28 Dec 10 Steps to Buying a House for the First Time Home Buyer
10 Steps to Buying a House for the First Time Home Buyer
Whether your a first time home buyer or not, buying a house is exciting but it is also time-consuming. It can be intimidating if you don’t know where to start. You have to find a home, obtain financing, and get all the pieces in place. This is likely the biggest purchase you will ever make, and you don’t want to stress over it or have regrets later on. Getting the home of your dreams at a low-interest rate and a payment you can afford is important.
Following these 10 steps to buying a house can make it an experience you are happy with. They can help you understand the process as you navigate the process. They can help you avoid common mistakes or getting in over your head. The right process can ensure the home of your dreams doesn’t slip through your fingers!
The process of buying a house can be significantly harder amid a pandemic. COVID-19 has created some unique challenges, but the process can still be completed. It may prove to be the ideal time for you to buy a new home. This can be your chance to get a great interest rate and a good deal on a home!
Be Prepared To Buy A Home
Buying a home is going to take time, be patient. It takes about 6 months to get it all done. For some home buyers, it will be shorter and for others, it will take longer. There are steps you can take to keep it moving along. Don’t just type in google “Jamestown NY Zillow” and don’t be in a rush to buy a house that isn’t ideal for you or the cost is too much. Hold out for additional listings to come on the market. It will happen!
The starting stages of buying a house begins on paper. Sit down and put your goals with a new home on paper. Be realistic about what you can afford and other details. If you have a partner, this should be a joint discussion. Both of you may need to be flexible with certain parameters so you can be on the same page for buying a home. Some of the issues to discuss include:
– How much can you afford for a monthly payment?
– How will you finance the home?
– How much can you afford as a down payment?
– How much is the average home in the town and neighborhood you wish to live in?
– What is the current market value of homes?
– What are the current interest rates on home loans?
– How long will it take to commute to work from that new residence?
– Are there ample parks, schools, etc. in that area?
– Are there activities you can conveniently walk to?
Such details can help you identify the key concepts you are after with a new home. There are plenty of other details to discuss, but this will get things moving in the right direction. Talk about what your ideal house will look like and where it will be. Identify the options the home must have. You won’t buy a home that doesn’t offer them. For example, you may require at least two bathrooms and a two car garage. Other perks may be optional but not a deal breaker. For example, you may love the idea of a fireplace but wouldn’t avoid buying a home if it didn’t have one.
What does your Credit Show?
You can look for a home to buy all you want, but if you don’t have money to buy it, there is no point. Most people don’t have the cash on hand to buy a home. They need to get a loan to finance most of it and they will put a percentage of the total price down. Never assume you can easily get a loan. Find out what your credit is going to show. If you have a partner both of you need to take a good look at your credit reports.
There may be inaccurate details on such reports. If there are accounts you don’t recognize or late payments that shouldn’t be there follow the procedure to get them reviewed. The goal is to get those adverse marks removed as soon as possible. If you have a high balance with credit cards and other bills, you may need to pay the debts down before you apply for a home loan.
Don’t let any potential lender look at your credit until you have done so yourself. Reserve that check by them until you are serious about buying a house and you want to see how much you can qualify for with a loan. It makes sense to have that information so you stay within your price range as you search the available homes on the market.
To check your credit reports, obtain a copy from each of the 3 reporting bureaus. You can do this by calling them or requesting the information online. You can get a free report from each agency annually. You could also use Credit Karma to monitor your credit. The main credit agencies include:
There are two credit scores for consumers. The first is the FICO score and the one most people are aware of. Your credit score can be as high as 850, and the higher the score the more responsible you are deemed to be with your credit. If you have high balances but you pay your bills on time it can give you a lower credit score. If you have late payments or collection debts your score will be hit hard by them.
The other score is known as the Vantage score. This is what you see when you use various sites online to see your current credit rating. While they can be useful to monitor credit, they aren’t the score lenders will use when they determine if you can qualify for a mortgage loan or the rate of interest on it. They will rely on your FICO score from the credit agencies.
Once you know your credit score, you can evaluate if you would be able to get a home loan. Some lenders will approve you with a score of around 580. For the best interest rates, you need a score of around 720. To raise your credit score, reduce your debts, and avoid applying for any new debt. This can help you raise your credit score to a point where you can get a better deal when you apply for a mortgage loan.
How much can you Afford?
Make a list of your income and expenses to see how much you can afford. You don’t want to get in over your head with a mortgage. You don’t want to struggle month after month to pay for it or when you have an emergency expense. Hopefully, your income will increase over time, but for now, you have to calculate the mortgage with a mortgage calculator based on what you earn. Don’t include any overtime hours or bonuses as they aren’t guaranteed to happen in the future.
