First-time homebuyers

Buying your first home? It’s more than looking at listings online. Here are 15 steps you’ll take during this exciting time.

  1. Improve your credit. Don’t wait until you’ve found a home to work on your credit. This should be done well in advance. Your credit score makes a big impact on mortgage loan qualification. Credit cards should not be maxed out. Make payments on time and in full whenever possible if not then always pay more than the minimum amount due. Paying off debt will positively impact your debt to income ratio which will help you qualify for and afford your monthly housing payment.
  2. Save Money. Save for a down payment. Typical down payments are 20% of the price of the home, however there are many loan options some with down payments as low as 3.5% of the home price. You’ll also need to save for closing costs (sometimes they’re written in the offer but plan on being responsible for them). In 2018 in Florida, the average origination fees paid to the lender totaled $1,050, while third-party fees averaged $1,157 for a total of $2,206 in closing costs on a $200,000 home (Investopedia).
  3. Research. Look at listings online to see what homes you like, research neighborhoods, schools, etc. You won’t know your budget yet, but you’ll get a feel for the market and be able to identify your must haves in a home (size, layout, location).
  4. Find a great agent. They will help you find a home that meets your specifications and budget as well as help you throughout the home-buying process including making an offer and completing paperwork. (See what is the difference between an agent and a realtor).
  5. Choose a mortgage lender. Ask your agent for their top two or three people they’ve worked with as a referral.
  6. Get preapproved. Determine how much you qualify for and which type of loan is right for you. You’ll need to have proof of income, bank statements and other documents. Your lender will run your credit report and work with you to get all the items needed for preapproval.
  7. Decide how much you can afford. Just because you’re qualified for a certain amount does not mean you can afford it. Don’t forget your budget, your regular expenses and debts you’re trying to pay off. Your monthly housing payment is not just the mortgage. The following can impact monthly payments: Down payment.The more you put down, the less your monthly payments are. PMI - If it is less than 20% on conventional loans you’ll be required to pay monthly primary mortgage insurance (PMI) which protects the lender in the event you stop making payments on your loan and your home goes into foreclosure. PMI fees vary from 0.3 % to 1.5 % of the original loan amount per year and it depends on your credit score and the size of the down payment. FHA and VA loans do not require PMI as they are backed by the government. Homeowners insurance. Property taxes. HOA fees.
  8. Find your dream home. View listings in person via private showings and open houses based on what you and your realtor find that meet your search criteria.
  9. Secure financing. Work with your lender to secure financing for your mortgage loan.
  10. Make an offer. Allow your agent to use their experience to negotiate the best price and terms for you. If your offer is accepted you’ll sign a sales contract.
  11. Home inspection. Most sales contracts have a home inspection contingency. Safety, quality and overall condition of the home is checked by a trained, certified home inspector. If the inspection goes well you should be almost ready to close. If serious problems are found that were not disclosed by the seller, you’ll be able to rescind your offer and get your deposit back. Other options are to negotiate that the seller to make repairs or reduce the selling price.
  12. Appraisal. The property value is assessed to see if it is enough to cover the mortgage. If it is close to the purchase price, you can move forward. If it appraises low your lender will not give you a loan for more than the home’s appraised value. There are multiple reasons why it could appraise lower and your realtor can help you navigate what to do if this happens. If your home appraises higher, congratulations you have instant equity.
  13. Closing. This involves a lot of paperwork, but your realtor is with you to help get you through everything that makes your home ownership official.
  14. Move in. Congratulations! You are now a home owner and have the keys to your new home. Time to make any minor repairs, add personal touches and move in!
  15. Keep saving. You never know when an unexpected repair or just regular home maintenance is needed. Have an emergency fund readily available.

 

Ready to buy your first home? Contact Conrad Realty Group today.