FIRST-TIME HOME BUYERS GUIDE
Buying your first home can be exciting. You get to look at all these different homes, envision a new chapter in your life in a new space, and invest in your own property! On the other hand, we understand it can be an overwhelming experience! ‘Where do I start?…Who do I ask for help?…Am I doing this right?…What if I make the wrong decision? Buying a home can be challenging for first time home buyers. There are so many steps, tasks, and requirements, and you may be anxious about making an expensive mistake. To help you go through the process so you get the most out of your purchase, here is a rundown of what you will need to consider before you buy and what you can expect from the buying process itself.
Who qualifies as "First Time HOME Buyers"
A first time buyer, according to the U.S. Department of Housing and Urban Development (HUD), is someone who meets any of the following conditions:
- An individual who has not owned a principal residence for three years. If you’ve owned a home but your spouse has not, then you can purchase a place together as first-time homebuyers.
- A single parent who has only owned a home with a former spouse while married.
- An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
- An individual who has only owned a property that was not in compliance with state, local, or model building codes—and that cannot be brought into compliance for less than the cost of constructing a permanent structure.
1. How much home can you actually afford?
Sometimes a bank will give you a loan for more house than you really want to pay for. Just because a bank says it will lend you $300,000 doesn’t mean you should actually borrow that much. Many first-time homebuyers make this mistake and end up “house-poor” with little left after they make their monthly mortgage payment to cover other costs, such as clothing, utilities, vacations, entertainment, or even food. Keep in mind that home-owners insurance and real estate taxes will be included in your monthly payment.
Research first-time homebuyer assistance programs. Many states and some cities and counties offer first-time homebuyer programs, which often combine low-interest-rate mortgages with down payment assistance and closing cost assistance. Tax credits are also available through some first-time home buyer programs.
2. Who will help you find the home and guide you all the way through?
A real estate agent will help you locate homes that meet your needs and are in your price range. Once you’ve chosen a home to buy, we will assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork.
A good real estate agent’s expertise can protect you from any pitfalls you might encounter during the process. Most agents receive a commission, paid from the seller’s proceeds.
Never walk into an open house without having an agent (or at least being prepared to throw out the name of someone you’re supposedly working with). You can see how it might not work in your best interest to start dealing with a seller’s agent before contacting one of your own.
3. Get PRE-APPROVED!
A mortgage pre-approval is a lender’s offer to loan you a certain amount under specific terms. Having a pre-approval letter shows home sellers and real estate agents that you’re a serious buyer, and can give you an edge over home shoppers who haven’t taken this step yet.
Apply for pre-approval when you’re ready to start home shopping. A lender will pull your credit and review documents to verify your income, assets, and debt.
Applying for pre-approval from more than one lender to shop rates shouldn’t hurt your credit score as long as you apply for them within a limited time frame.
4. Explore various home mortgage options before applying for one
You should shop around when it comes to your home loan or mortgage options. Why? Because you’ll get a chance to work with someone that’s just right for you.
First-time homebuyers have a wide variety of options to help them get into a home—both those available to any purchaser, including Federal Housing Authority (FHA)-backed mortgages and those geared especially to novices. Many first-time homebuyer programs offer minimum down payments as low as 3% to 5% (vs. the standard 20%), and a few require no down payment at all. Talk to us!
5. Finding a HOME
Weigh the pros and cons of different types of homes given your lifestyle and budget. A condominium or townhome may be more affordable than a single-family home, but shared walls with neighbors will mean less privacy.
Don’t forget to budget for homeowners’ association fees when shopping for condos, townhomes, or houses in planned or gated communities.
Make sure to take advantage of all available options for finding homes on the market, including using your real estate agent, searching for listings online, or driving around the neighborhoods that interest you in search of “for sale” signs.
If you’re on a budget, look for homes whose full potential has yet to be realized. Even if you can’t afford to replace the hideous carpet in the bedrooms now, you may be willing to live with it for a while in exchange for getting into a place you can afford.
If the home meets your needs in terms of the big things that are difficult to change, such as location and size, don’t let physical imperfections turn you away. Look for a house that you can add value to, as this ensures a bump in equity that you will build over the time that you will own the home.
6. Now that you found a home ...let's make an Offer!
Ask your agent to help you make sure your offer is competitive but also within your budget and the home’s value. Be careful not to make an impulsive offer that’s higher than you can afford just to knock out the competition.
What is the Offer process?
The Offer will specify the price and all other terms and conditions of the purchase. After the offer is drawn up and signed, it will usually be presented to the seller through the seller’s agent. The Offer will also specify your earnest money deposit, accompanying the offer—whether it’s in a check, or cash, and how it will be returned if the offer is rejected.
Earnest money is a deposit you put down with your offer on a house. A seller is understandably suspicious of a written offer not accompanied by a cash deposit to show good faith. A REALTOR® or a Title Co. usually holds the deposit. The amount becomes part of your down payment.
Also included in the Offer:
- A provision the buyer may make a last-minute walk-through inspection of the property just before the closing
- A time limit (preferably short) after which the offer will expire
- Your right to conduct a Home Inspection – The property must get a satisfactory report by a home inspector “within 10/15 days after acceptance of the offer
- Contingencies (i.e Financing, Appraisal, Home Inspection)
QUICK LINKS TO RESOURCES:
OUR RECOMMENDATION
Don’t be bound by loyalty to your current financial institution when seeking a pre-approval or searching for a mortgage. Shop around, even if you only qualify for one type of loan. Fees can surprisingly vary.
An FHA loan, for example, may have different fees depending on whether you’re applying for the loan through a local bank, credit union, mortgage banker, or mortgage broker.
Mortgage interest rates, have a major impact on the total price you pay for your home, and these can also vary.
You should put off applying for new credit cards or make large purchases while you are applying for a home loan mortgage.
ANY QUESTIONS? WE’RE HERE TO HELP!
Let’s Search for Your First Home Together! 1+786-267-8207 | upfrontre@gmail.com
