What You Should Know Before Buying Your First Home
What You Should Know Before Buying Your First Home
Buying a home for the first time is exciting, but it can also be overwhelming. In this article, I hope to clarify the process in hopes of reducing the stress and anxiety that can come with buying a home.
Your Finances
Save for a down payment.
A down payment is money you put down when buying a home. Some lenders allow as little as 3% of the purchase price or even no down payment at all. If your down payment is below 20%, you will probably have to buy mortgage insurance. This insurance protects the lender - not you- in case of foreclosure.
Maximize your credit score.
Good credit can help you qualify for a mortgage loan at a competitive rate.
Quick tips:
Know your credit score
Correct mistakes on your report
Pay your bills on time
Reduce your debt-to-income ratio
Determine what you can afford.
Just because you get approved for a certain amount doesn’t mean you need to spend that much.
Make sure you know what your new home will really cost. Your housing cost includes more than your mortgage payment. It will include the mortgage amount, property taxes, homeowner's insurance, and homeowner’s association dues, if applicable.
Explore mortgage loan types and shop around for rates.
There are different types of mortgage loans, including:
Government-backed loans – FHA, VA, or USDA have lower down payment requirements.
Conventional mortgage: This type of loan isn’t guaranteed by the government and can be harder to qualify for.
Get pre-qualified and pre-approved.
Your lender will approve you for the maximum loan amount they feel you can repay. You need a pre-approval letter to make viable offers on a home.
The Buying Process
1. Love your family, listen to the pros. Find the right real estate agent.
While family is a great asset to have, most of the time they’re not the pros when it comes to buying a home. Ultimately, you should follow the advice from a qualified agent, inspector, and loan officer.
Agents have knowledge of the local market, act as your advocate, and offer invaluable knowledge on the whole buying process.
2. Set realistic expectations.
HGTV is fun to watch, but you likely won’t get your dream home on your first purchase. Create a negotiable and non-negotiable list of features before you begin your search to help narrow down properties so you don’t waste your time viewing homes that aren’t right for you.
3. Make an offer.
An agent can use their expertise to help suggest an amount that would be reasonable and competitive.
Your offer will include details beyond pricing. Specifically, due diligence period, earnest money, who pays closing costs, and the closing date.
The due diligence period is when you, as the buyer, have time to do your “due diligence.” During this time, you can complete various inspections. A due diligence fee is non-refundable money you give the sellers to “reserve” the house for you while you conduct inspections. Earnest money is deducted from the total cost at closing and shows how “earnestly” you want the house.
Offer accepted! Now what?
1.Home inspection.
It’s a good idea to make sure the house and its systems are in reasonably good condition. You are responsible for the costs of the inspections you choose, and these costs are non-refundable. Your agent can recommend inspectors and schedule inspections. However, you are always welcome to choose your own inspectors. Inspection costs can vary anywhere between $400 - $3000.
Don’t let the inspection cause a freak-out moment. Keep in mind the inspector’s job is to note everything he or she finds wrong with the house, no matter how minor it may be. The right agent understands how serious or minor an issue is and will guide you through the report. Remember that the seller is not obligated to make any repairs but may at their discretion.
2. Appraisal.
An appraisal is an evaluation of the value of the property paid for by you and scheduled by the lender. Your mortgage lender will require you to get an appraisal on the property to cover themselves and make sure they are not loaning you more money than the house is worth. If for any reason the contract is terminated, you will still be required to pay for the appraisal. Appraisals in our area are typically $400-$600, but many factors could cause this amount to be higher.
3. Closing costs.
Closing costs average 3-5% of the purchase price. Make sure to set aside enough funds to cover closing costs.
Bottom Line
Research and educate yourself on the process of home-buying to give you the upper hand and ensure you aren’t met with any hidden surprises. Knowledge is power!
Buying your first home can be intimidating, but when the papers are signed and the keys are handed over, it will be completely worth it!
Bio: Andrea Greer is a real estate agent with a small local boutique agency. When not helping clients you can find her spending time with her husband, two teenage sons, and their spoiled pitbull. Her family loves to visit downtown Hendersonville and enjoy the local restaurants. Andrea loves to read, run half marathons, be on the water, and enjoy the outdoors.
Written by Andrea Greer
Contact Info:
Andrea Greer REALTOR
BluAxis Realty
(336)-442-9124
andrea@bluaxis.com