Congratulations on deciding to look for your first home. Home-ownership is a part of the American Dream, and you’ve been dreaming about your perfect house for quite some time. Before you jump in head first into a pool of unknown waters, here are some tips for first time home buyers.
Check Your Credit
Fix your credit first. Before you can apply for home mortgage loans, you’ve got to have your credit in pristine condition. You’ll need to obtain a current copy of your credit report and assess your situation. If you have derogatory accounts affecting your credit score, handle them immediately. Also, avoid making any big-ticket purchases during the process of shopping for your home. Big purchases can impact your credit in a negative way.
Build Your Savings
You should have an adequate amount of funds set aside in savings for your down payment, closing costs, and unforeseen expenses. Your home mortgage loan does not include closing costs, so those will need to come out of pocket. Furthermore, if you’re purchasing a pre-owned home, the house may have some necessary repairs. To avoid being house poor, make sure you have plenty of funds in your nest egg before making a purchasing commitment.
Get Pre-Approved
Seek pre-approval for your home loan. Knowing how much the bank can approve your mortgage loan for will help you accurately budget for your new home purchase. It would be frustrating and disappointing to find a house you love, and then find out you aren’t qualified for an investment of that amount. When you’re pre-approved, you know what you can afford to spend.
Know What You Want
Assemble your list of must-have and deal-breaker items. How many bedrooms do you need? Is backyard space important to you? Do you prefer an open floor plan? You’ll need to provide your real estate agent with some guidelines so that he or she can help you narrow your search to viable properties and not waste time looking at houses that wouldn’t apply to your liking.
Work With a Professional
Once you’ve got your credit report prepared; a substantial nest egg to cover down payment, closing costs, and unforeseen expenses; and you’ve assembled your list of must-have and deal-breaker items, it’s time to find your real estate agent. Your real estate agent should specialize in the types of home you’re trying to buy, and should be familiar with the neighborhoods in which you’d like to live. Be sure to establish clear and open lines of communication with your agent so that you’re always in the loop of information regarding the purchase of your home. Avoid working directly with family or friends, but do ask friends, family members, and associates for real estate referrals.
Understand the Buying Process
Once you find the home you’re prepared to purchase, you’ll make an offer. The offer you make does not have to match the asking price of the home, especially if your agent feels the house is priced above fair market value. However, the stronger your offer, the higher chances you have of your offer being accepted. In some cases, multiple offers come in on the same house, leading to a bidding war. Your professional real estate agent should guide you through this process and provide advice regarding offers and contract terms.
When the seller has accepted your offer, your bank will likely request a professional appraisal on the property to make sure its value matches the amount of the mortgage loan. With the appraisal complete, the home will then undergo a professional home inspection to look for any faulty or broken items, or things that may be in a state of disrepair. If the home inspection discloses defective items, you can negotiate for a lower price, to have them fixed, or to back out of the contract.
Finally, you’ll go through a closing process on the property where the title is transferred from the seller’s name to yours, and you’ll receive the keys to your new home.
Establish good credit, gather savings, seek pre-approval, know your wants and needs, and work with a professional real estate agent. Buying your first home should be an exciting time for dreams coming true. Welcome home.
Ready to talk about buying a home? Call Doug Hansen at 616-485-8955.