A Guide for First Time Home Buyers - Where Do I Begin?
As a Realtor that specializes in helping first time home buyers, I take it upon myself to educate my clients as much as possible throughout the process so that they can make the best decisions for their family and their future. I am not just a real estate agent - I am a real estate consultant.
It is important to note – you do not need amazing credit or a big down payment, or even any down payment to buy right now! There are many grants and down payment assistance programs we can explore.
But, where do you start? How do you even begin the process of buying a house?
Step 1: Financial pre-qualification or pre-approval
I know, instinctively you would think that you would apply for a mortgage once you’ve found the house you want to buy – it works that way when you’re buying a car from a dealership. However, it’s not the same in real estate.
Getting pre-approved up front accomplishes three things:
1.) It is an important part of the educational process for YOU as a buyer & often a huge deciding factor in whether or not you’re ready to buy. After filling out the loan application (note: this does not mean you’re committing to getting a loan) your lender will have the information they need to thoroughly examine your finances and your credit so that he may determine how much house you can actually afford. They will then explain in detail to you what your maximum loan amount is, what your interest rate will be, what your estimated home owners insurance and mortgage insurance will be, and perhaps most importantly, what your monthly payment will be. You need to be comfortable and confident that your mortgage payment is truly within your budget.
2.) If by chance you’re not currently in a position to buy the type of house you were hoping for – that’s okay! That is why we do this step first, and well in advance, so that you can be adequately prepared. The lenders that I work with will not only tell you what you’re approved for, they will offer advice on how to get you to where you’d like to be as fast as possible. How to raise your credit quickly, how to pay off certain debts to maximize the mortgage amount you can be approved for – there are tricks of the trade that you can get an inside peek at that will help you significantly!
3.) Once you’ve decided to buy and have found the perfect house, it’s not only important, but necessary to have a pre-approval letter in hand to prove to the seller that you are a serious buyer. This is crucial in the seller’s market we are currently experiencing because some homes sell in 2 or 3 days and they receive 5, 10, or even 20 offers in that time. The seller will pick the strongest offer, with the buyer most likely to perform. It would be very difficult to prove to them that you’re that buyer without proof that you can get the mortgage for the amount you’re offering.
Make sure that you interview and research your lender to ensure you have the best of the best on your team. The first place I’d recommend looking for one – ask your Realtor! We deal with lenders on a day to day basis and know which ones are extraordinary.
Step 2: Consultation with your Realtor to assess your specific needs and desires
This step is incredibly important to me, because if I am to do the job you have hired me to do – find you the perfect home – then I need to truly get to know you, your family, and what is important to each of you. Make sure that all of the decision makers will be present for this consultation and be open and honest with your Realtor. You would be surprised how much my clients often learn about their own needs and wants, and also their spouse’s.
Step 3: Select & view properties
The fun part! I will find homes that meet your needs and that I believe will be appealing to you, and we get to go on the adventure of walking through them to find the perfect one.
Step 4: Write an offer
As a first time home owner this step is often scary and will probably make you nervous, especially due to the excitement that goes with it. But relax! You are not required to buy the house even if your offer is accepted.
Step 5:Negotiate the purchase offer
The response to an offer will either be acceptance, rejection, or most commonly, a counteroffer. This is where the seller is proposing alterations to your offer. This is my expertise – I will negotiate on your behalf to get you the best deal and to protect your best interests, and I will consult with you every step of the way.
Step 6: Due diligence period
Once under contract, you have a period of usually 7-10 days to conduct what we call due diligence. It’s the time when I help you order a professional inspection of the home, and you can look into anything else that may be important to you at that time (school districts, crime rate, radon testing, etc.). It usually costs about $270-300 for a basic inspection.
Step 7: Final mortgage application & underwriting
Now that we have the house, and we are certain you want to go ahead with the purchase, your lender will submit your loan application to underwriting where they will give you final approval for your loan. It’s not uncommon for them to need more information or documents from you during this process.
Step 8: Title company, settlement & closing
You will have the opportunity to look over the financial documents for your loan a few days before the settlement date – which is when you will sign all of the purchase documents at the title company. Closing officially takes place when the deed is recorded with the county, which is often the next day.
Step 9: Keys & moving day!
Because there is a delay between signing documents and recording with the county, you will get your keys 1-4 after settlement. This also depends on what time frame the sellers agreed upon for possession of the house; many time they will request 48 hours after closing to move out.
After that -it’s all yours!
If you are considering buying or selling a home and have questions about this process, or need an agent to represent you – please call me. I’m happy to help in any way I can, even if that means offering the advice and resources to help you buy in a couple of years when you’re ready. It’s never to early to start preparing for your future!