First time homebuyers are such an important part of the real estate market. If you are someone who is about to become a first time homebuyer, congratulations!You are about to take the first step in the exciting journey of homeownership.
There are probably so many questions you have right now, but rest assured, the process of buying your first home is relatively straightforward and can be pretty painless if you start off with the right attitude, are organized and hire the right people.
First Time Homebuyers often are faced with the question “Why should I buy, instead of rent?” and the answer is simple, a home is an investment, when you rent you are writing a check that is helping the landlord’s wallet and not your own! By owning your own home, over time you will pay off more of your home and your home may increase in value.
Where do you start? Well, here is a step-by-step guide for a first time homebuyer to help get you on the housing ladder!:
- Decide on what you are looking for and if you are ready for homeownership! Do you need a condo, duplex, single family home, ranch or townhouse? Are you looking for an older property or new construction? What part of town are you looking in? What do you need to be close to? Is there particular school zones which you need to be in? You have heard the old saying “location, location, location” well, here is a new one for you: “research, research, research!” – learn everything you can about where you want to live!
- Hire a Real Estate Professional: Find an agent who you are comfortable with who you can rely on and trust, work with a buyers agent who has your interests at heart and represents you in any transaction. Work with someone who knows and specializes in the area and the type of property you are seeking. Interview many agents, don’t just settle on the first agent you find online or are recommended to by a friend or family member, call several and explain what you are looking for and work with one you feel suits your needs best.
- Obtain a Loan Pre-Approval: This is such an important step in the process, according to the National Association of Realtor’s Nine out of Ten homebuyers finance the purchase of a new home. Therefore most buyers look for financing, usually in the form of a mortgage. There are so many different types of mortgage that buyers should enlist the help of a qualified Loan Officer, these can be independent or work just with a single or group of lenders. Most loans written today are conventional 30 year fixed interest rate products but there are still other options available. Getting pre-approval from a lender means that a lender has pulled your credit and is willing to offer you a loan if you meet certain conditions. These days most sellers will not take an offer on their home seriously unless the buyer can show that they have been pre-approved for a loan, so this is one of the most important steps!
- Start house hunting! This is the exciting step where you go out with an agent and start viewing potentially suitable homes. Make this step efficient by carefully screening listings your agent gives you on paper before to see if they match your criteria that you need in a new property.
- Pick a home and make an offer: After looking at many homes you should start to shortlist the ones you like and then pick one to make an offer on! Your agent will guide you when it comes to an appropriate price to offer and will write up the contract and present it to the sellers agent. Your agent will likely include several contingencies in the contract which will allow the cancellation/renegotiation of the contract in those circumstances. If the seller doesn’t agree to the price you have offered then they may propose a counter offer. Once the contract is signed and a date is set for closing then the process moves forward! Your agent is a huge resource during this step.
- Inspections, appraisal, insurance: Now that you have got a home under contract the real process begins! Your lender will want an appraisal carried out on the property you are purchasing, this means they compare recent like sales in the area along with the specific features of your home to come up with a carefully calculated value to use for the mortgage to be based on. In addition to the appraisal buyers should always commission a home inspection, these will highlight potential maintenance issues and repairs as well as give an overview condition of the home from an objective standpoint. Now is also the time to start shopping for home insurance, consider talking to your auto insurance provider, many allow you to bundle policies which can save you money! Your lender will want to see that home insurance has been obtained before they will sign off on the loan.
- Closing: This is the final step in the whole process, all of the documents are reviewed and signed by all parties and the property’s ownership is transferred to the new owner. Make sure you read everything carefully and ask your real estate agent if you have any questions!
Asides from the pride of homeownership, there are other great benefits too, such as great tax advantages like the mortgage interest deduction. Talk to your accountant/tax preparer for more information. Don’t ever be afraid to ask questions to your real estate professional or loan officer throughout the whole process.
3 Things for a First Time Homebuyer to be aware of!:
- Let’s be honest, homeownership is expensive, so no matter how much you think a repair can cost when you are looking at a potential home, double that figure to get a more likely number!
- Look after your credit throughout the homebuying process, pay off any high interest lingering debt before you start even thinking about purchasing a home.
- Don’t take on a mortgage which is too big for you to manage, consider what you might do in the event of a job loss, death, disability etc.