First Time Home Buyers Guide

Congratulations on your decision to buy your first home! Owning a home is a big step towards independence and can be an exciting and rewarding experience. You’ll have the opportunity to personalize and make a space your own, and the sense of accomplishment that comes with owning your own place is unparalleled. However, it’s important to be prepared and understand the process to make sure it goes smoothly.

Preparing for House Hunting

Here are some key points to keep in mind as you begin your journey:

  • Research the home buying process and understand what to expect. The home buying process can be complex and there are many steps involved. It’s important to understand what to expect so you can be prepared and avoid any surprises. Some of the key steps include: determining your budget, getting pre-approved for a mortgage, finding a real estate agent (if you choose to work with one), and starting the house hunt.
  • Gather the necessary documents and paperwork. You’ll need to provide proof of income, assets, and credit history to your lender. This might include things like pay stubs, tax returns, bank statements, and proof of employment. It’s a good idea to gather these documents in advance so you’re ready to go when you start the process.
  • Work with professionals, such as a real estate agent and lender, to help you through the process. These professionals can provide valuable guidance and expertise to help you navigate the process and make informed decisions. A real estate agent can help you find homes that meet your criteria, schedule viewings, and negotiate on your behalf. A lender can help you understand your financing options and guide you through the mortgage process.
  • Avoid the dangers of emotional purchases and stay within your budget. It’s easy to get caught up in the excitement of finding the perfect home, but it’s important to stay focused on what you can afford and avoid overstretching your budget. It’s a good idea to set a clear budget before you start looking at homes and stick to it. This will help you make sure you’re making a financially sound decision.

Determine your budget

Determining your budget is an important first step in the home buying process. It will help you narrow down your options and make sure you’re looking at homes that are within your price range. Here are some key steps to help you determine your budget:

  • Look at your income, debts, and savings. Take a close look at your financial situation, including your monthly income, debts, and savings. This will give you an idea of how much you can comfortably afford to spend on a home. Don’t forget to factor in your other monthly expenses, such as groceries, utilities, and transportation.
  • Use online mortgage calculators to get an estimate of your monthly mortgage payment. There are many online tools available that can help you estimate your monthly mortgage payment based on the loan amount, interest rate, and loan term. This can give you a good idea of what your monthly payments will be and help you stay within your budget.
  • Don’t forget about ongoing expenses. In addition to your monthly mortgage payment, you’ll also have ongoing expenses such as property taxes, insurance, and maintenance. These costs can add up, so it’s important to factor them into your budget.

Determining your budget might take some time and effort, but it’s an important step that will pay off in the long run. By understanding your financial limits, you’ll be able to make a smart and financially sound decision when it comes to buying a home.

Get pre-approved for a mortgage

Before you start looking for a new home, it’s a good idea to get pre-approved for a mortgage. This will help you understand how much you can borrow, and it will also make you a more attractive buyer to sellers. Here’s what you need to know about getting pre-approved for a mortgage:

