There are basic steps every homebuyer must take to become a homeowner. To familiarize yourself with the process, see the 10 Steps to Homeownership listed below:
| 10 Steps to Homeownership |
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1. Contact a HUD-Certified Housing Counselor
Purpose: To prepare homebuyers for the homebuying process via pre-purchase and post-purchase housing counseling. Housing counseling includes one-on-one sessions, personalized guidance, and group workshops. Pre-purchase counseling includes but is not limited to credit, money management, mortgage readiness, loan products, available down-payment and closing costs help, and how to avoid real estate scams and predatory lending practices. HUD-certified housing counselors do not earn a commission from the seller or buyer. They are employed at Community-Based Organizations (CBOs) funded in part by federal and the D.C. governments. |
2. Apply for Financial Assistance Programs
The Professional: Contact a HUD-Certified Housing Counselor. The homebuyer does not pay for housing counseling or other related services. Purpose: To provide financial assistance, such as grants and interest-free loans, to help homebuyers with downpayment, closing costs, and loan requirements. HUD-certified housing counselors are tasked with training and assisting eligible homebuyers with applying for government-sponsored, down-payment and closing costs programs. HPAP, a down-payment and closing costs assistance program, provides approved homebuyers with an NOE (Notice of Eligibility). This pre-approval letter states the maximum amount of money the homebuyer can receive from HPAP. |
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3. Get A Pre-Approval for a Lender
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4. Select a Licensed Real Estate Agent, Conduct a Housing Search, and Seek Non-Profit, Affordable Housing Builders
The Professional: Contact Real Estate Agent, REALTOR®, or Realist®. The homebuyer does not pay for their services. Purpose: To find homes, write sales contracts and negotiate real estate sales transactions for homebuyers. The homebuyer selects the real estate agent. The housing search process starts when the homebuyer gives the real estate agent the pre-approval letter from the lender. The real estate agent works for a commission earned when a homebuyer purchases a home. The seller pays the real estate agent’s commission. When using the service of a real estate agent, choose one who has experience with first-time homebuyer’s assistance programs. |
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5. Select a Home and Make an Offer
The Professional: Real Estate Agent, REALTOR®, or Realtist®. The homebuyer does not pay for their services. Purpose: The real estate agent writes sales contracts for homebuyers for the home selected and presents the contract (makes an offer) to the seller via the seller's real estate agent. During the negotiation process, the seller can accept the homebuyer's offer, negotiate, counteroffer or reject the offer without negotiating. When the seller accepts the homebuyer's offer, and the sales contract is ratified (when the buyer and seller sign an agreement with the terms of the contract and addendums), the homebuyer continues the process and moves to step 6. If the seller and buyer cannot agree and the sales contract is not ratified, the real estate agent will resume searching for homes for the homebuyer. |
6. Inspection, Appraisal, Loan Approval
The Professional: Contact a home inspector and the lender. The homebuyer pays for the home inspection and appraisal upfront, not at settlement. Purpose: HUD recommends home inspections for the homebuyer's best interest. The real estate agent arranges the home inspection. A home inspector provides the homebuyer with a report of findings from the inspection at the property the homebuyer has under contract. The inspector checks the home for the safety and soundness of the structure, roof, mechanical systems, and appliances. The homebuyer’s real estate agent negotiates with the seller’s real estate agent to request repairs the inspector recommended. The lender selects the appraiser to estimate the property's fair market value; to ensure the value is equal to, or more than, the contract price. If the appraised value is less than the contract price, the seller can reduce the price, or the buyer can pay the difference. If stipulated in the sales contract, the buyer can void the contract due to financing. The underwriter works for the lender to determine the homebuyer’s creditworthiness, risk, and loan repayment ability. The property's appraised value is also needed to determine if the loan will be approved. Once the loan is approved and a "clear to close" has been issued by underwriting, the next and final step in the homebuying process is the settlement. Ten Important Questions to Ask Your Home Inspector (hudexchange.info) |
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7. Final Walk-Thru
The Professional: Real Estate Agent Purpose: The final walk-thru is conducted before settlement. The homebuyer and real estate agent conduct a visual assessment to ensure that the property is as stipulated in the ratified contract. If repairs are required via the contract, the walk-thru ensure all repairs are completed. |
8. Settlement
The Professional: Purpose: This process is called closing or settlement when the seller and buyer finalize the sales transaction. The settlement attorney oversees the process and ensures the seller and buyer sign the required documents and funds are received to transfer the title (ownership of the property). Once the signing process is complete, the homebuyer is the new owner and gets keys to the property. |
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9. Move-In and Know Your Community Organizations
The Professional: A licensed moving company. Purpose: If you need to hire a moving company, check if the company is licensed (see links below) because moving scams are on the rise. The Better Business Bureau (BBB) reported that 15,198 complaints were filed with the BBB against moving companies in 2022. Some scams include the moving company taking deposits and the movers never showing up; movers provide an estimate, arrive on time, steal the consumer’s belongings, or demand additional money to deliver them to the consumer’s new home. BBB recommends that consumers take inventory (pictures) of all their items before handing them to movers. Take a picture of the mover’s ID and license plate. You also want a signed contract with your agreed upon terms. Before you move-in, make sure to: submit a change of address at the post office; update your address with prescription delivery services; update your address with auto-delivery services; place utilities in your name and turn on; schedule cable and internet set-up; test smoke and carbon monoxide detectors and, gather boxes for packing. You should learn about your Advisory Neighborhood Commission (ANC) to stay abreast of what is happening and planned for your community and network with neighbors. See the link below to locate the ANC for your neighborhood. |
10. Follow up with Your HUD-Certified Housing Counselor
The Professional: Contact your HUD-certified housing counselor. The homebuyer does not pay for housing counseling or other related services. Purpose: To follow up with your HUD-certified housing counselor, provide an update on the settlement, and ensure that necessary paperwork was completed to receive applicable property tax credits and abatement. To learn about post-purchase counseling and programs to help homeowners maintain their homes and prevent foreclosure. |
CFPB: Your home loan toolkit: A step-by-step guide (consumerfinance.gov)