Buying a home is a big deal! And if you are a first-time homebuyer, chances are, you’ll likely find them complex. But if you can manage to get your head around the basics, it’s possible to enjoy each and every part of the home-buying process. Read on to become better informed when buying a house for the first time.
This article will walk you through each step so that you are less likely to be taken by any surprises/shocks along the way to your new home! Familiarizing yourself with the home buying process will help make the experience pleasant by reducing confusion and stress.
1. Find Yourself a Realtor (Buyer’s Agent)
When buying a house for the first time, it’s important to have help. The best news is that you don’t even have to pay for it. That’s right, homebuyers don’t pay real estate commissions. Bet you didn’t expect that!
So finding a top local Realtor is very smart. They can help you in so many ways. From helping identify the best options, to actually showing you the homes, to guiding you through each step in the process. It’s critical that your Realtor knows what they are doing.
You can look for Realtors online. If you know of anyone who has bought a home recently, you can ask them for a reference. But make sure to talk to a few Realtors before you hire one. Here are some key questions:
- Are they a full-time?
- What’s their work experience?
- How many clients have they helped sell and buy houses in the last year?
- Do they have a website or a blog?
- You can ask them for testimonials from previous clients
Having a buyer’s agent is not mandatory, but it’s much better than working with a listing agent whose primary responsibility is to their seller.
2. Buyer’s Agency Agreement
After finding a great agent, ask them about any contract they might need that talks about their responsibilities towards you. These contracts can help both the Realtor and you, the buyer, but you definitely want to read them thoroughly to make sure.
Most often these contracts are called Buyers Agency Agreements. They will include your home needs, time limits, and any other expectations in writing. Once you sign the contract, you can be assured that the Realtor will owe you confidentiality, trust, disclosure, loyalty, and accountability. Their job is to assist you through the home-buying process and offer you the best advice. Ultimately, the decision is always yours, but it highly helps to consider your agent’s opinion.
3. Find a Mortgage Lender
Even before you step out to look for suitable properties, it is essential to get yourself a mortgage lender. Some Realtors even ask for proof of the loan approval before they begin showing you houses. Sellers will certainly value any offers with pre-approvals above offers that don’t include them.
Get a Credit Report
Before you head out to find a mortgage lender, you need to get a copy of your credit report. This can be obtained online or locally for a small fee. Some buyers skip this step and let the lender get it. But you don’t want to share your personal and financial information with someone unless you are sure that you will work with them. So, when you are interviewing mortgage lenders, it is better to have your credit report copy.
If you are looking at online lenders, think twice. The rates that online lenders offer may seem competitive, but you don’t want to be left alone with a toll-free number if some problem crops up. We recommend local lenders because they are credible, more accessible, and will be with you during the closing to help you with the final transactions.
Short-list the potential lenders that you want to interview. Although most of them do not charge any fee for this process, some of them do, especially if you don’t have a credit report.
Some lenders might agree to a phone interview, whereas others might request you to meet in person. The lender can ask you questions related to your assets, income, and debts; be open and precise about it. Choose a lender who offers a good deal and with whom you can sense a good connection.
Once you find a great mortgage lender, you can request to get pre-qualified. A pre-qualification determines the following:
- How much money you will be granted for buying a home
- The different interest rates and the mortgage plans available
- The amount for your monthly repayments
- The amount of money you will need for down-payment and for covering closing costs
On to the next step!
4. Now It’s Time to Find a Home
You can’t be buying a house for the first time without actually seeing homes in person. I mean, you can, but you shouldn’t.
List all your home requirements–both present and future needs. Once you are aware of your essential needs, it becomes convenient to short-list potential properties.
If you have too many requirements, prioritize them to make the house hunt smoother. Jot down an affordable price range, the property area, number of rooms, etc., that you would want in your new place. The next step is to hand out your list to your buyer’s agent and let them do the work for you. You can also do your own search because ultimately you know what to look for.
5. Time to Make an Offer
Your Realtor will schedule appointments so that you can tour homes together. These homes are usually chosen by you. They should match your requirements.
Once you find a great match, the next move is to offer a price. The agent will perform a comparative market analysis (CMA). The CMA tells us the current market value of the property based on sales of similar homes in the area. It serves as the baseline to help you determine the right price to include in the offer.
Once you submit the offer to the seller, the seller can accept, counter-offer or reject it. If it is accepted, the contract is said to be ratified, and you move on to the next step.
If it is counter-offered, you need to be prepared for negotiations. The negotiations will keep going back and forth until both the parties reach a settlement or until one of you decides to walk away.
The third probability is the offer getting rejected; this happens when the price you offered is way below the seller’s expectations. But don’t feel let down during these situations because there are other options to choose from.
Once you have an accepted contract, you will need to pay the earnest money deposit. This is one of the variables you put in your offer. When you close the deal, this amount becomes a part of your down payment. But remember, if you back out of the purchase, you will lose it.
6. Time for the Home Inspection
When buying a house for the first time, a home inspection is essential. It helps to ensure that the home you are buying does not have any overlooked or underlying damages or any other issues. Your agent should be able to recommend to capable home inspectors but you can also ask family and friends for recommendations.
Another variable in your offer was the inspection period. It can be any number but in our market, it’s typically 7-14 days. Plan to be at the property during the home inspection so that you can get firsthand knowledge of the home’s condition. After your home inspector delivers the report, you will discuss the findings with your Realtor to determine “next steps.”
7. Closing the Deal
Assuming you’re past the inspection period, the lender needs to complete their underwriting process. Once complete, you’re ready to close! When you close on the home, the home’s title gets transferred into your name. Now you’re responsible for making payments and certain other rules according to your lender or the state. But the house is yours… congratulations!
And that’s all, folks. All the real estate formalities are done, and you can now move into your new place!