Some handy tips to make your life easier!
1. What Type of Home Best Suits Your Needs?
You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condominium, a co-operative, or a multi-family building with two to four units.
2. What Specific Features Will Your Ideal Home Have?
While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life; you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trustworthy appliances.
3. What Size of Mortgage Do You Qualify For?
Before you start shopping, it's important to get an idea of how much a lender will actually be willing to lend you to purchase your first home. You may think you can afford a $300,000 place, but lenders may think you're only good for $200,000—depending on factors like how much other debt you have, your monthly income, and how long you've been at your current job.
Make sure to get preapproved for a loan before placing an offer on a home: In many instances, sellers will not even entertain an offer that’s not accompanied by a mortgage preapproval.
4. What Kind of Home Can You Actually Afford?
On the other hand, sometimes a bank will give you a loan for a more expensive house than you really want to pay for. Just because a bank says it will lend you $300,000, doesn’t mean you should actually borrow that much. Many first-time homebuyers make this mistake and end up “house-poor”—meaning after they pay their monthly mortgage payment they have no funds left over for other costs, such as clothing, utilities, vacations, entertainment, or even food.
5. Do You Have Serious Savings?
Even if you qualify for a sizeable mortgage, there will be considerable upfront costs (like the down payment on the home, typically 20% of the total purchase price) and closing costs, too. So you need to have money put away.
6. Who Will Help You Find a Home and Guide You Through the Purchase?
I will help you locate homes that meet your needs and are in your price range. Then, I will meet with you to view those homes. Once you've chosen a home to buy, I can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork.
The Buying Process
Now that you've decided to take the plunge, let's explore what you can expect from the home buying process itself.
1. Find a home
Once you're seriously shopping for a home, don't walk into an open house without having an agent (or at least being prepared to throw out the name of someone you're supposedly working with). You can see how it might not work in your best interest to start dealing with a seller's agent before contacting one of your own.
2. Consider your financing options and secure financing
It'll behoove you to make sure your personal finances are in order. Generally, in order to qualify for a home loan, you have to have good credit, a history of paying your bills on time, and a maximum debt-to-income ratio of 43%.2
Lenders these days generally prefer to limit housing expenses (principal, interest, taxes, and homeowners insurance) to about 28% of the borrowers' monthly gross income, though this figure can vary widely, depending on the local real estate market.
3. Explore mortgage options
A variety of mortgages are available with varying down payment and eligibility requirements. Here are the main categories:
• Conventional mortgages are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.
• FHA loans are insured by the Federal Housing Administration and allow down payments as low as 3.5%.
• USDA loans are guaranteed by the U.S. Department of Agriculture. They are for rural home buyers and usually require no down payment.
• VA loans are guaranteed by the Department of Veterans Affairs. They are for current and veteran military service members and usually require no down payment.
You also have options when it comes to the mortgage term. Most home buyers opt for a 30-year fixed-rate mortgage, which is paid off in 30 years and has an interest rate that stays the same. A 15-year loan typically has a lower interest rate than a 30-year mortgage, but the monthly payments are larger.
4. Research first-time home buyer assistance programs
Many states and some cities and counties offer first-time home buyer programs, which often combine low-interest-rate mortgages with down payment assistance and closing cost assistance. Tax credits are also available through some first-time home buyer programs.
6. Compare mortgage rates and fees
Lenders may offer the opportunity to buy discount points, which are fees the borrower pays upfront to lower the interest rate. Buying points can make sense if you have the money on hand and plan to stay in the home for a long time. Use a discount points calculator to decide.
7. Get a preapproval letter
A mortgage preapproval is a lender's offer to loan you a certain amount under specific terms. Having a preapproval letter shows home sellers and real estate agents that you're a serious buyer, and can give you an edge over home shoppers who haven’t taken this step yet.
8. Make an offer
Your real estate agent will help you decide how much money you want to offer for the house, along with any conditions you want to ask for, like having the buyer pay for your closing costs. Your agent will then present the offer to the seller's agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits.
9. Obtain a home inspection
Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect your potential new home for the quality, safety, and overall condition. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation.
10. Close or move on
If you're able to work out a deal with the seller, or better yet, if the inspection didn't reveal any significant problems, you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period and hoping that nothing falls through at the last minute.
Things you'll be dealing with and paying for in the final stages of your purchase may include: having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork.
11. Buy adequate home insurance
Your lender will require you to buy homeowners insurance before closing the deal. Home insurance covers the cost to repair or replace your home and belongings if they're damaged by an incident covered in the policy. It also provides liability insurance if you're held responsible for an injury or accident. Buy enough home insurance to cover the cost of rebuilding the home if it's destroyed.