When it comes to your expenses, allow some extra cushion monthly. There should be a certain amount of money going into savings as part of your monthly budget. There can be emergency expenses when you own a home. Instead of calling a landlord to take care of it, you have to pay out of your pocket to resolve the issue.
When you are pre-approved for a mortgage loan, the lender says how much they will loan you for a home. Strive to find a home at a lower cost than the maximum to lower your monthly payments. Sometimes, lenders will give you more than you can afford. Don’t be tempted to take it, rely on your calculations and confirm you will be able to pay all your bills ongoing if you get that home loan.
Once you know the amount of money you can afford for the home, create a list of essentials the place has to offer. Prioritize them and work your way down that list when you look at potential homes. If certain extras are important to you, hold off buying a home until you pay down debt and can afford a higher payment. If you are willing to forego those extras, you may be able to get into a home now.
Some of the items to consider on that list include:
– Commute time to and from work
– Crime rate
– Number of bedrooms
– Number of bathrooms
– Schools and activities in the area
– Total square footage of the home
– Type of home structure
Find an Amazing Real Estate Agent
Whether searching for Chautauqua real estate or real estate in any market searching for a home on your own is exhausting, time-consuming and could leave you vulnerable. There are too many variables and too much at stake. Find a great real estate agent to work with you, don’t just type in “Realtor near me” or “real estate near me” and call the first Realtor you see! They should be licensed and easy to communicate with. They should be passionate about matching clients with homes that fit their needs and price range. Yet they shouldn’t pressure anyone to make a home purchase. If your buying real estate in Chautauqua or surrounding areas you should use a Chautauqua Realtor and I would love to help you! Here are what my clients have said about me!
The real estate agent is there to guide you and answer questions as they come up. Share with them what you are after in a home including location and price range. The more they know about your ideal dream home, the easier it is for them to match you with it! They will review the current listings and show you images and videos of those available. They can schedule a time for you to see any of them in person.
If you don’t find the ideal home within current MLS listings, don’t worry. The Realtor will contact you when something new comes on the market they feel you may like. When you are ready to make an offer the agent will help you with the contract and any negotiations. They will also assist you with the closing.
Typically, there is no cost to you when you use the services of a real estate agent. They get paid a commission from the sale of the real estate. The money comes out of the money the seller gets when the transaction is completed. Since they get paid on commission, it is a great motivator for them to help you find the right home to buy.
Your real estate agent can give you insight into the market conditions. For example, if there are plenty of homes for sale or if the interest rates are low. If homes are selling quickly, they can help you identify ways to get a jump on a place when you are interested in it. They can help you find a lender and take care of any problems that may arise while buying a home.
Pre-Approval for a Loan
Getting the paperwork done and being pre-approved for a loan is encouraged. This validates the funds are available and how much you can borrow. It shows you the monthly payment and interest rate if you borrow that maximum amount for a home. With this information, you can confidently work with a Realtor to view homes within that price range.
The pre-approval also gives you some negotiation power. For example, you may want a home a bit higher than you were approved for. It doesn’t hurt to make an offer for the amount you were approved for. The home seller may be eager to sell and accept that lower price since you are already approved for the funding. The amount and the interest rate will be good for a given period of time after approval. If you don’t find the home you want by then, you may have to complete the process again.
The lender will need a variety of documents to get you pre-approved for a mortgage loan. Common items they will ask for include:
– Checking and savings account statements
– Debt information including monthly amount and the creditor
– Proof of income
– Tax returns
– Current expenses including your rent and vehicle payments
Your debt-to-income ratio is going to determine if you pre-qualify and how much you can borrow. Don’t buy anything new between when you get the approval and when you proceed with the loan. If your debt-to-income ratio changes due to a purchase such as a new car or new furniture it can changes things and prevent you from getting the home you want.
Find a Home
The fun part of buying a home is looking at various places on the market. You will get to explore neighborhoods. You will see various layouts and designs within the homes. Your real estate agent should narrow it down so you only get referrals to those places that meet your criteria. They can send you information on a listing including location, price, and photos. If you are interested then you should go look at it in person.
Look at a home that has your interest as soon as you can. Otherwise, it may have an offer on it before you do so. In some locations, the housing market is very competitive and homes don’t stay available for long. Make sure your Realtor can reach you to discuss new options as they are available.
Watch for open house offers too. This is a chance for you and others to come and see that home during scheduled hours on a given day. You don’t need an appointment, you just show up. You can go alone or ask your real estate agent to go with you. If it is a great home they may get several offers on it by the end of the day.
When you go see a home, take your time to explore what it has to offer. Look around the place and in the closets. Verify it has enough storage space. Is the neighborhood noisy? Do you hear lots of children and pets? You may enjoy socializing or be after a place offering plenty of privacy and quietness.
