One of the first BIG purchases people make in their lives is a home. In that sense, first-time homebuyers can experience a lot of confusion and stress leading up to and during the process. However, with the right help, first-time homebuyers can enjoy a smooth and exciting time in their lives as they shop away for a place they will call, home.
Preparation
The most important thing prior to looking for a home is preparing. Preparing your finances, learning about the process, understanding what you are looking for, and setting yourself a timeline for when you want to buy.
The very first thing you should do is start saving! It is best to understand how much cash you will need to purchase your new home. Here are some of the expected costs:
Your down payment will be a large portion of the cash needed to buy a house. As a first-time homebuyer, you could qualify for an FHA loan with down payments as low as 3.5% of the purchase price. However, a larger down payment tends to benefit the buyer at times. Therefore, it is best to speak with a mortgage lender. Find out how different amounts of a down payment will affect the rate and terms of your loan.
Closing costs are the main expense first-time home buyers tend to not know about. While closing cost is not just one single thing, rather a combination of fees and services in order to close on the house, one can expect closing costs to range anywhere from 2-5% of the home sale price. The number varies depending on who is paying for things like the title policy and home survey.
You also have to consider any moving expenses that you will incur. Will you be using a moving company? Will you be ending your home lease early and have to pay to break or complete the lease? Will you have to buy new furniture? Or how about new appliances?
Pre-Approval
Once you have your finances figured out, the next step you should take is to get a Mortgage Pre-Approval (What is a Pre-Approval? Click here and find out). With this pre-approval letter, you will find out how much of a loan you qualify for, the interest rate you will pay, and the basic terms of your loan. This will allow you to establish a range of home prices you wish to shop in and give you an idea of what you need to work on. Do you need to better your credit? Or maybe you need to save up more money for a down payment?
It is important to note that just because you get a pre-approval with one lender does not mean you have to go with that lender. It is encouraged to talk to a couple of lenders and shop around to see who can give you the best terms for your loan.
Let's Start the Search
If you have not done so, now is the time to talk with your favorite real estate agent. With your pre-approval letter and a short discussion on what you are looking for, your agent should be able to provide you with a detailed list of homes that would be perfect for you. Think about it all. Do you want new construction or a home that needs a little bit of love? In what kind of area do you want to live? Near the city? In the suburbs? Or what about a more rural area? Planning out what you are looking for will make your home buying experience a lot easier.
Inspections
You have now picked your dream home and had your offer accepted. Make sure to get a home inspection. An inspection will allow you to learn if any part of your home is faulty. An inspector will run a very detailed assessment of the home's structure, mechanical, and electrical systems. Inspections have their limits, so it is good to understand before-hand what an inspector looks at and what they do not. It is also highly advised for you, the buyer, to attend the inspection. This way, the inspector can clarify any questions and concerns you may have about what he finds in the home. Remember that you can and should negotiate repairs that come up after the inspection. You could say this is where the real negotiating takes place.
Closing
After you have negotiated and agreed upon repairs, it is time for closing. Now, sit back and wait for that special date. When the closing day comes, you will sign a lot of documents. Make sure you know and understand what you are signing. Also, make sure you double-check the amount you will need to bring to closing. You are not going to want to delay your move-in. Ask the escrow officer any questions you may have about the documents you are signing. Once that is complete, you are ready to move into your new home!