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Buying A Home For The First Time Heres What You Need To Do
Buying a home for the first time? Here’s what you need to do.
You’re thinking about a home for the first time and want to make smart decisions to avoid paying to much or making a decision you’ll regret later. It takes more than a steady job, a little savings and watching Home Hunters to make your dream come true. Take your time and follow these steps in sequential order to help you take charge and make the process as stress free as possible.
Where do I start?
The year before buying a home is the perfect time to run your credit score and get a copy of your credit report at annualcreditreport.com. It’s free each year and gives you the opportunity to correct any mistakes and take measures to boost your score. The higher your score, the better the rate on your mortgage loan.
Determine your budget and how much house you can afford.
Mortgage lenders evaluate your total debt-to-income ratio. It should be no more than 43% of your gross monthly income. You can find calculators online to help you determine how much you can actually afford.
Establish a down payment plan.
Many conventional mortgages will require a 20% down payment. This will lower your loan cost and help you achieve a better interest rate. However, if you do not have that amount, there are many programs to assist you. FHA loans require only a 3.5% down payment, but require mortgage insurance premiums, that increase your monthly payment. The Department of Housing and Urban Development (HUD) is a great source for a list of nonprofit homebuying programs by state. Also check different lenders, credit unions, or even your employer to see if they have an assistance program.
Figure out what you need in your new home.
Make a priority list of what is important to you such as a quiet street, move-in ready or close to work. Think ahead of issues that might arise in the future and you’ll avoid the frustration later.
Find a Realtor®
You need a real estate agent to represent you and guide you through the home buying process. Your buyer agent will be paid by the seller of the property you are buying, so there is no out of pocket expense for you. Ask your friends, family, co-workers for references. Interview more than one and ask questions that are important to you and find someone you feel comfortable with.
Visit Open Houses and their investigate neighborhoods.
There are many convenient and free ways to find out about homes and their communities such as realtor.com and your city’s municipal website to find out about crime, home values and school districts. Also drive around neighborhoods and visit their Open Houses to discover what appeals to you. Get to know what you get for your money.
Prepare your budget for your home buying.
Research and ask your resources about the steps and costs in buying your home such as home inspections, title search, home warranties and appraisals. Be sure to save and prepare yourself for these expenses.
Prepare your budget for owning your home.
Start saving for the costs of maintaining, repairing and emergencies that go with being responsible for a house.
Organize your personal financials.
Prepare your statements and tax returns to submit to your mortgage lender. In order to approve your loan your lender will request the following:
-Tax returns for the past 2 to 3 years
Get pre-approved for your loan.
Set up an appointment with the lender of your choice and submit your financials. Your lender will run a credit check and inform you of how much your loan approval is for. Create a budget for yourself that will include this mortgage payment, insurance, maintenance and all of your financial responsibilities.
Start looking for your new home.
Work with your real estate agent to find a home in your price range that meets your search criteria. There are many free resources to assist you in your search, but your agent has most reliable and detailed resources to guide you in order to not waste yours and your agents time.
Make an offer on a home.
When you find the right home, your agent will prepare a contract offer to submit to the seller’s agent. Your agent represents you and speaks on your behalf during this transaction and has your best interest in mind. Your agent will negotiate costs and try to get you the best deal possible. Counter offers may be submitted so be prepared to know what will make or break your offer.
Also, your offer will establish the day you close and able to move in. It takes on average 4 to 6 weeks to close on a home, so coordinate your move-out and move-on dates accordingly. Allow for possible delays and stay flexible.
When your offer has been accepted, submit your earnest money to the title company that will deposit into the transactions escrow account. Your earnest money amount can be 2%-3% or a flat amount such as $1,000. These funds are refundable within the correct timeline and terms and shows your intention.
After your offer has been accepted and have come to terms with the seller, schedule a home inspection as soon as possible. You have 10 days to be sure you want to want to proceed with purchasing this home. Your home inspector will report to you everything about the home including issues that need to be repaired. Every home has small issues, except new ones, so be willing to accept cosmetic repairs and request repairs for those big warranted items to be corrected.
Research and visit the neighborhood at different times of day and week. Talk to neighbors and research online as much as you can before your inspection period is up.
You have until the end of your inspection period to submit a Residential Buyer’s Inspection Notice and Seller’s Response addendum to the contract, known as a BINSR. This addendum organizes any repair requests to the seller. The seller has 5 days to respond and can repair or not the items requested. Unless you have time to spare, try to get this done as quickly as possible to prevent delays.
Apply for your homeowners insurance and submit to your title company.
Review all of your financial documents to confirm all costs. Do not make any large purchases because your credit score will be checked again. Hold your funds steady in your accounts.
Do your final walkthrough as “close” as possible to your closing as possible to be sure all repairs have been made and nothing has changed in the home as agreed with your seller.
Visit your bank where you are paying your closing costs from to have them wire your funds on time for closing, because personal checks are not accepted.
Close escrow and move into your new home!
Contact me today to help you buy your first home.
Brenda@Budwigteam.com - 602-529-4729