Tips For Buying Your First Home
Buying your first home is exciting, but can also be intimidating! The home buying process involves many different professional industries; including mortgage, real estate, inspection, appraisal, title and insurance. Here is an in-depth look at the entire process to help relieve some of the stress as you enter into the home buying process.
FUNDING YOUR NEW HOME
The first question you need to ask yourself is how are you paying for your new home. Buying a home is typically the largest financial decision in your lifetime. More than likely you plan to get a mortgage to pay for your first house. Although this may seem like I am stating the obvious....you would be surprised at home many buyers have a long list of must haves and homes they want to see, before they have spoken to a lender. Lets face it, looking at homes is way more fun than delving into your finances. Most realtors will not begin the process of finding homes with a buyer until they have spoken with a mortgage lender and gotten a pre-approval letter.
- It is important to find a mortgage lender that you feel comfortable discussing your finances with, who is highly skilled and experienced. No worries if you are having a hard time finding one, most realtors can offer contact information on a few that they have done business with previously. Realtors are not compensated for these referrals. Since realtors deal with many Mortgage Lenders throughout their career they often times have a good handle on ones that consistently close on time, are professional and easy to work with.
- Local lenders can be known to be more accessible, which can help close quickly. Some national mortgage companies have a reputation for being difficult to deal with because files often times go through a lot of peoples hands, making the chance for closing delays higher. So do your research and check reviews.
- Don't be intimidated to talk to a lender. Remember they deal with all types of financial situations. A good lender will do everything they can to help you purchase a home, and give you good advice if you aren't quite financially ready.
- Remember they are working for you! You will have closing fees, which are paying your chosen mortgage company for generating your loan. A loan officer can make or break your home buying experience, it's not a good feeling to work with someone that is hard to get ahold of and doesn't communicate important dates with you.
- Once you have found a lender, you need to obtain a Pre-Approval letter and keep it handy. Your Realtor will likely want a copy of this letter in order to start your home search. A Pre-Approval letter gives you the ability to make an offer on a home immediately, and in a sellers market....you need to act quick! However now I'm getting ahead of myself, we will talk about these items in a few steps. So before we go to the next step...make sure to have a copy of your Pre-APPROVAL letter (NOT a pre-qualification letter).
DECIDING OUR PRICE RANGE
Determining the price range you want to be in is crucial! The best thing to do is to determine your price range BEFORE you start looking online at homes. Just because you have been approved for a certain amount, does not mean you have to spend that much! Look at your finances, think about the lifestyle you want to enjoy. A mortgage is a long term commitment, buying a home the maximum amount that your mortgage company will allow...could lead to very frustrating times. When things go wrong such as a roof leak or a burst pipe, you are responsible for fixing it, unlike when you are renting and the owner takes care of things. In addition, do you like to travel, shop, eat out...those extra things could be impossible if you max out your mortgage payment.
Knowing your price range before looking can help set your expectations. Looking at $300,000 homes, but only be approved for $200,000 can make it hard to find something you like....because every home you look at, in your mind you are comparing it to the $300,000 homes. Start your home search at the lower end, see what there is and work your way up. For example starting at $100,000 you may quickly learn that the homes are out of date and need lots of work, or they aren't in the neighborhoods you prefer, or they are too small. Work your way up in $10,000-$20,000 increments until you start seeing homes that may fit your needs.
FIND A REALTOR
Your Realtor is the person that you will likely have the most contact with during your home buying experience. They help coordinate all the other pieces and therefore are the most involved professional in your transaction. A good Realtor will help guide you and give you advice on items that you may not even realize are important. For example, many buyers are so excited on becoming a home owner, they aren't thinking about down the road when the sell the house. your Realtor can help give you advice on future resale value, they know the hot markets, growing areas.
So some research online and find an agent that is experienced, has great reviews and has a strong online presence. Neighbors, friends, family....although trustworthy may be a great characteristic, you need to make sure if you are going to use them as your realtor that they meet the other characteristics as well. Trust me, your home buying experience will be better, and your relationship will be better off as well.
