Firstly, are you ready to purchase a home?
So you're a first time home buyer? Before anything, you need to make sure all your finances are in order. When you purchase your home, you won’t only be paying the purchase price. You will be paying closing costs, inspection costs, loan fees, and recording fees. It is recommended that you have enough savings to cover these costs plus at least 3 months of emergency living expenses. Some lenders will require this before they give you financing. Also, you want to have a repair budget depending on the condition of home you are willing to buy. Even a home that looks new and is ready to move in, often has maintenance or repairs that will be needed to be addressed asap. Don’t forget you will also need a down payment. Some lenders require as low as 3%, but you will also have to pay closing costs and PMI. There are state programs that offer down payment assistance.
Getting Pre-approved for a mortgage
You need a letter of pre-approval to be taken seriously in the market. Without one, real estate agents won't work with you and your offer won't even be considered. If you already have a real estate agent in mind, ask them for a reference to a lender they like working with. Their recommendations go along way because these are lenders that have worked with them previously. With that being said, we recommend you still shop around; another lender might have better terms. Also, we suggest avoiding big national banks. These banks as so big and do so much, your transaction might get put on the back burner. Try going with a local lender that you know will have your back. There are a few options when it comes to the type of loans such as FHA, VA, or even USDA loans. Talk to the lender and see what best fits you and see if there are any state or federal programs that can help you with down payments or other benefits. Many states offer some sort of first-time home buyer assistance programs.
Choose a real estate agent
As a buyer we suggest you don’t sign an exclusive agreement with an agent. Talk to a few, get a feel for their style and competency. Even if the agent is new, if they are eager and have the get stuff done attitude, that is what you are looking for. You need an agent that is personable to be around but is also no push over. If you tour a few houses with one agent and you’re not feeling their work ethic or personalities don’t mesh, then find a different one. If your agent can’t answer questions for you, can’t lead you in the right direction, or is never available, then that isn’t the agent for you.
Before you start browsing, find your budget. Sure, the bank will loan you x amount of dollars, but do you really want to use the entire loan amount? Consider what your monthly mortgage payment will be. Be aware that you will also have to pay property taxes, and homeowner’s insurance, and possibly HOA fees. When looking, consider the renovation and repair budget you have. Let your agent know these details so they can better search for you. Decided on areas you will be willing to move, and the features you need the home to have. I suggest ranking your needs and wants from most important to least important. Then give these details to your agent and they will get to work. Feel free to browse online or drive through neighborhoods you want to live in and tell your agent if anything catches your eye.
Make an offer
This might be the most anxiety inducing part of the process, and the most daunting for a first time home buyer. When you have found a home you would like to purchase, sit down with your agent and formulate an offer. Besides the listing price there are other things that go into an offer. Such as how much earnest money, inspection contingency, closing dates, and other items your real estate agent will walk you through. Count on your agent to come up with a competitive offer that will win you the bid. You might want to bid over the asking price if the market is hot or bid under if the property has been siting a while. There could possibly be some negotiations, so make yourself available on the review date if there is one.
Congratulations! If you made it this far you got your offer accepted. Now you need to inform your lender asap. They will take the longest to act in the closing process. They need to start the underwriting process as soon as they can. Usually when a house doesn’t close on time it is the lender’s fault. Make sure you give them anything they need asap. If for some reason they cannot finance you, hopefully at the beginning of the process you shopped around and you have a back-up lender that also pre-approved you at the start of the process. You also need to give escrow the earnest money deposit. You usually have 3 business days to deliver these funds. Eventually the lender will require you to shop for homeowner’s insurance, choose whatever feels right for you.
We suggest you always include an inspection contingency in the contract, and this is when you would order an inspector. You can ask your real estate agent for a few recommendations or if you know one, you can go with them. I suggest you are present when the inspector is at the home. Don’t follow them around but do your own inspection and ask them questions when they are done. They aren’t contractors, but they can give you a rough estimate of what the costs for any repairs are needed, and any repairs should be weighed against your savings. Some inspectors will give you a verbal report with a written one costing extra. I recommend you spring for the written one. Depending on how your contract is written, this is the point of no return. If you find anything you don’t like during the inspection you can ask the seller to repair, ask for a dollar amount credit, or walk away.
It’s time to sign! You’re going to sign a bunch of documents from your lender, and a few documents from escrow. You also need to send over the down payment. On closing day, expect to get the keys to your new home later in the day. The county must record the new deed in your name, then you agent can pass the keys to you. Do a final walk through with your agent to make sure all the appliances are there and there is no new damage to the home. I highly suggest before you move anything in, get a locksmith to change your locks for you. You never know. Congratulations on your new home!
If you have any questions or are looking for someone to guide you through the process, feel free to reach out to us. We are always availalbe!