

Protecting your savings

According to USA Today, it usually takes 14 years to save for a down payment on a home. This equates to different amounts of money depending on your yearly salary and spending habits, but it’s a good benchmark to help you make sure you have enough money saved before you begin the home buying process.

When you do have that down payment or earnest money, don’t give it directly to a home seller, especially in a FSBO deal. Instead, as recommended by The Balance, leave the down payment with a third party.

First steps in financing

Whether you’re buying from an owner or working with real estate agents, one step is absolutely necessary: getting preapproved for a mortgage.

When you get a preapproval letter from a bank or mortgage lender, you have proof that someone is willing to finance your home purchase. It isn’t a guarantee of any details like interest rate or payments, and either party can back out later — but it is your first step toward securing reliable financing for your new place.

Mortgage preapproval makes the home buying and financing process easier, faster and less prone to error. That’s especially important when buying a “for sale by owner” property, because home sellers like to know that you’ve come prepared. This step may also be required by your purchase agreement, as it protects sellers from wasting time on a deal that isn’t going to go through anyway.

Alternative approaches to finding and buying a house

If buying a “for sale by owner” property sounds like a lot of work, stress or potential trouble, don’t worry — there are plenty of other ways to get your dream home.

Here are a few things to consider when looking for alternative approaches:

Unique listings

In particularly hot markets, competition for a single property can be fierce. Searching Bungalo listings, however, means you’ll be able to find unique properties that other buyers may not have seen yet.

Timeline

Remember that home sales are quickest when buyers bring cash to the table. However, that’s not the only way to speed up the timeline. Look for home sellers who are particularly motivated — for example, they’re trying to secure financing on a new home and need to sell their current property first — or experienced agents who know how to get the job done quickly and efficiently.

Closing costs

If you’re looking to save on closing costs, not all home buying processes are created equal. Keep in mind that traditional deals, where both parties have an agent, can have a lot of associated fees, while FSBO deals are cheaper for home buyers but can be complex. The solution? Buy direct from Bungalo without an agent and save thousands of dollars in closing costs.

Home certifications

Remember how you need to write contingencies into your purchase agreement to protect yourself during a “for sale by owner” deal? That type of backup plan isn’t necessary when working with Bungalo — and that’s because all Bungalo houses are certified and guaranteed, meaning they’ve been thoroughly inspected for issues big and small. They even come with one-year warranties so you know your dream home will still be your dream home even after moving in.

Skip the stress with help from Bungalo

Although buying a “for sale by owner” home is one way to save money, it may not be the easiest — or the least stressful. If it’s a quick, simple, stress-free and even guaranteed buying process you’re looking for, skip all those extra steps and buy from Bungalo instead.

With exclusive listings, home certifications and all the answers you’ll ever need, Bungalo is your best bet for getting into that dream house without tearing your hair out along the way. Start searching today and get home a whole lot faster.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.