10 simple steps for first-time homebuyers!
Buying your first home can both be exciting and scary! Between down payments, credit scores, mortgage rates, property taxes, interest rates, and closing the deal, it’s easy to feel overwhelmed. But with these 10 simple steps, I hope to help make the process a little less intimidating and more fun!
The very thing a first-time home buyer should do is to figure out their finances. Buying a new home for the first time requires a mortgage, where a mortgage lender or bank fronts you the money and you pay it back over time.
A down payment on a mortgage should be 20% of the home’s price to avoid added fees, don’t worry if you don’t have that much of a down payment. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages, such as FHA, VA, and USDA loans.
In addition to having a down payment, a first-time home buyer will need a pretty good credit score. A lender will check your score and report in order to estimate the odds that you will deliver your monthly payment, too.
In turn, the lender will use this information to decide whether or not to loan you money, as well as how much and at what the interest rate would be. If a lender sees some late payments on your credit cards or other issues in your credit report, this can affect you on receiving a loan with a great interest rate, or even prevent your chances of getting any loan at all.
So it’s important to know your credit score, and take the necessary steps to payoff credit cards or student loans to help raise your score.
Before you start looking for homes to purchase, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies.
Each mortgage lender will examine your financial background such as your debt-to-income ratio and assets — and use this information to see whether to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range.
Want a trusty home-buying guide by your side? Most first-timers will want a great real estate agent — specifically a buyer’s agent, who will help them find the right houses, negotiate a great real estate deal, and explain all of the details of home buying along the way.
The best part? The agent’s services are free to first-time home buyers (because the seller pays the sales commission).
This is the fun part! At this point you agent should have been sending you a bunch of listings from the MLS, then after narrowing down your favorite homes, ask your agent to set up appointments to see them in person.
Found your dream home? Then it’s time to make an offer to the seller.
A home inspection is where you hire a home inspector to check out the house from top to bottom to determine if there are any issues with the home that might make you think twice about moving forward. Some example would be termites, faulty foundation, mold, asbestos, etc. Sure, a lot can go wrong, but rest assured that most problems are fixable.
Even if you got pre-approved for your home loan, your lender will want to conduct a home appraisal. This is where the lender checks out the house to make sure it’s a good investment. It’s similar to a home inspection, but for your lender.
Closing, is also known as settlement or escrow, brings together a variety of parties who are part of the real estate transaction, including the buyer, seller, mortgage representative, and others.
Closing is the day you officially get the keys to your new home — and pay everyone involved. That will include your down payment for your loan, plus closing costs, the extra fees you pay to process your loan.
Congratulations, you’ve made it! You are now officially a homeowner!