Look for problems with the structure such as cracks. You don’t want to buy a home with foundation concerns. It can be expensive to repair them. Turn on the lights and flush the toilets. This allows you to test the electrical design of the home as well as water pressure. Look for signs of water leaks you don’t want to buy a home with such concerns.
Check around the doors and windows to see if heating/cooling is being lost through them. An energy-efficient home will be designed to keep heat and air conditioning from escaping through them. If you are extremely interested check out the roof and verify it doesn’t need repairs or to be replaced.
Create an Offer
You may know right away a particular home is the one you want. In other scenarios, you may walk through it several times before you decide. When you are ready to buy a home, an offer needs to be created. Your Realtor can help you do this. They will help you negotiate the best price for it. Don’t be shy asking them to accept less than it is advertised for. The initial offer should give you room to move! The negotiation is one of my favorite parts of the entire home buying process!
If they accept that offer, the house is yours and you already have some equity with it. The seller can decline the offer and you can choose to walk away or offer more. They can also counteroffer a price between what they asked and what you offered. Your real estate agent may encourage you to ask for a few extras in the offer too. For example, it may state a water leak under the kitchen sink has to be fixed by the seller.
Your real estate agent will be familiar with the required disclosures where you reside. They can request those documents and review them. If they have any concerns they will address them with you. For example, they may have to disclose the property is in a location where flooding is a potential risk.
There should be contingencies in the offer too. For example, your agent may put in there the home has to pass an inspection and appraise at a certain amount. If the inspection fails or the appraisal is low this would mean you aren’t legally bound to proceed with the purchase of the home.
The offer should include a closing date for you to take ownership of the home. This is typically 30 to 45 days after the offer has been accepted. However, you may need to get in there sooner due to when your current rental agreement expires. It doesn’t hurt to ask if you can move it up. Sometimes, the seller will ask the new buyer to push back the closing date because they can’t get into a new home until a later date. Try to be flexible if the seller has such a need.
Earnest money is given, typically in the form of a check, when an offer is made. If the offer is accepted, that money goes to the seller. The money becomes part of your down payment amount so you aren’t losing those funds or trying to replace them. If the offer isn’t accepted or any of the terms of the offer can’t be met you get that money back. If you back out of the agreement for a reason not covered in that agreement, the seller will get to keep that earnest money.
Some offers are accepted immediately and others take some negotiating. Your real estate agent isn’t going to let you get taken advantage of. If the agreement can’t be made then it may be best to move on and keep looking for a different home. If the offer is accepted, it is just a matter of time until you can move in and call it your own!
It is wise to put a contingency in the offer the home must pass an inspection. A professional inspector may find a problem with the home you didn’t see when you walked through it. This information may alter your decision to buy. You may decide to buy it but ask the seller to fix something or lower the cost of the home to compensate for what has to be done. Many states don’t mandate an inspection but you are taking a risk to buy a home without one. Most lenders will require one before they lend you money.
Complete the Financing
Since you were already pre-approved, it won’t take much to finish the financing. You may need to provide current income. They will run your credit again to make sure there isn’t a drastic drop since the pre-approval. If you don’t get pre-approved, you will be on pins and needles as you wait for the financing. You really want the home but you won’t be sure if you qualify. This is one more reason to do the pre-qualification before you search for a home.
If the appraisal amount is less than the amount you need for the home, you have a problem. The lender can’t give you more money than the home is worth. If the appraisal is for the same amount or it is higher than the loan amount then it won’t be a problem.
Insurance on your Home
Many lenders give you the option of bundling the insurance on your home with your mortgage. You will pay one payment each month to cover both. If you choose to get your own coverage you will need to provide documentation to the lender. They may mandate the amount of coverage you have and the deductible before they approve the home loan.
Final Walk Through
On the day of the closing, you will complete all of the documents and sign the paperwork. You will have a final walk through of the home with the Realtor. If you notice any problems or concerns from when you agreed to buy the home they must be discussed at this time. If everything looks good you can complete the closing process and get obtain the keys. The home is yours to move into when you are ready!
If you are considering buying a house, you may want to read “Buying a Home- Everything is Negotiable.”
REAL ESTATE BROKER
ERA TEAM VP REAL ESTATE
MLMcVinney & Associates, LLC
To see what clients think about me, check out my 5 star google reviews!
Micro-Bio: I am a real estate broker with over 20 years of experience in the real estate industry in both residential and commercial real estate. My primary focus is in Chautauqua County, in Western NY, especially Chautauqua Lake Real Estate…including Bemus Point, Lakewood, Jamestown, Mayville, Stowe, etc. You can search for Chautauqua Real Estate here. My website has all of the listings that Zillow, Trulia, Realtor or the NYS MLS has.