Welcome to the first post in our exciting series on being a first time home buyer. Today I’m going to be talking about the home buying process.
Step 1: Find An Agent
The first step in the home buying process is finding the right real estate agent to represent your best interests. What’s going to be most important to you is finding an agent that you feel comfortable working with. Not only this, but you want to make sure that they have great communication skills and are up to date in this changing market. You will be spending a lot of time together, so trust is of utmost importance.
Step 2: Meet With A Lender To Get Pre-Approved
Unless you’re paying all cash for the home you plan to buy, you will need to meet with a lender who will talk you through your mortgage options and possible incentives that come with being a first time home buyer.
The lender will ask you for all your financial documents. You’ll need to provide your income information, tax returns, any investment accounts you may have, and any current debts and expenses. The lender will go over your financial information and then issue a pre-approval letter, which states how much loan you could potentially afford. Based on this number, the lender can suggest what purchase price you may be comfortable with based on the monthly payment. The monthly payment will likely consist of the actual mortgage (principal and interest), property taxes, and HOA dues and PMI, if applicable.
This step is essential before heading out to look at homes and will be submitted with your offer. As your agent, we want you to fall in love with the home but also feel comfortable with the monthly payment that comes with it.
Step 3: Touring Homes and Submitting The Offer
Once you’re preapproved, the fun part starts – looking at potential homes. After finding a home that’s right for you, we will discuss the terms of the offer that best suits your wants and needs while also factoring in the current market conditions.
Once you submit the offer, it’s very important that you don’t change your finances – that means no opening of credit cards, no large purchases such as furniture or cars, and no job changes, etc.
Step 4: Escrow Process
Assuming all goes well and the offer is accepted, you are now what’s called “under contract.” After you go under contract, your earnest money deposit is due (1-3% of the purchase price). Before closing, your agent will arrange a home inspection, appraisal, and title search on the property to ensure that closing on your new home goes smoothly. Many documents will need to be read and signed throughout the approximately 30-day process.
All of this seems like a lot, but with a great agent on your side, we’ll walk you through the process, step by step. When it’s almost time for closing, your escrow officer will give you an exact amount of how much you owe in closing costs and downpayment. Typically, your closing costs are 1-2% of the purchase price.
Step 5: Closing
Once all documents are signed at closing, you are officially a homeowner! Your first mortgage payment is typically due on the first day of the second month after closing.
No doubt, buying your first home can certainly feel like a daunting endeavor but also a very rewarding one. With the right agent, the home buying and selling processes don’t have to be stressful.