It is such an exciting time to start thinking about buying your first home. Buying a home can also be emotional and overwhelming. So, I am here to help better prepare you for what comes next.
1. Build your Credit Score
Unless you are prepared to have someone co-sign the house with you, you will have needed to build your credit score for a solid amount of time. Lenders offer a variety of programs to meet the needs of many different situations. However, this is a great first start toward a smooth transaction. Usually a minimum of a 620 score is required for conventional loans. For FHA, the scenario ranges a little more, above a 580 will get you a smaller down payment than those below 580. Therefore, FHA makes home buying possible for those without a super high credit score.
2. Research Loans
As mentioned above, there are different loans for each situation. There are many different loan types. conventional, FHA, VA, USDA Rural Housing, etc. Each have their own guidelines and rules. Find a lender that can best match you with a loan to best suit buying your first home.
3. Save for Down Payment
Once you know which loan is best for you, you will have an idea what percentage of the home price you will need to put as a down payment. When most people think of conventional home loans, they think they need 20% down payment. Fannie Mae and Freddie Mac have conformed to allowing some conventional loan types to only have 3-5% down depending on the situation and guide lines, while also tacking on the PMI (Private Mortgage Insurance). FHA (Federal Housing Association) usually requires 3.5-5% down also adding on the PMI. VA loans usually require 5% down payment. USDA Rural Housing loans do not require a down payment, however, they have a more strict guideline to determine what land qualifies for this loan.
4. Get Pre-Approved
Finding a lender that makes you feel comfortable and meets your needs really is such an important step in the whole process. Buying your first home is a huge decision and you want to make sure you pick the right person to assist with the job. Previously having met with a lender will also give you an idea of what price range of homes you best qualify for. This needs to be an early step in the home buying process because it will save a lot of time in the long run knowing exactly what you can and can’t buy. This is also important when the time comes to put in your first offer. Being pre-approved gives you a way better advantage against other offers than just being pre-qualified.
5. Find a Realtor
As mentioned before, buying your first home is exciting, but also overwhelming and emotional. When searching for a realtor to work with, find one that you know will put your needs first. Using a realtor is also helpful in knowing the local market trends and keeping your financial interest at the top of their priority. At times it is easy to get caught up with house shopping, a realtor is there to view all pros and cons of each home in an unemotional viewpoint. Better yet, they will negotiate on your behalf to ensure the best deal possible.
6. Before Putting in an Offer
While working with your realtor, be sure to check the property taxes for the county in which you wish to buy in. This will ensure there will not be any surprises down the road when taxes are due. Research different neighborhoods, consider school zones, commute to work, and also future resale value. Depending on the size of the town, searching all the available homes on the market can be quite overwhelming. Start by making a wants and need list of your top 5 items. Narrowing in on what is truly important will help to make sure you don’t impulse buy or have buyers remorse later down the road.
7. Offer Accepted
You find the perfect home and even better your offer was accepted. What now? Now the clock starts ticking and it is very important to stay on top of things to ensure a smooth transaction. First you will need to deposit the earnest money offered when your contract was submitted. Earnest money usually ranges on 1-2% of the total purchase price. Depending on the market and its demand, some may offer more to secure their contract.
Next, I would really recommend getting the property inspected. Moving into your first home to later find major things wrong with it could turn into a major disaster. Now time to submit lender docs for the mortgage, review title with title company, and start researching home owners insurance policies.
After all is complete, make sure to do a final walk-through with the realtor. This is to ensure no changes were made to the house unless formally requested after the home inspection report. If everything is good to go, it is now time for closing! If possible, schedule closing for middle of the week around lunch time. There is nothing like having the moving truck waiting in the driveway to find out the funds won’t be wired until the next day. Giving additional time ensures the transaction to run smoothly in a timely manner. Once funds have been wired and received, its move in time!
Keller Williams Realty Franklin
* If you are located in TN, check out my My Real Estate Webpage I would be happy to help with any real estate needs you may have!*