How do I buy a home?

The Search


When you’re ready to explore the idea of buying a home, you’ll typically do the following:

  • Find a realtor. You can find and purchase a home without a realtor, but these licensed individuals can provide several helpful benefits. For example, they can get you into homes for a tour outside of regularly-scheduled open houses. They can help you craft a competitive offer when you’re ready, draw up the paperwork, and negotiate with the seller on your behalf. And you don’t directly pay them for their time—realtors earn their money from the seller of the home you eventually purchase.
  • Figure out your budget and find a lender. Unless you have cash to pay for the entire cost of the home, you’ll need to secure a mortgage—a bank loan to pay for part of your home’s cost. A lender can help you explore your budget and financing options based on things like how much you have in cash to put towards the home (a down payment), how long you want to take to pay back the loan (the term), and how much interest you will need to pay the bank for giving you the loan. You can also explore a number of home purchasing assistance programs offered by DC Government or the federal government that may provide you with cash or reduced interest rates towards your purchase.
  • Start looking at home listings online or stop by open houses in the neighborhoods you’d like to live in. This gives you a sense of what’s available, what features you like (or don’t), and what prices are like.
These activities above can happen simultaneously or in any order.




The Offer


When you’ve found a home you’d like to buy, your realtor will help you put together an offer to the seller. You’ll have several key choices as you put together your offer. Your realtor can offer guidance on what’s best for you.

  • Price - How much are you going to offer for the home? In competitive real estate markets like DC, it’s not uncommon to add an escalation clause to your offer. An escalation clause says that if anyone else offers more than you, you’ll automatically increase your offer upwards until your offer is highest or the other bidder passes your maximum amount. If you’ve ever bid on an eBay item, it’s kind of like that.

  • Contingencies - Your offer may have several contingencies, or terms that allow you to back out of your offer. You can have contingencies on things like the home inspection or the appraisal, that say you can back out of the sale if the inspection or appraisal results aren't what you expected.

  • Closing date - The closing date is the day you'd like to take ownership of the home. It's typically set 30-90 days from the day you offer to buy the home to allow for logistics like paperwork processing, finalizing your mortgage, and packing for the move.

  • Earnest money deposit - To further entice the seller to accept your offer, you might offer them an earnest money deposit—an upfront payment—to show them that you’re serious about buying the home. Think of this as an optional security deposit that will go towards the full cost of the home if the seller accepts your offer.

Once you make your offer, you’ll usually hear back from the seller in a few days. They may accept your offer as is, come back with a counteroffer for you to consider, or simply not accept your offer.




Under Contract


Once the seller has accepted by signing your offer paperwork, you are under contract. This period is the 30-90 days between when your offer is accepted and the settlement. At this point, there are a limited number of reasons either you or the seller can back out without paying a penalty. Those reasons—contingencies—were agreed to in your contract.

  • Inspection - To ensure that the home is in good condition, you can hire an inspector to take a look and provide you with a report. They’ll test the plumbing and electrical, look for pest problems, inspect the age of appliances (e.g. the hot water heater, refrigerator), and check for structural issues (e.g. a crack in the foundation).
  • Review condo or cooperative documents - If the home you’re purchasing is a condominium or a cooperative, you’ll have several days to review the bylaws and financial documents. Typically, someone from the condo/coop board will provide these to your realtor. This gives you a chance to ensure you’re comfortable with the association's financial circumstances and the rules of the condo like quiet hours, pet policies, and monthly fees for the maintenance of common areas.
  • Financing - Now that you’re moving forward with the purchase, you’ll reconnect with your lender to secure your mortgage. Your lender will ask for documentation of your income and assets (e.g. current pay stubs and bank statements) and help you navigate any government programs that you’re using to buy your home.
  • Appraisal - To ensure that the home is worth the sale price, your lender will require an independent assessor to tour the home and estimate its value. Your realtor will typically schedule the appraisal.
  • Title Search - Your realtor and lender will connect you to a title company. During this time under contract, it is the title company’s responsibility to make sure that the seller actually has the right to sell the property to you. They will verify this by searching local government records and then make sure everything is in order for settlement day.
  • Insurance - You’ll need to line up a homeowner’s insurance policy so that it takes effect the day you become the homeowner. This ensures that you are immediately protected if something should happen to the home once you become the owner.




Settlement


On the closing date stated in your contract, you’ll head to your title company to sign the documents finalizing the sale! This is known as settlement or closing and it typically takes about an hour.

  • Payment - You’ll bring a check or money order for the amount of your down payment, closing costs, and any additional fees. The title company will tell you in advance how much to write the check or money order for and they will deliver the fees to the appropriate people—your mortgage lender, the seller, the government, and themselves.
  • Proofs - You’ll need to bring a photo ID so the title agent can verify who you are. You’ll also need documentation saying you have homeowner’s insurance in place for the property.
  • Signatures - You will sign many documents during settlement. The title agent will walk you through each document to explain what it is and give you time to review. The key documents you’ll be signing are your mortgage agreement and the paperwork to transfer the title (also known as the deed) of the home to you. If you will be living in the home, you should also sign a DC Homestead Deduction form which will reduce your annual property taxes.
In the days that follow, the title company will submit the title transfer to the DC Office of Tax and Revenue. This updates the government’s records to show that you are the official owner of the property. Congratulations!





The process of buying a home can follow many paths. It can move as quickly as several weeks or as slowly as several years. But, generally, the process follows four steps—search, offer, go under contract, and go to settlement, regardless of whether you’re buying a house, condo, co-op, or apartment. In some ways, the process is sort of like finding a spouse: 

 

The Search phase is like dating. You’re thinking about buying a home, maybe going to open houses, talking with a realtor, or scrolling through sale listings on your phone. 

 

The Offer phase is like the proposal. You think you’ve found the one! You make a formal offer to the current homeowner. Typically a realtor helps you prepare the offer paperwork. And then you wait for their decision… hopefully not very long!

 

The Under Contract phase is like the engagement. They said yes! The current homeowner has accepted your offer. During this period of roughly 30-90 days, you do things like have the home inspected, review condo rules, and move forward with securing your financing to buy the home.

 

The Settlement phase is like the wedding day. The day is finally here! You go to a title company who walks you through the paperwork process with the bank and city to officially make the home yours. You’ve tied the knot and leave with the keys.

 

Like finding a spouse, the process is a little more involved than this. So, let’s get into the details. Keep in mind that we’re outlining the common steps of the home buying process, but your experience may be different.

Keywords: home buying, homebuyers, settle on a home, close on a home, put an offer on a home, find a home, homeownership, getting a home appraised, getting a home inspection, choosing homeowner's insurance

This page was last updated February 2021.