The Ultimate Guide To Purchasing A Home For First Time Buyers
A time comes when you grow weary of paying rent year after year and you’re now ready to take the bold step of owning your own home. You may, however, have no clue whatsoever where to start in this whole process. Investing in real estate through buying a home is no small deal and it’s relatively easy to lose your hard earned money if you make an uninformed move.
First time home buyers have a huge challenge on how to go about this process. The fear of getting it wrong makes some to shy away. Not to worry. Here is an insightful step-by-step guide that can aid you in purchasing the much-desired home you’ve always dreamt of:
1. Carefully Analyse Your Need To Buy A Home
Is owning a home a priority for you? Is renting a better choice for you than buying? Is your drive to buy a home solid and backed up with real facts or is it just a wild desire within you that’s not well calculated and properly analyzed? Is this the right time to make this bold purchase decision? Are there changes you will need to make once you’ve bought the home such as shifting locations and will they affect you?
Considering all these factors and listing out your priorities and how they will be affected by purchasing a home is the first hurdle to jump before making any other move. Buying a house isn’t like making any other purchase, it has a lot to it and calls for a lot of factors to be put into consideration.
2. Source Out A Real Estate Buyer Agent To Assist You In The Process
Once you’ve analyzed your need to purchase a home, the next important thing is to source out a buyer agent. Professional guidance is practically one of the most important things you should have in your home purchase pursuit.
Agents have a better understanding of all the home listings available. You can search for licensed agents online through their websites, customer reviews, publications such as magazines, newspapers, and blogs, recommendations from friends, among many other credible sources.
Source out an agent who will represent you in a trustworthy manner, who is mindful of your best interests, who has a good understanding of the area in which you are interested in purchasing a home, and who sets the offer on the table to sign a buyer broker agreement. The more skilled and well experienced the agent is, the better it is for you.
3. With The Help Of Your Agent, Find Homes That Are Available For Sale
Time to add some meat to the bones by checking the available homes on sale in the market. With the aid of your agent, source out homes that are on sale. Consider each home available in the market whether they be foreclosures, Real Estate Owned (REOs), overpriced homes that have longer days on market, short sales, and fixed uppers.
Do a tour of as many homes as you possibly can and get a feel of the interiors and exteriors. Narrow down your search to the homes that conform to your specifications. Get MLS print-outs from your agent of similar sales within the area. Rate the homes as you view them to help you settle on the final best options.
4. Align Your Finances To Your Purchase Need
Find out the loan programs available by consulting with your agent for the best lender referrals with the highest performance. Find the best sources of mortgage and do a comparison of the fees and rates. Work with the best mortgage broker who has proper communication and is able to meet your expected closing date. Work with the best loan offer that suits you.
Select a loan program with FHA Loans if they are available in your state since they come with competitive interest rates, have low down-payment requirements, and permit home sellers to pay closing costs. Once this is done, acquire a pre-approval letter as evidence to the seller that you’ve been pre-approved to get a loan. This gives you an advantage when negotiating an offer.
Establish a down payment guided by the loan program you selected. The higher it is, the lower the monthly mortgage payments you will make.
5. Make A Smart Offer
Considering already sold homes is a good anchor point to use to make price offers to sellers. Determine whether the market is a seller market where demand for homes is more than supply where sellers have more advantage in price negotiation, or it’s a buyer market which is the opposite. Make the best offer that is reasonable and competitive.
6. Negotiate The Seller’s Counter Offers
Sellers are more likely to make counter offers once you’ve made your offer. Negotiate well with the seller, sticking to the best terms until you come to an agreed price.
7. Time For An Earnest Money Deposit And To Setup Contingencies
Once you agree on the price with the seller, making an earnest money deposit is the next step. This shows your commitment to the transaction process. Deposit the money check with the right party but limit it from being payable to the seller. Have contingencies that guarantee money back in case you cancel the contract.
8. Setup An Escrow
Have an escrow officer prepare escrow instructions. He/she will process transactions which include collection, preparation, and recording of documents, acquiring signatures, and distributing funds.
9. Get An Assessment/ Appraisal
Lenders order for appraisals to ensure that the home value is equivalent to your pay offer.
10. Request For A Homeowner’s Insurance Policy
Do this early enough to get the insurance on time. Some insurance companies don’t insure certain homes such as old houses or those in risky locations. Previous homeowner claims can make it hard to get insurance. You can get a replacement coverage which can do a rebuild if the home is destroyed.
11. Carry Out Inspections
Contract the services of a professional inspector to carry out sewer, pest, chimney, and any other major inspection needed. You can cancel the contract if you discover defects that are unbearable to you.
12. Take Out The Contingencies
Once the loan has been confirmed and the appraisal has been approved, you can remove the contingency under the contract terms and obligations. Failure to do so can result in the seller issuing a Notice to Perform and canceling the contract.
13. Conduct A final Evaluation
This is to ensure the house is in the best condition even after removing of any furniture that was in it. Ensure there are no floor damages, pipe leaks, or other issues. In the event of those, have them addressed before closing the deal.
14. Sign The Loan And Escrow Official Documentation
These documents are large, almost 100 pages. Read them through and sign them as required. This can take you typically up to an hour’s time to do.
15. Deposit The Pending Down Payment
You can now make a deposit of the pending down payment along with the closing costs. You need a certified check that can be paid to escrow.
16. Close Escrow
Once the Recorder’s Office sends a confirmation to the title company that documents are now on record, escrow can then be closed. Your Deed of Trust, Seller Reconveyance, and Property Deed will now appear in public records. The original deed will be mailed later to you.
Once your transaction has been recorded, the title company will send a notice to your agent who will then notify you. Once the recording is fully done, the property now belongs to you.
And there you have it, a detailed step-by-step guide to buying home. If you are a first time home buyer, no need to be afraid or shy away. Follow these steps and you’ll be a happy homeowner in no time. Get home safely!!!