First-Time Home Buying 101
The first-time home buying process is one that’s mixed with excitement, anticipation, anxiety, and sometimes, confusion. (This why it’s so important of having an experienced real estate professional agent who can guide you through the process.)
There are several steps to buying a home and these begin well in advance of the actual house hunt. So, let’s take a look at what’s involved in the first-time home buying process and what you can expect.
First-Time Home Buying 101
Purchasing a house is a big deal not only because it’s such a large, long-term investment. (Although that’s certainly no small part of the equation.) It’s where you’ll live for the next several years to decades. Which means it’s very important to take it step by step and understand every part of the overall process.
Here’s a rundown of what the first-time home buying process entails, from start to finish:
- Save for a down payment. This usually begins a few years before it’s time to visit open houses and tour through model homes and resales. Ideally, it’s best to have a down payment of 20 percent to avoid paying PMI or private mortgage insurance. But, there are home loan products and programs which only require 3.5 percent to 5 percent down. (If possible, save up 10 to lower your monthly mortgage payment and to amortize the loan enough to drop the PMI in a shorter time frame.) It’s also a good idea to squirrel away a little extra cash, about $3,000, for the inspections, moving costs, and miscellaneous items.
- Check all your credit reports. Once you are near your down payment goal, it’s very smart to order copies of all three of your credit reports. You can do this once a year, free of charge through AnnualCreditReport.com. Take the time to examine each page. If you encounter errors, which is very, very common, dispute them through snail mail, providing documentation. During this time, you should pay down balances on your lines of credit to help boost your credit score.
- Get pre-approved for a mortgage. Next, you’ll go through the initial pre-qualification phase. This is an estimate of how much you’ll be able to borrow and a cursory look at your finances. Then, you’ll move into the pre-approval process, which will give you more accurate numbers and a borrowing limit. It’s a sound practice to stay about 10 percent under your maximum loan amount so you don’t overextend yourself and spend less per month on your mortgage payment.
- Partner up with an experienced agent. You’ll need an experienced, local real estate professional to guide you through the rest of the first-time home buying process. Talk honestly and openly about what you can afford to spend and where you’d most like to live. The more information you provide and the more accurate, the more pleasant and easier the house hunt and purchase process will go for you. Create a list of must-haves and wish items with your real estate agent. But, be prepared to be flexible. It’s very common to have to sacrifice in order to find the right home for you and your family.
- Submit a purchase offer to the home seller. When you find a house that mostly fits your needs (an may even have a few to several of your wish list items), you’ll submit a purchase offer. Listen to your buyer’s agent advice about how to best proceed.
- Go through the inspections and appraisal process. If the seller accepts your purchase offer, you’ll schedule the necessary inspections and the lender will order an appraisal.
Once the inspections and appraisal are completed, you’ll close on your new home and move in!