A staggering 28 million Americans plan to buy their first home this year, which means brushing up on the buying process.
Being prepared is essential for having the right funds and preventing any hiccups along the way. But with so much information out there, it can feel overwhelming when you start.
Luckily, if you're planning to buy your first home, you've come to the right place. Read our first-time home buyers guide to find out what to expect.
List Your Wants
The most exciting part about buying your first home is listing your ideal features. Decide on the location, style of the property, and how many bedrooms you’ll need. For instance, you may dream of a single-family home where you have more privacy and no remodeling restrictions.
Or you may prefer the condo lifestyle. Sure, you must pay monthly HOA fees, but it's far more affordable and you needn't worry about costly maintenance repairs.
It’s also important to consider the layout and, if you’re growing your family, ensure there’s enough space for the future.
Outline Your Budget
Our home buying guide wouldn’t be complete without mentioning a budget. This magic number determines what you can and can’t afford, so it’s important to be realistic. If you have little savings, look at properties that may need new wallpaper or flooring because you can change these later on.
You should also look at your savings. Aside from a mortgage, you’ll need funds for the down payment and closing costs, which can add up. Don’t forget, you’ll need extra to fund the move and if you want to make any changes to the property.
Calculate Your Down Payment
As a first-time home buyer, you'll need a down payment. Ideally, you'll have 20% of the asking price, so it's easier to qualify for a mortgage. If you don't, simply shop around for loans or see whether you can use a down payment gift from loved ones as part of it.
Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is a crucial part of the home-buying process.
Regardless of whether you've spotted a listing, this means you can close the mortgage quickly if your offer is accepted. If you're in a bidding war and need an edge over the competition, it's a lifesaver. Plus, it'll tell you how much lenders are willing to offer you.
The key is to find the right mortgage lender. Check out major banks, local credit unions, and mortgage brokers to see what works out best. Once you've found one with a low-interest rate, the lender will ask for documentation about your salary, debts, and expenses.
Further, decide whether you want a fixed or an adjustable-rate mortgage.
Fixed mortgages start at a higher rate, but rates and payments won't change over time. Many homeowners find this useful because you needn't worry about adjusting your budget because of rising costs. On the flip side, adjustable-rate mortgages start at a lower rate, but because they're tied to the financial index, they can fluctuate.
Buyers should also consider the loan term. A 30-year repayment plan is the most popular but, if you'd prefer, go with a 15-year mortgage. To help you decide, calculate the monthly repayment and see which one works best for you.
Contact a Real Estate Agent
Before hunting for a home, it's wise to contact a reputable real estate agent in your area.
These professionals understand the local market and will show you properties that align with your needs and budget. Once you find the right place, real estate agents will help you make an offer and handle negotiations, so there's no chance of getting a bad deal.
Aside from looking online, ask your family members and friends if they know anyone good in the area. This is especially useful because your loved ones will give you honest feedback about the agent and whether they had a good experience.
When you meet with potential candidates, find out whether they've worked with first-time buyers and the type of property they deal with. For instance, if you want a condo, you'll want a real estate agent who has years of experience handling these deals.
You should also ask about their availability. Although most real estate agents work full-time, you want someone who will reply promptly and keep you updated, especially in the latter part of the buying process. If you want more attention, consider an agency team, so that you're always in the loop.
Further, factor in the contract. Commissions vary, so ask how much the agent will take and check that they don't represent sellers in your area, so there isn't any conflict of interest.
Find Your Dream Home
Now for the exciting part: searching for your first home!
Your real estate agent will give you a list and arrange bookings so that you can scope out each property. Take your time when you're viewing because you don't want to rush the process and miss out on physical issues, such as warped floors or cracks in concrete walls.
You should also consider the neighborhood. If you've got kids, check whether they're near good schools or useful amenities like stores. It's wise to visit the street at different times of the day so you can see whether it's congested or if it's noisy at night.
Don't be embarrassed to take notes and check everything. Test windows or doors and even go to the basement to look at the plumbing or electrical systems. Although it's impossible to diagnose every issue, you'll know to avoid properties with glaring problems, such as extensive water damage.
Ask your real estate agent why the house is for sale and how much similar homes in the area are worth. If you love the property, arrange a second viewing because you may notice a problem or realize that it's the one.
Make an Offer
You've found your dream first home, and it's the moment you've been waiting for. Your real estate agent will help you figure out how much to offer along with any conditions you want, such as the buyer paying for closing costs. The agent will then present it to the seller, who will decide whether to accept or deny it.
But before you do, get the property professionally inspected. The home inspector will examine its physical structure and systems, so you don't get any nasty surprises if the offer is accepted.
Don't be disheartened if it's not immediate, simply issue a counteroffer that you can afford. Make sure you're constantly referring to your budget so that you can pay for potential closing or commuting costs and any potential repairs.
Further, the state of the housing market will influence your offer. For instance, in a buyer's market, there are hundreds of homes available, so you could potentially offer below the asking price. In contrast, a seller's market means you may be stuck in a bidding war with several other buyers.
Close On Your First Home
Anyone buying a home fantasizes about closing, which is always a special occasion. During the process, you must sign different documents in a specific timeframe so that nothing falls through. You'll likely have to pay for additional costs, such as getting the home appraised, getting insurance, and completing the mortgage paperwork.
In contrast, if you lost in a bidding war or haven't found the perfect property, continue your search. Because you've got an idea of what to look for, it'll help your real estate agent recommend listings and inch you closer to buying your first home.
Once You've Bought Your Home
You've signed the papers, got the keys, and you're finally a homeowner. Congrats!
Many homeowners think that it's done and dusted, but you should always be prepared. Once you've calculated mortgage repayments, adjust your budget so that you're saving and creating an emergency fund. This means you'll have enough to cover a faulty HVAC system or clean the rain gutters.
Regardless of the home's age, regularly maintain it to reduce repair costs and help appliances last longer.
Enjoy Our First-Time Home Buyers Guide
Now that you're armed with our first-time home buyers guide, it's time to start your search.
The key is to find a great real estate agent and find a lender who offers a low-interest rate. Buyers should also spend time viewing each property and constantly refer to their budget for extra security. Good luck with your search!
Ready to find your dream home? Then, browse through our properties and get inspired.