  1. Understand the difference between pre-qualification and pre-approval: Pre-qualification is an estimate of how much you may be able to borrow based on your income and debts. Pre-approval is a more in-depth process in which a lender looks at your financial information and confirms in writing how much they are willing to lend you.
  2. Find a lender and get pre-approved for a mortgage loan: There are many different lenders to choose from, so it’s a good idea to shop around and compare offers from different lenders. You can use websites like Zillow or LendingTree to compare offers, or you can work with a mortgage broker who can help you find the best lender for your needs.
  3. Gather the necessary documents: To apply for pre-approval, you’ll need to provide proof of income and assets, such as tax returns and pay stubs. You’ll also need to provide information about your debts, such as credit card balances and student loans.
  4. A pre-approval letter will show sellers that you are a serious and qualified buyer: A pre-approval letter is a document from a lender that confirms how much they are willing to lend you. This can be a powerful tool when negotiating with sellers, as it shows them that you are a serious and qualified buyer.
  5. Different types and lengths of loans: There are several different types of mortgage loans to choose from, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), conventional mortgages, FHA loans, VA loans, and jumbo loans. Fixed-rate mortgages have an interest rate that remains the same for the entire loan term, while ARMs have an interest rate that can change over time. Conventional mortgages are not insured or guaranteed by the government, while FHA loans are insured by the Federal Housing Administration (FHA) and are available to first-time homebuyers or those with low to moderate incomes. VA loans are guaranteed by the Department of Veterans Affairs (VA) and are available to eligible military service members and veterans. Jumbo loans have a loan amount that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.
  6. Points: Points are a type of fee that you can pay to lower your interest rate. One point is equal to 1% of the loan amount. Paying points can be a good option if you plan to stay in the home for a long time and want to lower your monthly payments.
  7. APR (Annual Percentage Rate): APR is the total cost of a loan, including the interest rate and any fees, expressed as a percentage of the loan amount. It is a more comprehensive measure of the cost of a loan than the interest rate alone, as it takes into account the impact of any fees. Be careful to pay attention to the APR rather than just the interest rate. Typically the interest rate does NOT include all the fees of the loan which can be significant. Use the APR to compare lender offers.

Start looking ! – House Hunt

To begin your search for a new home, there are a few key steps you should follow:

  1. Research different neighborhoods and areas: Take some time to explore different neighborhoods and areas where you might be interested in living. Consider things like the proximity to schools, public transportation, and local amenities. You can do this by looking at online resources like local news websites, real estate websites, and neighborhood forums. You can also try visiting the neighborhoods in person to get a feel for the area.
  2. Determine your must-haves and nice-to-haves in a home: Make a list of the features and amenities that are most important to you in a new home. These might include things like a certain number of bedrooms or bathrooms, a garage, or a certain type of layout. Consider the size of the home, the age of the home, and the type of construction. Think about what features are must-haves and which ones are nice-to-haves. This will help you focus your search and make it easier to find a home that meets your needs.
  3. Use a real estate agent or do it yourself? You can either work with a real estate agent to help you find a new home, or you can try to do it yourself. If you choose to work with an agent, they can help you navigate the process and find properties that meet your needs. They will also be able to provide you with advice and guidance as you go through the process of buying a home. If you decide to go it alone, you’ll need to be prepared to put in a bit more legwork to find your dream home. This might involve searching for homes on your own using websites and other resources, or contacting homeowners directly to inquire about their homes. No matter which route you choose, be sure to do your research and be prepared to make informed decisions as you search for your new home.

Make an offer and negotiate

Once you have found a home that you are interested in, it’s time to make an offer and begin the negotiation process. Here are some key things to keep in mind:

  1. The offer – Work with your real estate agent to come up with a fair offer: Your real estate agent can provide guidance on what a reasonable offer would be based on the asking price, the condition of the home, and any recent comparable sales in the area.
  2. Consider any contingencies: A contingency is a condition that must be met before the sale can be completed. For example, a home inspection contingency allows you to have a professional inspection of the home and negotiate any necessary repairs or credits with the seller.
  3. Negotiating tips to save the most money: Don’t be afraid to negotiate! It’s expected and can save you thousands of dollars. Don’t reveal your top budget to the seller or their agent, and make sure your offer is reasonable and backed up by market data and recent comparable sales. Consider asking for closing costs to be covered by the seller, or for appliances or other items to be included in the sale. However, don’t get emotionally attached to the home and be willing to walk away if necessary. Be prepared to counter-offer and continue negotiating until you reach an agreement that works for you.
  4. Don’t be afraid to negotiate: EVERYTHING is negotiable. Remember, it’s expected and can save you thousands of dollars. Be confident and don’t be afraid to ask for what you want.
  5. Don’t reveal your top budget: Keep this information to yourself. The seller and their agent don’t need to know how much you are willing to pay.
  6. Make sure your offer is reasonable: It should be based on market data and recent comparable sales. Don’t overpay for the property.
  7. Consider asking for closing costs to be covered or for appliances to be included: These are just a couple of examples, but be creative and see what you can negotiate.
  8. DON’T GET EMOTIONALLY ATTACHED !!!! You fall in love with your spouse – NOT a house! If you can’t separate your emotions from the purchase, you’ll likely overpay by thousands! If this is your first house hear this: THERE WILL ALWAYS BE ANOTHER HOUSE – and who knows – it may be better! So don’t be afraid if the deal doesn’t work out the first time. Be willing to walk away if the deal isn’t right for you.
  9. Be prepared to counter-offer: Don’t be afraid to negotiate until you reach an agreement that works for you.

