Buying your first home can be an exciting and daunting prospect. But with the right information, you can ensure that your home purchase goes smoothly and you’re set up for success long-term. We’ve gathered together 10 of the most common questions about buying a home and answered them below. Let’s get started!
Starting the search
First things first, you’ll need a lender pre-approval. Which will help set your budget and give you an idea of what you can afford. It’s important to know that there are programs available for homebuyers with lower incomes who would have trouble buying a house without assistance. These include down payment assistance loans (through nonprofit organizations) or mortgage credit certificates (offered by local governments). Federal tax credits are also available for certain buyers. The National Association of Realtors has more information on these options. Once you’ve determined how much you can spend on a home, it’s time to start looking at properties.
Here are some tips:
1) Check out online real estate listings in your area;
2) Talk to friends and family about any good property they may have heard about;
3) Contact real estate agents in your area;
4) Attend open houses in person. In order to buy a home, you’ll need enough money saved up for closing costs and down payments. Which is typically around 20 percent of your total purchase price. For example, if you want to buy a $200,000 house, you should be prepared to come up with $40,000 in cash for closing costs and a down payment.
Getting a loan
If you don’t have that kind of money lying around. You might consider getting a loan from a bank or other financial institution. There are two main types of mortgages: fixed rate and adjustable rate. Fixed rate mortgages stay constant over time while adjustable rate mortgages change periodically depending on market conditions.
Typically, fixed rate mortgages are less expensive than adjustable ones but they require larger down payments. You’ll also need to decide whether you want a 30-year or 15-year mortgage. With a 30-year mortgage, your monthly payments will be smaller because you’re paying off interest over a longer period of time. However, because it takes so long to pay off your loan, interest rates are usually higher than with 15-year mortgages.
As mentioned above, you may be able to get assistance through government agencies like FHA and VA or private companies like Freddie Mac and Fannie Mae. These loans are often easier to qualify for since they allow borrowers to make down payments as low as 3.5 percent of their home’s value.
Mortgage Eligibility Requirements
Borrowers must still meet eligibility requirements, however, such as income limits and debt-to-income ratios. And even with these types of mortgages, most lenders require borrowers to put down 10 percent or more when purchasing a home. Before applying for a mortgage, check with your state and county to see if you’ll need to register as a licensed broker.
This varies by location but most states require brokers to register with their state agency before conducting business. When applying for a mortgage, be sure to ask plenty of questions about fees. And interest rates so you can make an informed decision about which type of loan is best for you.
Once approved, it’s time to start shopping! But wait, you’ll need to hire a home inspector to look over your new home and make sure everything is in working order. This could cost anywhere from a few hundred dollars to several thousand dollars, depending on where you live. Finally, you’ll need to arrange for financing and inspections of your new home. Many lenders offer closing cost assistance grants or mortgage rate reduction grants that can reduce your costs significantly.
You’ll need to apply for these grants, which are offered on a first-come, first-served basis. You can find information about these grants on your lender’s website or contact them directly. After you’ve found a home and been approved for financing, it’s time to sign on the dotted line.
Be sure to read all of your paperwork carefully and have an attorney review anything that seems unclear or complicated. Congratulations! You’re now a homeowner.
Finding a broker
Once you decide on a specific type of home, and how much you’re willing to spend. It’s time to find a real estate agent. Look for an experienced, full-time agent who belongs to at least one professional organization in your area (like NAR).
That way they will have access to information that can help guide your decision making process. Plus, their connections in real estate can be invaluable when it comes time for escrow and closing. It’s also important to hire someone with whom you feel comfortable. It may take several meetings before you make a final decision, so don’t settle until you feel good about working with them.
Going through offers
If you’re making an offer on a house, make sure you’re asking for all of your desired features. The seller will surely counteroffer and expect you to ask for some concessions, so if there are features that are non-negotiable (like a pool or outdoor patio), it is best not to mention them in your initial offer. Also, remember that you can always negotiate back down from your highest offer; don’t be afraid to go high!
Just be prepared to lose a bit of ground. Once you’ve settled on an agreed-upon price. You’ll need to decide how much money up front you want to put towards closing costs and other fees.
Typically, buyers pay one percent of their purchase price towards these costs but they can range anywhere from two percent up to six percent. Be sure to talk with your real estate agent about what is standard in your area. Once everything has been negotiated, both parties will sign a contract which details all of these agreements as well as closing dates and deadlines.
What happens at closing?
At closing, you’ll sign a final loan agreement and also receive your deed (from which you get your home’s title). This transfer of ownership officially makes you a homeowner. In most cases, there will be two closings: one for a mortgage and one for an insurance policy on your property.
The first is between you and your lender; at that time, they’ll release their lien on your home. The second is between you and an insurance company; at that time, they’ll issue a policy that protects your investment in case something happens to it. A small fee goes to each institution involved in these transactions. If you use a real estate agent, he or she might collect a commission as well.
The last step before moving into your new home! Make sure all paperwork is correct before going through with closing!
Dealing with all the paperwork
Getting a mortgage is complex, but it’s also just part of home ownership. After you purchase your first home, you’ll have to deal with an array of additional paperwork—things like setting up utilities and getting insurance. The best way to learn how these processes work is by going through them yourself.
And don’t worry: If you find that something isn’t clear or you need help along the way, there are plenty of resources available to help guide you through all of it. It might seem daunting at first, but buying a home doesn’t have to be scary! With time and practice, you can become a pro at handling any obstacles that come your way.
Final thoughts
Getting your own place is a big deal. It might be a house, an apartment, or maybe even just a little studio—but it’s yours. Congratulations! Though buying your first home is exciting and fun, it can also be stressful and overwhelming if you don’t know what you’re doing. Don’t worry; we here to help you on your first home.
