Purchasing your first home is exciting, and at the same time it can be overwhelming. A roller coaster ride with a maze of uncertainties. These 7 important tips will help educate and prepare you to make it as stress free as possible. Knowledge is power and these tips for the first time home buyer will hopefully help ease the process and eliminate the stress.
1. Get Pre-Approved
This is the first step to purchasing your new home. With many loan programs available, its important to find a loan that’s right for you. Talk to a lending professional, your bank, or a Mortgage Broker to find out how much you can afford. You may only be able to afford $150,000, but want to purchase a $200,000 home. It’s best to know what you can afford first so you avoid disappointment later. Don’t start shopping until you know how much you can afford. A pre-approval letter will maximize your chances to get your offer accepted and puts you in a very strong position through the negotiation stage. It tells the seller that you have already gone through the necessary steps to purchase the home
2. Be Sure to Plan for Closing Costs
Closing costs vary depending on the price of the home and the area your new home is located in. Closing costs include: loan origination fees, taxes on the home, escrow fees, title insurance and homeowners insurance. In some cases you may be able to negotiate with the seller to have them pay some of the closing costs, however, in many cases the lender will want to see that you have the money to cover these expenses. It’s best to talk with your lender about how much you are able to negotiate with the seller on your closing cost.
3. Save for your Earnest Money:
This is another important piece to the process of purchasing your new home, and one that is often overlooked. What is earnest money and why is it important? Earnest money is defined as: The portion of the down payment to the seller by the purchaser with a written offer as evidence of good faith. In a nutshell it tells the seller how serious you are about buying the property. There is no set amount, but It is typically 1-2% of the purchase price and can be anywhere from $500.00 to $2,000. The earnest money goes towards your purchase price as a credit, and gets refunded to you if the home doesn’t pass the home inspection and the seller refuses to fix items on the inspection and any other contingency.
4. Put together a Wish List:
Lay out your wants and needs for your new home to keep you focused and organized through your purchase. There are several items to consider when planning your search. Your categories should include: Area, Time Frame (when do you want to move in?), Need-to-have (3-car garage), and Nice-to-Have (RV parking). List 3 to 4 items in each category to help narrow the search. For instance, you may need to have a 3 bedroom 2 bath, single level with a fireplace and formal dining. List what’s important to you and your future family needs.
5. Plan on doing a Home Inspection:
A home inspection is done at the buyers expense, so make sure to factor in the cost to do this. The price to hire a home inspector is going to cost you anywhere from $200.00 up, depending on the square footage of the property. A home inspection is something you should never skip. I recommend every buyer to get one done, even on a new construction home. The home inspectors responsibility is to provide you with a complete and thorough inspection of the home. They will provide you with an inspection report on the condition of the property at the time of the inspection.
6. Start your Home Search
It’s important to start your home search and browse homes that interest you. Drive around areas you are interested in, attend open houses, and of course search the internet. There are many websites on the internet that allow you to search for homes within your criteria such as Zillow, Trulia, etc. However one bit of caution when using these websites, the data is not always up to date. This means that the home you liked that they have listed for sale may have already been sold. I will save my rants about these websites for another time. They are a convenient sources , but do yourself a favor and find a real estate agent. They can set you up on a home search that fits your criteria and the data is accurate! So go ahead and keep looking around the internet for your new place , but have a real estate agent also, so you always have the most accurate data.
7. Find a Real Estate Agent
Interview several real estate agents in your area. Don’t skip on this one. Hiring a real estate agent is important. A good real estate agent will listen to your needs, educate you through the process, and has a good understanding of the current real estate market. A buyers agent works for you, and must legally and ethically look out for your best interest. Remember they work for you so you want someone who is passionate and motivated about finding that new home for you. Having a real estate agent on your team is beneficial to help navigate you through the process of purchasing a home. Plus, it doesn’t cost you a dime to have the buyers agent working for you. They are paid by the seller under the terms of the listing agreement. It’s also important to review the Buyers Rep. Agreement that your real estate agent may have you sign. It will outline the terms of your agreement with the real estate agent, the time period for the agreement, the duties and responsibilities the real estate agent has to you. The buyers rep. agreement will also detail how the real estate agent will get paid. So choose wisely and read anything you are asked to sign.
Other Helpful Tips Worth Reading:
- 20 Cold Hard Facts in Real Estate Home Buying by Lynn Pineda
- Tips on How to Get The Best Mortgage by Bill Gassett
- What Happens After Your Offer is Accepted? by Andrew Fortune