How to buy a home in 2022
Get preapproval for a loan
What is the first step to buying a house? Most people start by getting preapproval for a loan from a mortgage lender.
You can’t buy a home without money—even if it’s someone else’s cash (a mortgage loan). The mortgage broker or loan officer will tell you how much you qualify for based on your income and credit score. Tackle this step before you look for your dream home—there’s not much point looking at $600,000 houses if the credit union says you qualify for only a $400,000 home loan.
It’s also helpful to have some money ready to put down on your new house. Many realtors recommend a down payment of 20%—or about $70,000 for the average home in 2022.
Note: If you make a down payment of 20% or more, you don’t have to pay mortgage insurance. Those savings add up over a 15- or 30-year loan term.
Boost your credit score
If your loan estimate is lower than your expected, look at your credit score. A higher credit score means a lower interest rate on your real estate loan—and that affects your buying power. So check your credit report and boost your credit to get a better loan offer.
Don’t overlook the importance of a real estate agent when going through the steps to selling and buying a house. The selling homeowner pays realtor fees for both parties (a combined 6% commission is around $21K for the average home), but everyone benefits.
In addition to listing your current home, taking you from house to house, and answering your questions, realtors help the average homeowner sell their home for $80,000 more than owners who sell their homes without a realtor. That’s one reason 90% of homeowners use a realtor.1
For Sale by Owner vs. realtor-assisted selling prices
For Sale by Owner
There may be an even better option for homeowners in Utah, Arizona, and Nevada. Homie is an innovative real estate company that charges a flat fee instead of a percentage-based commission, meaning its real estate customers save about $10,000. And that’s not counting the $80,000 boost it can provide to your home’s selling price (compared to owners who sell without a realtor). Learn more in our Homie Review.
Need an extra $10K for your down payment?
How do you pronounce realtor?
Your pronounce realtor as reel-ter, not reel-it-ter. Impress your real estate agent by saying it correctly. Who knows—since imitation is the sincerest form of flattery, it might even help you negotiate your fee.
You can sell your house for more money if you fix up the right things. A good realtor will do a home inspection and tell you how to make it more attractive to buyers. It’s like dating: the right outfit can hide your insecurities and make you more appealing. And the more attractive your home is to buyers, the more they’ll pay.
Now that your home is ready for the red carpet, it’s time to walk the real estate runway and put it on the multiple listing service (MLS). Once your home is on the list, it gets distributed to all the big traffic sites. This is one of the most important steps for first-time home sellers.
It’s best to have a real estate professional do this for you. Although you can pay to post it on your own, your listing could be flagged as For Sale By Owner (FSBO)—and that can be a turnoff to prospective buyers. Fewer interested buyers mean lower demand, and lower demand means a lower selling price.
You’ll also want to put up a yard sign, spread the news on social media, and have an open house.
Put your realtor to work
Realtors can’t start advertising your home until you sign a contract allowing them to represent you. Make sure you sign on the dotted line so everything’s legal.
Now it’s time to start looking for a new home. Tell your realtor what your price range is (your preapproved loan amount) and swipe left until you find a good fit. The average home buyer visits around 10 homes before committing.2
Make sure you find a patient real estate agent. Realtors don’t get paid until you purchase a home—so some agents pressure you to buy because each home visit makes them work more for their commissions.
It’s one reason we recommend Homie. It pays agents a salary instead of a commission, so Homie realtors never get impatient—even if it takes you 50 visits to find your dream home.
Hate feeling pressured to buy?
You negotiate a price with the homeowner when you’re ready to buy. It’s not like finding the perfect watermelon at the store with a clear purchase price. You might find the ideal home, but the homeowner has to agree to your offer. And in a real estate market like 2022, many other home buyers will likely make an offer on the same house.
You don’t want to make an offer so high you can’t afford your monthly payment. But you also don’t want to come in so low that the homeowner picks a higher bid from another home buyer. Know in advance how high you’re willing to go, and ask your realtor for advice. They have access to confidential data about home prices and can help you submit a winning bid.
Save money on high-speed internet
Homie helps you save thousands of dollars on realtor fees. Save even more by finding high-speed internet deals for your new home.
Do your paperwork (and due diligence)
You have to make everything legal once the seller accepts your offer. That means signing a contract filled with complicated terms and conditions—including closing costs. The mortgage company typically charges between 2% to 5% for closing costs, meaning a home buyer can expect to pay around $3,700.3 That’s on top of the real estate agents’ fees for selling your current home.
If you’re selling the home on your own instead of using a realtor, it’s a good idea to hire a lawyer to review the paperwork. A tiny mistake adds up when you have to pay both the buyer’s agent and the seller’s agent a 3% commission, plus loan closing costs on your new home.
A Homie lawyer?
Homie provides its clients access to a real estate attorney to help with paperwork at no extra charge. See why else we love this real estate company in our Homie review.
This is also when you’ll begin due diligence—a short period in which the home buyer can cancel the contract for any reason. Use this time to have a home inspector do a home inspection (the average cost is about $350).4 You want to make sure what you like about the house is more than lipstick on a pig. You might love that new kitchen, but you need to make sure there isn’t $40,000 worth of black mold hiding beneath the floors.
Don’t forget to budget for moving expenses. It’s fine and dandy to sell your home and find a new one, but moving costs can add up. Your dream home could feel more like a nightmare if you don’t have enough money leftover to move in.
Thankfully, you have Move.org. We’ve put together a list of resources to help you find the cheapest way to move, whether across town or across the country: