The Only Guide to Buying a House in Indiana That You Will Ever Need
You are ready to buy a house, or at least you think you are. How exactly do you go about purchasing a home? It’s not like going to the dealership and buying a vehicle. Or going to Verizon to buy a new iPhone. There are a lot of steps involved with buying a home, and I’m going to lay them all out in one easy-to-read article for you. As we know, making the decision to buy a home is a very exciting time combined with a touch of nervousness. After all, it is likely the biggest investment you may ever make. My goal is to ease some of those fears with this guide, educating you ahead of time on some of the things you’ll need to prepared for. I'm going to walk you through each step of the home buying process in this article, from pre-approval to closing – these are roughly in order of how the process will happen in real-time. So grab a cup of coffee and let’s dive on in!
1. The First Step is Always Pre-Approval
Before you start scrolling through real estate listings and picturing yourself in a cozy living room, you must get pre-approved from a reputable lender. A pre-approval will not only tell you how much house you can afford, but it also shows seller’s that you are a serious buyer who has the ability to actually purchase their home. Most seller’s won’t even acknowledge your offer if you are not pre-approved, which is why agents usually won’t show houses to a client that isn’t pre-approved yet. If you know you are going to be looking to buy a house in the coming months, I always recommend getting pre-approved as early as possible.
2. Start Searching for a House
Now this is the fun part! This is when you'll spend countless hours browsing online listings, attending open houses, researching cities and things to do, and exploring different neighborhoods within those cities that you narrow down. Your agent at this time should have asked you what is most important to you in your new home. How many beds, baths? Is there a certain location you are wanting? Do you want a basement? Fenced-in yard? Remember to stay true to your needs, preferences, and budget. Your agent will help take your “wishlist” and trim it down if needed to stay within your budget. They will also get you set up on an automated search (if they have access to that technology), that will send you new listings via email that meet your budget and criteria as soon as they hit the market. This is a huge advantage as you’ll be one of the first people to see this listings. Whenever you see a house (or a few) that you want to see, let your agent know and they will set up a showing for you so you can tour it.
3. Make an Offer
You've found it—the perfect home that checks all your boxes! It's time to make an offer and let the seller know you're interested. This step can feel nerve-wracking, but it's also exhilarating. You will be working closely with your agent on this step as they begin to draft your offer. An offer is roughly 6 pages long, so there are a lot of things your agent will need from you while they fill it out. Once they have the offer drafted, they will send it over to you to review and sign! The three most important items that you will need to address as soon as you received an accepted offer are earnest money, scheduling the inspection, and homeowner’s insurance – and we will discuss each of these below.
4. Negotiate
Negotiating is like a dance, with each party trying to find the right rhythm. It's normal to experience some back-and-forth as you negotiate price, repairs, or other terms. Stay flexible but firm on what matters most to you. Remember, it's not just about getting the best deal but also reaching a conclusion that benefits BOTH the seller and you as the buyer.
5. Earnest Money
When your offer is accepted, it's customary to provide earnest money as a sign of good faith. Think of it as a deposit to show the seller you're serious about the purchase. If you get cold feet and decide to back out for no reason, the seller gets to keep that earnest money in exchange for their home being off the market due to accepting your offer. There are a few exceptions to that: if something major comes up on the inspection, if the appraisal comes in low, or if your mortgage falls through. All of those reasons give the buyer an opportunity to back out of the deal and typically get their earnest money back if the seller can’t make it right. The amount varies but is typically a percentage of the home's price (in Indiana 1% of the purchase price is standard). So for example, a $350,000 house would typically have a $3,500 earnest money deposit. The amount of earnest money is outlined in the offer that you wrote, so you would have had this discussion with your agent already by this time. This money is usually written in a check and delivered to the listing agent’s brokerage, or the title company that will be facilitating the transaction. Rest assured, this money is applied toward your down payment or closing costs when the deal is sealed. So, if you submitted $3,500 in earnest money, you would need to bring $3,500 less to closing.
6. Mortgage Application
Once your offer is accepted, it's time to get that loan process rolling. Reach out to your chosen lender and provide the necessary documentation, such as income verification, bank statements, and tax returns. They'll evaluate your financial profile and guide you through the mortgage application process. During this stage, the lender will need some items from your agent as well, but that’s not for you to worry about! This will need to be according to the terms of the offer, some giving a few days to apply for financing while others are immediate – each deal is unique and your agent will guide you through this part.