CHOOSING A HOME AND NEGOTIATING A PRICE
Now that you have secured a Pre-Approval letter and mortgage lender to work with, found a realtor and determined a price range.....it's time for the FUN TO BEGIN!
If your moving to a new area, its important to do your research on the schools, crime statistics, neighborhood amenities and convenience in order to narrow down the area(s) in which you would like to live. Next, find 4-6 homes you would like to see and make an appointment with your Realtor. Right now, it is very much a seller's market. Homes are going quick. First time home buyers can sometimes be slow to commit....they see a house they love, but they are worried what may be out there and so they wait, thinking they can always make an offer next week if they don't find something better. Chances are many of the homes that were your favorite in your price range, also landed on other buyers lists. It's certainly ok if your not ready to commit, just be sure that you are ok with "losing" that house.
One thing to realize as well....homes are not always as they appear...in online pictures! Depending on the quality and angles of the pictures, homes can look better and believe it or not WORSE in the online pictures! Pay attention to the house details (square footage, number of rooms, characteristics), these are often times more informative than pictures. You would be surprised at the number of realtors who use old photos are put very little effort into capturing pictures.
You've found your dream home, what's next? Its time to start the negotiations. Your relator will need to write up a sales contract or purchase agreement in order to make an offer. Talk your offer over with your Realtor and don't be afraid to ask questions. First time home buyers sometimes like to submit lowball offers, thinking the seller can always counter. Trust me if your offer is too low, the seller will not even bother submitting a counter offer and by time you realize you need to go higher, they may have already accepted another offer. Great deals typically happen on homes in distress, so unless your plan is to get a home and fix it up, be prepared to be in the general area of market value. Right now the availability is so low many homes are going for more than asking and at times even more than the appraisal amount.
Once you have a accepted offer it is time to order a home inspection. Your Realtor is a great resource for a list of reputable home inspectors, again, just like a mortgage lender, your Realtor should not be compensated in any way for this referral. Once the inspection is completed you will receive a copy of the report. it I the job of the inspector to find every possible issue that they can, even new construction homes turn up lengthy inspection reports. Your task is to read through the list and determine any important issues that will have significant monetary value and determine whether or not you would like to ask for repairs to be done.
This often times begins and new negotiating conversation between the parties. It's important to really determine fixes you feel have a high importance. replacing a cracked light switch cover or new batteries in the smoke detector are nit picky matters that will likely sour the deal. I suggest focusing on items such as water damage, broken appliances, AC/heating repairs or roof issues. dealing with big inspection problems that have large monetary value will likely lead to a more successful negotiation.
Your Realtor should be communicating with all parties and they should ensure that all parties have relevant documentation and information needed in order to close the transaction. If you are asked for something, make sure to act promptly! e sure to communicate with everyone to ensure the closing is moving along and schedule to close on time. Your sales contract has dates and deadlines that have to be met. If you have a contractual closing date and your lender needs additional time the seller has the right to keep your earnest money and put their house back on the market.
Once you are about 1-2 weeks out from the closing date and everyone involved in the transaction has confirmed that it will close on time, you should schedule your final walk through and closing time. A final walk through is standard practice to ensure there are no new major issues that would prohibit you from purchasing the home. If the contract states that all appliances are to stay in the home and you notice one has been removed, then you would need to resolve this issue prior to closing, or cancel the closing and seek legal advice. For this reason it is best to schedule the walk through at least 24 hours prior to closing to allow for any issues to be addressed.
THE GRAND FINALE
As the buyer you will most definitely have a stack of papers to sign! most closings take about an hour. once you have signed everything the title company will submit the papers to the mortgage company who will then send the funds to complete the transaction. Once the loan is funded you will get the keys! make sure to check with the mortgage company in advance how long this takes. Some of them will fund the loan in advance so that you can receive your keys at closing, but if you have a late afternoon or evening closing the loan may not be funded until the next day!
Once the loan is funded...you will receive your keys and be the proud owner of your first home!