1. What Type of Home Best Suits Your Needs?
You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condominium, a co-operative, or a multi-family building with two to four units.
2. What Specific Features Will Your Ideal Home Have?
While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life; you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trustworthy appliances.
3. What Size of Mortgage Do You Qualify For?
Before you start shopping, it's important to get an idea of how much a lender will actually be willing to lend you to purchase your first home. You may think you can afford a $300,000 place, but lenders may think you're only good for $200,000—depending on factors like how much other debt you have, your monthly income, and how long you've been at your current job.
Make sure to get preapproved for a loan before placing an offer on a home: In many instances, sellers will not even entertain an offer that’s not accompanied by a mortgage preapproval.
4. What Kind of Home Can You Actually Afford?
On the other hand, sometimes a bank will give you a loan for a more expensive house than you really want to pay for. Just because a bank says it will lend you $300,000, doesn’t mean you should actually borrow that much. Many first-time homebuyers make this mistake and end up “house-poor”—meaning after they pay their monthly mortgage payment they have no funds left over for other costs, such as clothing, utilities, vacations, entertainment, or even food.
5. Do You Have Serious Savings?
Even if you qualify for a sizeable mortgage, there will be considerable upfront costs (like the down payment on the home, typically 20% of the total purchase price) and closing costs, too. So you need to have money put away.
6. Who Will Help You Find a Home and Guide You Through the Purchase?
I will help you locate homes that meet your needs and are in your price range. Then, I will meet with you to view those homes. Once you've chosen a home to buy, I can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork.
The Buying Process
Now that you've decided to take the plunge, let's explore what you can expect from the home buying process itself.
1. Find a home
Once you're seriously shopping for a home, don't walk into an open house without having an agent (or at least being prepared to throw out the name of someone you're supposedly working with). You can see how it might not work in your best interest to start dealing with a seller's agent before contacting one of your own.
2. Consider your financing options and secure financing
It'll behoove you to make sure your personal finances are in order. Generally, in order to qualify for a home loan, you have to have good credit, a history of paying your bills on time, and a maximum debt-to-income ratio of 43%.2
Lenders these days generally prefer to limit housing expenses (principal, interest, taxes, and homeowners insurance) to about 28% of the borrowers' monthly gross income, though this figure can vary widely, depending on the local real estate market.
3. Explore mortgage options
A variety of mortgages are available with varying down payment and eligibility requirements. Here are the main categories:
• Conventional mortgages are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.
• FHA loans are insured by the Federal Housing Administration and allow down payments as low as 3.5%.
• USDA loans are guaranteed by the U.S. Department of Agriculture. They are for rural home buyers and usually require no down payment.
• VA loans are guaranteed by the Department of Veterans Affairs. They are for current and veteran military service members and usually require no down payment.
You also have options when it comes to the mortgage term. Most home buyers opt for a 30-year fixed-rate mortgage, which is paid off in 30 years and has an interest rate that stays the same. A 15-year loan typically has a lower interest rate than a 30-year mortgage, but the monthly payments are larger.
4. Research first-time home buyer assistance programs
Many states and some cities and counties offer first-time home buyer programs, which often combine low-interest-rate mortgages with down payment assistance and closing cost assistance. Tax credits are also available through some first-time home buyer programs.
6. Compare mortgage rates and fees
Lenders may offer the opportunity to buy discount points, which are fees the borrower pays upfront to lower the interest rate. Buying points can make sense if you have the money on hand and plan to stay in the home for a long time. Use a discount points calculator to decide.
7. Get a preapproval letter
A mortgage preapproval is a lender's offer to loan you a certain amount under specific terms. Having a preapproval letter shows home sellers and real estate agents that you're a serious buyer, and can give you an edge over home shoppers who haven’t taken this step yet.
8. Make an offer
Your real estate agent will help you decide how much money you want to offer for the house, along with any conditions you want to ask for, like having the buyer pay for your closing costs. Your agent will then present the offer to the seller's agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits.
9. Obtain a home inspection
Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect your potential new home for the quality, safety, and overall condition. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation.
10. Close or move on
If you're able to work out a deal with the seller, or better yet, if the inspection didn't reveal any significant problems, you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period and hoping that nothing falls through at the last minute.
Things you'll be dealing with and paying for in the final stages of your purchase may include: having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork.
11. Buy adequate home insurance
Your lender will require you to buy homeowners insurance before closing the deal. Home insurance covers the cost to repair or replace your home and belongings if they're damaged by an incident covered in the policy. It also provides liability insurance if you're held responsible for an injury or accident. Buy enough home insurance to cover the cost of rebuilding the home if it's destroyed.