7. Homeowners' Insurance
If you are using a mortgage to purchase your home, your lender will require you to get homeowner’s insurance. Within a few days of your offer being accepted, you will want to reach out to a couple of insurance companies and compare quotes. Once you find the best deal for you, you’ll want to get your insurance agent and your lender in contact with each other – your agent can help with this. It is important that your lender gets the insurance quote and all other information from the insurance agent.
8. Schedule the Home Inspection
Immediately after your offer is accepted, you will want to call a reputable local inspector and schedule them to come out and inspect your new house. Each offer outlines how long you have to complete the inspection AND respond to the inspection (we talk about that below), usually 7-10 days. You will want to schedule the inspection for the earliest that the inspection company can get in. It is recommended that you attend the inspection if possible, but if you can’t, your agent can step in for you. I personally like to attend the last hour or so of inspections so I am present when the inspector walks us through all the things they found. Inspections typically take 2-3 hours depending on the size and scope of the house. Be present during the inspection, ask questions, and seek clarification on anything that raises concerns. And keep in mind – inspectors make it seem like the house is falling apart. You are paying them to find any and all potential issues with a home, and every home has plenty of those. If it seems like the report is overwhelming, you agent may be able to help you figure out which items are more common vs. not.
9. Repairs: Negotiating the Inspection
After the inspection and reviewing the inspection report, you might request repairs or credits from the seller based on the report's findings. It's essential to prioritize safety and structural issues while being reasonable about the minor or cosmetic items. Remember, negotiations can continue until an agreement is reached. Keep open communication with your agent and make sure your interests are protected. Also, keep in mind your agent can’t really make any recommendations for you in term of what you should ask for and what you shouldn’t – that is completely up to you as the buyer.
10. Appraisal
An appraisal is an unbiased assessment of your home's value, conducted by a professional appraiser. It's ordered by your lender to ensure they're financing a property that's worth the agreed-upon price. This step ensures you're not overpaying and protects both you and the lender. Let’s say you purchase a home for $350,000 and the appraisal comes in at $340,000. Since the appraisal came in lower than what you offered on the property, you have a few options:
1). You can accept the original purchase price and bring the difference between that amount and the appraisal to closing (because the lender will only lend you up to the appraised amount, you are required to bring the additional funds above the appraised amount). In this case because the property appraised for $10,000 less than what you originally offered, you would have to bring $10,000 in additional funds to closing.
2). Negotiate with the seller on a lower purchase price. Depending on the market and the seller, you could meet them somewhere in the middle or maybe they’ll come all the way down to the appraised amount if they don’t want to risk losing the deal. Maybe you could meet in the middle at $345,000 so you only have to bring $5,000 in additional funds to closing. Or maybe the seller will come down to the $340,000 appraisal price so you don’t have to bring any extra money. Each situation will be unique depending on the seller’s needs and buyer’s financial situation.
3). You can back out of the transaction and typically get your earnest money back
Keep in mind that low appraisals are not very common, so hopefully you won’t ever have to run into a situation like that.
11. Final Walk-Through
Before closing, you'll have a final walk-through to ensure the property is in the same condition as when you made the offer. Check that any agreed-upon repairs were completed, and the house is ready for you to call it home. Take a moment to savor the excitement and envision your future in this place that will be yours in just a few hours!
12. Settlement Statement and Wire Transfer
A few days before closing, your agent will review the final settlement state with you. This statement shows all the debits and credits for you as the buyer, and at the bottom shows your cash to close amount. This is the amount you will need to bring to closing in order to close (you should have had a rough idea of what this amount would be prior to this from talking with your lender). Your agent will help you set up a wire transfer to the title company in the amount of that cash to close figure. Once that is done, you are ready for closing day!
13. Closing
The big day has arrived—the closing! Gather your paperwork, grab a pen, and get ready to sign your name one hundred times. During the closing, you'll review and sign numerous documents, transfer funds, and officially take ownership of the property. Congratulations, you did it! Pop the champagne and celebrate this monumental milestone.
Buying a home is a roller coaster filled with ups, downs, and everything in between. Remember, this is your journey, and each step is an opportunity to learn, grow, and create lasting memories. Please also note that every transaction is different and may include various other steps other than or in addition to the ones discussed above – this is why it’s so important to use an agent when buying a house!
Welcome home!
And as always, if you ever have any questions, please reach out to me – even if you aren’t quite ready to buy or sell.