Being a first time home buyer can be a little nerve-wracking, right?You have all the unknowns of what to expect and the fear that you might do something wrong.
The good news is that it can actually be a fun and exciting process if you know what you’re doing, which I’ll show you in our ‘First Time Home Buyer Guide’ below.
You’ll understand the process of buying your first home so that instead of being frustrated and stressed out, you’ll have more fun than little Sally opening her first gift on Christmas morning!
First Time Home Buyer Guide
How Much House Can You Buy?
Don’t commit the sin most first time home buyers make and ignore getting your mortgage pre-approval BEFORE you start looking at homes for sale. It could cost you days or weeks of your time and you may lose out on your dream home because of it!
Before you do anything else, tell you bank or mortgage lender that you want to get pre-approved for your home loan. They’ll have you fill out a mortgage application and submit income documentation in order to find out the maximum loan amount you’re approved for. It’ll only take 15 minutes of your time.
Once you know how much you’re approved for, you can begin looking at houses for sale within your price range rather than wasting time touring homes that may have been too expensive for you. Plus, when you find a home you like, you’ll be ready to make an offer and not risk losing out on the home while you get your mortgage pre-approval.
Let the Home Searching Fun Begin!
This is the step in the home buying process most home buyers jump to first because it’s the most fun, right? It’s not everyday you get to shop for a house! But since you got your mortgage pre-approval first, you’re way more prepared than every other home buyer.
Pick your favorite real estate website such as ShilohStreet.com and start searching homes for sale within your price range and criteria. Narrow down the real estate listing results by setting the number of bedrooms, baths, house size and cities you prefer.
When you find a house you like, jot down the address and take a drive by to check out the neighborhood as well as the house itself. You’ll find that you can cross a lot of properties off your list just from driving by them.
By the way, it’s not essential at this point but if you haven’t picked a real estate agent to work with, now is a good time to do it. After you’ve driven by a few homes you like, you can tell your Realtor which properties you want to go see and so they can get you inside right way.
If you don’t have a real estate agent lined up at this point, you could waste time interviewing possible agents rather than getting inside homes, which is the part every first time home buyer wants to get to, right?
Ready to Make an Offer?
Once you tour a few homes for sale with your real estate agent and find a property you like, it’s time to think about making an offer to the seller(s). This is where your real estate agent’s expertise will be absolutely critical.
Have your agent check the value of the home and help you decide on an offer price. Depending on your local real estate market conditions, you may offer more or less than the listing price. If you’ve chosen the right Realtor or real estate agent, they’ll advise you on what price to offer so you have the best chance at getting it accepted rather than getting shot down or laughed at (may happen if you offer too low).
Your Realtor will draft up the purchase and sale agreement for you to sign and then submit it to the seller’s agent for review. Typically, you’ll have an answer from the seller within a couple of days but the exact time frame depends on the specific property and situation.
Once the seller reviews your offer, they could:
1) accept your offer without any changes (a great thing!)
2) counter-offer with different terms such as a higher selling price (not too bad)
3) they could outright reject your offer (hopefully doesn’t happen to you ).
The negotiations may take some time depending on how quickly you and the seller can agree on the terms of the contract. Your Realtor will handle it and guide you to the next step once you have an accepted offer.
Home Inspection Time
You don’t have to know a thing about plumbing, electrical or construction in general because you’re going to hire the best home inspector you can find to perform a thorough home inspection on the property.
Depending on your real estate market, the size of the house you’re buying and the home inspector you hire, the home inspection may cost you around $200 – $700. But it’s well worth the bucks you’re going to shell out; I’ll explain….
The home inspection process can save you OR cost you thousands of dollars. If your home inspector misses a critical construction defect (like a sinking foundation), you’ll be footing that bill at some point in the future.
On the flip side, if your inspector points out a repair that needs fixing in the near future, you’ll at least know what to expect or decide not to buy the house. This is why you need to interview 2-3 home inspectors to ensure you’re hiring the best of the best, not Inspector Joe who works at Wal-Mart during the week.
Don’t simply go with the home inspector your Realtor recommends because he/she may not be good enough for you. And don’t pick the cheapest inspector either because this is not a step in the home buying process you want to skimp on. Pick a home inspector with years of experience who answers all your questions, doesn’t rush you or the inspection process and comes highly recommended from past first time home buyers.
Just like when you negotiated with the seller about the offer you made, you’ll negotiate with them about what items they will repair (if any) once your home inspection is complete. If you can’t come to an agreement, you may be able to walk away from the contract but hopefully you can both come to an agreement and move onto the next step; finalizing your home loan.
Finalize Your Home Loan
At this point, all that’s left for you to do is finalize your mortgage to buy the home and close escrow. Most of this stuff is done behind the scenes but you’ll want to stay on top of your lender to make sure they meet the deadlines in your purchase and sale contract.
One of the top reasons for delays in closing escrow on time is lenders not getting the home buyer’s mortgage documents to the escrow company or closing attorney on time. This is why you want to be sure your lender has all the documentation from you that they need to finalize your home loan.
You should be able to rely heavily on your Realtor at this point to be contacting all the parties involved to ensure timelines are being met so you can close escrow on time. It’s never fun to expect the keys to your new home and then find out you have to wait 2 more weeks.
Closing Escrow & Final Walk-Through
A couple days before you’re scheduled to sign the final papers to buy your new home, you’ll do a ‘final walk-through’ of the house with your real estate agent. This is when you’ll check to make sure the home is in the same condition as when you saw it last and that all repairs (if any) have been completed by the seller, according to your home inspection negotiations.
If anything is wrong, your Realtor will get on the phone and make sure the issue(s) get resolved before closing escrow. For example, if the roof was supposed to be replaced but hasn’t been at the time of your walk-through, you’ll want to delay closing escrow until that repair is completed. Otherwise you may be paying for that new roof yourself, which most home buyers would just love to do, right?
But if all goes according to plan, you’ll sign those final papers, officially be homeowners of your first home and pick up the keys to start the real fun….. moving all your junk in!
By the way, now that you know how to buy a house as a first time home buyer, you may want to read our article on “Buying a House – 7 Pitfalls to Avoid”. It’ll help you avoid some of the mistakes that cost home buyers thousands of dollars.