If you are a first time home buyer, the process can be both exciting and overwhelming. Your first home is a big purchase and requires a lot of planning and thought. If you take the time to plan your purchase in advance and think about what you want in your first home, the process will go smoother and you’ll be happier with the home you eventually choose.
Start saving for your new home as soon as possible. When you’re saving, you’ll want to include money for the down payment, escrow, and closing costs. All of these will vary depending on your budget for your first home. Note: If you put less than 20% down on your house or condo, you may also have to pay a deposit on Primary Mortgage Insurance (PMI). PMI protects your lender in case of default and will add to your monthly mortgage amount.
Improve Your Credit
The higher your credit score, the lower your mortgage rate for your new home. Pull a copy of your credit score to find out where you might have problems or concerns to address. Pay down any big balances and consider paying off some of your student loans and/or other obligations to lower your monthly debts before you seek credit for your new home. Don’t make any large purchases (i.e. car, boat, large appliances) before you buy your new home.
Determine How Much House You Can Afford
When you begin to plan your first home purchase, think about how much home you can afford. Home prices vary greatly by city and even by areas within a single city and shopping for a house is easier when you know your budget. You can use a mortgage calculator to determine what you can afford in your first home. Link: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
Apply For Pre-Approval
Shop for a mortgage before you select your new house. Sellers prefer buyers that are pre-approved and it will make the closing process faster if you have the mortgage handled upfront. You can use a mortgage broker to find the best rates or apply with your primary bank to take advantage of any benefits they offer for current customers.
Before the Offer
Determine Your Target Area
Research the area that you want to live. Look at your commute times, availability of public transit, neighborhood schools, walkability, and/or other factors that you prioritize.
Choose a Realtor
Talk to a couple of different realtors who work in your target area. You might prefer an office with a Buyer’s Agent who specializes in working with first time home buyers. Your realtor should be someone who listens to your desires and concerns and who makes recommendations that meet your criteria. Your realtor should also be able to offer information about the buying process that helps you make the right decisions along the way.
Choose a Home
This is usually the fun part! Look at houses that meet your needs in your target area. You’ll want to look at several homes before making a decision unless there is very limited inventory in your target area. Make a list of your ‘Must Have’ and ‘Nice to Have’ items and evaluate each potential home against your list. Take a look at our article Create a Wish List When Buying to grab our checklist.
Negotiate a Price
Your negotiation will start with an offer. Your buying agent will make your offer to the seller’s agent and the two agents will negotiate a price from there. Your agent represents you in the negotiation and the seller’s agent represents the seller. As a first time home buyer, it’s easy to get swept into an emotional whirlwind while negotiating for your new house or condo.
After the Offer
Schedule an Inspection
Your realtor can recommend a home inspector that will inspect your new home. You’ll want to be present at the inspection to listen to the inspector’s recommendations. He will probably even offer you some information about how to fix whatever he finds. After the inspection, you might have a list of repairs that total a few thousand dollars. If so, you have an opportunity to go back to the seller to negotiate repairs. If the seller does not want to fix the problems that an inspector finds, they might offer you a discount on the home so that you can handle the repairs after you take ownership of your new home.
Conduct a Walk-Through
Your final walkthrough takes place just a few days before closing. Your new home should be ‘broom clean,’ which means the seller will have removed all personal belongings, trash, and swept the floors. You might still have some cleaning to do, but the home should be in similar overall condition to the way you saw it on your initial home tour and any repairs you discussed after the inspection should be completed.
Congratulations! You made it to the finish line. The only things left to do are close on your new home and move in. At closing, you’ll provide a check for the closing costs and the down payment on your new home. Depending on your state, you may receive the keys to your new home at closing. If not, you’ll get them after the mortgage lender has paid the seller, which may take a few days.
Once you receive the keys to your new home, it’s time to move in. It’s much easier to work on an empty house, so if you have big projects to tackle (i.e. refinishing the floors or replacing appliances) you might want to complete those projects before moving your personal items. You might also want to hire a cleaning crew to go through the house while it’s empty. Once your big projects are complete, you might find it easier to move your belongings by room. As you unpack a room, it will feel complete and give you a sense of accomplishment.
Enjoy the adventure!