First-Time Home Buyers Guide
So, you’re thinking about buying your first home? Congratulations! It’s a big step, but an exciting one. This guide will give you the tools and knowledge to make informed decisions every step of the way.
There are 4 big steps to buy a house:
- Find a lender, set a budget, and get a prequalification letter
- Work with a real estate agent to find a house
- Write an offer and work through the offer contingencies
- Get to closing
Find a Lender, Set a Budget, and Get Prequalified
- Find a Lender: Shop around and compare lenders (banks, mortgage brokers, etc.). Choose one that suits your needs and offers competitive rates.
- Set a Budget: Your lender will help you determine how much you can afford based on your income, debts, and credit history. This will guide your home search.
- Get Prequalified: This letter from your lender states the loan amount you’re likely to qualify for. It shows sellers you’re a serious buyer and can improve your negotiating position.
Before browsing homes, you need to understand your financial situation. There are lots of lenders out there, from your local bank to mortgage brokers, to government lenders, to even private parties, like family members. You should shop around for a lender you like and trust and someone with a lending program that fits your needs.
Your lender will help you figure out how much you can afford based on your income and financial picture. They will help you set a budget for your up-front costs and your monthly payment after closing.
After you submit an application showing how much you make, your lender may give you a prequalification letter. All this letter says is that this lender believes you have sufficient income to pay up to X dollars for a house. It’s not a guarantee that they will give you the money, but it tells real estate agents and home sellers that you have done your homework.
2. Team Up with a Real Estate Agent
Navigating the housing market can be overwhelming. A good real estate agent helps you figure out what type of house you can buy on your budget and helps you find it. Our agents work with clients to figure out what features they really need, like location, commute time, number of bedrooms, etc. This means less wasted time and a more focused search. Find an experienced agent that’s seen the good, the bad, and the ugly, and can help you avoid problem houses!
- Define Your Needs: They’ll help you identify your must-haves (location, size, features) and prioritize them.
- Efficient Search: Agents have access to the Multiple Listing Service (MLS) and can narrow down your search to properties that match your criteria.
- Expert Guidance: They can spot potential issues, negotiate on your behalf, and guide you through the entire process.
3. Making an Offer and Navigating Contingencies
Once you find a house that fits your needs and your budget, we get to the third step, which is write an offer and work through contingencies
Write an Offer
An offer to purchase is a contract, where you agree to pay X dollars for a certain house by a certain date. An offer to purchase will typically include contingencies, like an inspection or financing contingency.
Understanding Contingencies
A contingency is a way out of a purchase contract if something isn’t what we expected. There are four typical contingencies:
- Inspection Contingency: Buyers have the house inspected to make sure there are no unexpected issues with the structure or major components.
- Appraisal Contingency: Ensures the property’s appraised value meets the agreed-upon price. You make sure that the house is worth what you are willing to pay for it.
- Title Contingency: Verifies clear ownership and no outstanding liens on the property.
- Financing Contingency: Protects you if you can’t secure financing.
If something isn’t as you expected, or your lender is not willing to lend you the money, then you may be able to get out of the contract. A good real estate agent helps you write your offer to protect you, and then helps you work through these hurdles.
4. Closing Day: The Finish Line
This is the final step where all the paperwork is finalized:
- Review Loan Documents: Carefully review all loan documents before signing.
- Prepare Closing Costs: Have your down payment and closing costs ready.
- Obtain Home Insurance: Get insurance to protect your investment.
- Transfer Utilities: Arrange for the transfer of gas, electricity, and other utilities.
- Move In!
Closing is the day when all of these items come together and, if you’re successful, you walk away with the keys to your new home.
How Long Does It Take?
Our rule of thumb is that it typically takes 45 days from the date you have an accepted offer to closing. Knowing that you need between 30 and 60 days will help you plan when to end your lease and get ready to move.
Ready to Start Your Homebuying Journey?
What do you need to do to buy a house? A lot – that’s why the smartest thing you can do is find a great real estate agent to help you. Our team is really good, and we’re ready to help you find your new home! Give us a call and come meet one of our friendly agents.