ALWAYS Get a home inspection.

A home inspection is an important step in the home buying process, as it can help identify any potential issues or problems that may not be immediately apparent. Inspectors can’t find EVERY problem. But they will find more than you can. PLUS a good home inspector will document everything the find with pictures, descriptions and action steps. with this report you now have information to make a wise decision.

So schedule a home inspection: Once you have found a home that you are interested in, and have an accepted offer, be sure to schedule a home inspection as soon as possible. A good inspector will thoroughly examine the home and provide you with a detailed report of their findings. Be sure to review the report carefully and consider any recommendations or suggestions the inspector has made.

Can I save money by not getting an inspector?

The old phrase “penny wise, pound foolish” applies here. Once you receive that inspection report which cost you hundreds of dollars, you’ll likely discover hidden issues that will cost you thousands if not tens of thousands of dollars down the road! No house is perfect. Sellers are not supposed to hide issues. But putting the best construction on everything, let’s assume they are simply unaware. In either case, the inspection report brings it to the surface and now the seller has to deal with it.

Remember the caution earlier “DON’T GET EMOTIONALLY ATTACHED” ? Sellers have emotions too. They are selling their house for a reason. They have accepted your offer. They too are looking down the road. They want this deal to go through! No doubt the SELLERS are EMOTIONALLY invested in getting this done! The last thing they want to see is a list or even the actual inspection report with 50 pages of color photos and descriptions of all the things that are glaring problems with their house – any of which could end this deal and prevent them from getting to the closing table.

Now, with inspection report in hand, you have information to bring back to the seller to get further price reductions or other concessions.

The negotiations can continue!

Just so we are clear, the things that need to be brought back to the sellers are things that are discovered which will leave you with significant cost or problems down the road – sooner or later. These are things that you didn’t know of who you made your offer (or maybe things you suspected but needed confirmation of such). Things such as a new roof, new HVAC, structural repairs, electrical problems, plumbing problems etc. all can have hidden faults which can easily each require TENS of thousands of dollars or more in repairs or replacement! Some of the big ones are listed below:

10 most expensive problems that an inspection could turn up:

  1. Structural issues: These can include foundation problems, issues with the framing, or other issues that affect the overall structure of the home.
  2. Roof damage or need for replacement: A damaged roof can be costly to repair or replace, and it’s important to address any issues before they become more severe.
  3. Plumbing issues: These can include faulty pipes, drainage issues, a malfunctioning septic system, hidden leaks, or other issues that can lead to water damage or other problems.
  4. Electrical issues: Outdated wiring or inadequate panels can be a safety hazard and may need to be updated.
  5. HVAC problems: An old or inefficient heating, ventilation, and air conditioning (HVAC) system can be costly to repair or replace.
  6. Pest infestations: Termites and carpenter ants can cause serious damage to a home if not treated properly.
  7. Environmental hazards: These can include lead paint , radon or asbestos, which can be dangerous and costly to remove.
  8. Water damage or mold growth: These issues can lead to serious health problems and can be costly to repair.
  9. Poorly functioning appliances: Appliances such as a water heater or furnace can be expensive to repair or replace if they are not functioning properly.
  10. Erosion, grading, or drainage issues: These problems can cause future problems with the foundation or landscaping, and can be costly to fix.