So, you have decided to buy your first home. Great, now what? What are the steps that you need to take in order to purchase your first home? We’ve compiled a simple guide to help first time home buyers in the process of purchasing a home.
What First Time Home Buyers Need to Know
Get Preapproved for a Mortgage
The first thing you need to do in order to buy a home is to get preapproved for a home loan. Getting preapproved for a loan does not lock you into any contract (or debt)! The purpose of pre-approving for a mortgage is to help you determine how much you can afford to buy. There is another significant reason why you need to get preapproved for a loan. When you put in an offer for a house you need to prove to the seller that you can back up the offer you are making to them.
Set a Budget
After getting prequalified for a mortgage, your next step is to determine how much money you want to (can) spend on a house.
Kate Rooke says, “Be realistic about what you can afford and take care of this step before you look at homes. This will save you the heartache later of falling in love with a house that will not be approved for you to purchase or getting in over your head with a house payment that is too high to manage.”
During the preapproval process you will learn what interest rates you can qualify for on your future home loan. This will help you determine how much money you need to save up for a downpayment.
Find the Right Realtor for You
This next step is arguably the most important in the home buying process because it will help determine how easy the rest of your home buying process will be. Determining the right real estate agent for you is so important and shouldn’t be rushed. Not all Realtors are equal and have the same skills, abilities, and resources.
It’s important that you find a Realtor that knows the market you want to buy in well so that they can match your needs and wants in a home with what’s currently available in the market.
Eric Mitchell says to “be sure to find a Realtor that can guide you from sales contract to inspections, repair negotiations to appraisal, and then final inspections and closing.”
But most importantly you want a Realtor that you can easily communicate with. You want to build a great relationship with your agent so that you can trust them to make the best decisions for you.
Prepare for the Future
When deciding on what kind of home you want to buy you need to think about the future. How many bedrooms and bathrooms do you want? Are you planning on having kids in the foreseeable future, should you get a bigger house to grow into it? What city or part of town do you want to live in, how close is it to your work?
Rusty Burnett says, “Think about it as an investment, as well as a home. Think about appreciation over the years.”
Do you plan on living in this home for a while, or is this more of an investment property? You don’t want to go into the home buying process blind, so research everything and don’t be afraid to ask your Realtor questions.
Make an Offer
You’ve found the house you want to make an offer on, now is where things get real! You want to make an offer that is competitive and that the seller will accept. Putting in too low of an offer could insult the seller but at the same time putting in too high of an offer is like throwing away money that you never needed to spend. If you live in a place where the market is very competitive, there is a good chance that multiple offers will be given for a house. This is where it is really important to have a good Realtor on your side. A great real estate agent will help negotiate the best price for you!
Apply for a Mortgage
Your offer has been accepted, now you need to figure out the best way to pay for it. Just because you were pre approved for a mortgage through a certain institution does not mean that you have to use them to purchase your home. Shop around to find the best Mortgage Lender for you. Don’t be afraid to get your agent involved, they will probably have a list of lenders they recommend.
There are usually 4 main kinds of mortgages available for First Time Home Buyers:
1. Conventional mortgages
Conventional mortgages are not guaranteed by the government. Some conventional loans that are aimed at first-time buyers require as little as 3% down if you have good enough credit.
2. FHA loans
FHA Loans are insured by the Federal Housing Administration and allow down payments as low as 3.5% for qualifying buyers.
3. USDA loans
USDA Loans are for rural home buyers and usually require no down payment; they are guaranteed by the U.S. Department of Agriculture.
4. VA loans
VA Loans are for current and veteran military service members and usually require no down payment; they are guaranteed by the Department of Veterans Affairs.
You should consider looking into first time home buyer purchasing assistance programs that are offered by certain states, counties, and cities. They can usually help you to get a mortgage with lower interest rates.; not only that, you could qualify for a grant that can help cover your down payment, inspections, or closing costs.
Home Inspections
After your offer has been accepted but before closing, you must go through the process of getting the home inspected. Reach out to your agent to get recommendations on who you should use to inspect the property. If you pick the right agent, they may even schedule the appointment for you. (It should be noted that you are responsible for paying for the home inspections.) You should be at the house while it is being inspected, ask as many questions as you can think of, leave no stone unturned. If you can’t be at the inspection make sure your agent is there for you.
If the inspector finds anything that needs to be fixed, relay it to your agent so that they can reach out to the sellers. Normally, the seller will either repair the issues themselves or they will lower the price on the house so that you can pay for the repairs yourself.
Close on Your Home
You’ve made it to closing! Congratulations, but you aren’t finished quite yet. You still need to sign under the dotted line…. many times. Be prepared to sign papers for an hour on closing day. One of the last things that is down in the home buying process is the home walk-through. When the papers are signed the house is yours, which makes it really difficult to try to make the seller pay for any missed damages or problems. So, always be at the final walk-through to make sure the house is in order. If you can not be there, you should have your trusted Realtor be there in your place.
We hope this simple guide helps you in your journey of buying your first home!
Reach out to one of our Expert Real Estate Agents in order to help you in your home buying search.
