Purchasing your first home is a very exciting milestone. It doesn’t come without a little bit of work, though. The process of qualifying for a home loan is often very intimidating for first time home buyers. A little research can go a long way in making the homebuying experience go a little more smoothly. Here, we’ll provide a few tips for first time homebuyers that can help.
Questions You’ll Need to Answer
The first thing you’ll have to figure out is what your long term goals are and how home ownership fits into them. Use these four questions to help guide your answer:
- What type of home will suit your needs? There are plenty of options: single-family, multi-family, a townhome, a condo, or a fixer-upper. Each option has pros and cons, depending on your goals, so choose one that will help you reach those goals.
- What features will your ideal home have? You’ll have to have a little flexibility here, but it’s important to remember that this is the biggest purchase of your life, and you don’t want to go purchasing your first home and hating it in six months. Write down your non negotiables and your would be nice list, and then use it to gauge your interest in the available homes.
- How much mortgage do you qualify for? Figure out how much a lender will actually be willing to give you to purchase your first home.
- How much home can you actually afford? Sometimes, lenders will give you a loan for more than you actually want to pay for. Look at the house’s total cost beyond the monthly payment to determine if it’s within your budget.
The Buying Process
Once you’ve sorted out some questions about what you’re really looking for, it’s time to begin the process of purchasing your first home. This can be a chaotic time, but preparation goes a long way. Here’s what you can expect:
- Find a home. Use all the help you can get, including real estate agents, online listings, driving around interesting neighborhoods, and asking friends and family members.
- Consider your financing options and secure financing. There are plenty of first time home buyer benefits, including FHA down payment assistance programs and federally backed loans. The FHA requires a down payment of just 3.5 percent of the purchase price of the home, and sometimes includes closing costs.
- Make an offer. Your real estate agent can help you decide what to offer and will present that offer to the seller’s agent. A few counter-offers might be made until you reach a deal or decide to call it quits. If you reach an agreement, you’ll make a deposit and escrow begins, a short period where the seller takes the house of the market with the expectation that you will buy it as long as there aren’t any serious problems.
- Get a home inspection. Have a trained professional inspect for quality, safety, and overall condition. If he or she finds serious defects, you will probably be able to rescind your offer and get your deposit back or negotiate to have the seller make repairs or discount the selling price.
- Close or don’t. If you can work out a deal with the seller or didn’t have any major inspection problems, you should be ready to close, a short process involving a ton of paperwork. You might have the home appraised, do a title search, obtain private mortgage insurance or a piggyback loan, and complete mortgage paperwork.
Purchasing your first home is serious business, but it doesn’t have to be stressful as long as you know what to expect.