Are you excited but nervous at the same time about buying your new house? Well, it makes sense. Buying your own house is overwhelming, as it can be the biggest purchase in our lifetime, so it's natural to have questions. But, especially if you are a first-time homebuyer, you must know buying your home can be a hectic process. There will be money issues, due diligence, loans, trials, and lots of paperwork. But don't worry; with the right set of checklists, you can go through the process easily.
Now let's look forward; as a first-time home buyer, what do you need to check first.
1. Checking What You Can Afford?
Homeownership is one of the most important financial steps you'll ever take in your lifetime. And if you are a first-time homebuyer, you need to make sure that you can afford the purchasing expense of your desired home before you start visiting open houses.
Buying a house comes with many expenses; you might require a loan to purchase your house. For a loan, you need a lender. And when it comes to buying your first house, there is nothing more frustrating than your mortgage application getting denied. So before you go out home hunting, make sure to assess your finances.
2. Figuring Out Down Payment
After you've determined what kind of house you can afford, you'll need to figure out how much down payment you'll need. The sort of mortgage you acquire will significantly decide the amount of your down payment. Usually, the down payments of a mortgage typically range from 3% to 5% of the home's purchasing price. But If you want to avoid paying private mortgage insurance, you'll need a 20% down payment.
But there are some types of loans that allow you to purchase a home with no money down.
Regardless of your down payment size, you should set aside some of your savings for closing costs for any problems that your house inspection may discover later.
3. Finding a Mortgage Lender
Even if you aren't ready to apply, speaking with a mortgage lender should be one of the important steps in your home-buying checklist. A mortgage lender can tell you whether you're financially ready to buy a home, what price range you should look at, or if you need a loan. If not, what are the other options?
The lender can tell you what measures you need to take as it will not be his first time like yours. And if you aren't in a position to secure a mortgage yet, you should still try. Because rather than making assumptions about what you should do, it's better to seek professional help from the start. As a first-time homebuyer, It's easy to make a mistake and misdirect your efforts.
4. Get All Documents Together
As a first-time homebuyer, you must be experiencing many hectic things, but you have to take everything in an organized manner. It's inconvenient, but you need several documents with you to lend. It can be pay stubs, tax returns, bank statements, or your marriage certificate. Always double-check all these documents because you don't want to rush into the lender's office only to rush back out five minutes later because you forgot your bank statement.
5. Explore Your Options
When most people think of mortgages, they think of expensive fixed-rate mortgages that can't be changed. However, there are some alternative options. Your financial circumstances determine your mortgage possibilities. While some first-time homebuyers may be looking for the smallest down payment possible, this isn't necessarily the best option. Your financial status and interests can add to the options.
If you can afford higher monthly payments, then a mortgage with a shorter term and cheaper interest rate would be the better option for you. It depends on certain circumstances, but bear in mind that the sooner you pay it off, the less you'll have to pay.
If you don't plan on staying in this house for a long time, adjustable-rate mortgages may be worth considering.
6. Options as a First Time Home Buyer
Some first-time homebuyer programs offer formal loans. You can be eligible for that. Other alternatives include loans from the Federal Housing Administration, Veterans Affairs, or the United States Department of Agriculture, which need little or no down payment.
At this stage, you should look at down payment options and closing cost assistance programs that don't require compensation. Your down payment may be settled if you qualify for an assistance program. So you can be closer to your goal than you think you are.
7. Create a Wishlist
You should know your priorities for buying a house. Make a list of must-haves and nice-to-haves for your house. There are many small details to consider when you're a first-time homebuyer. Whether you're searching for a starter house or a place to call home for many years, you need to be very specific. Here are some of the main ones to consider while making your list:
Attached unit or detached house: A classic single-family home is ideal for you if you want a backyard. But, if you want to live in a more densely populated location or don't want to deal with the upkeep, a townhouse can be in your best interest.
Choosing your Location: It's time to choose a neighborhood if you plan to stay in a populated area or general area away from the city. Consider things like safety, amenities, and prices (like property taxes). It's also a good idea to think about the school district. Even if you don't intend to have children, the quality of your local schools might affect the value of your property and your resale price if and when you decide to sell it.
Future Development: If you are buying a house, you must be planning to spend a lot of years there, So look out for future development projects. They can affect the quality of your life and the value of your house.
8. Hire a Real Estate Agent
Now that you have everything sorted out and know what kind of home you want, let's locate someone to assist you in your search. From knowing the ins and outs of the local market to finding your dream place, real estate agents can help a lot. Searching for a house is difficult, but more problematic is handling the process of determining the worth of the house, offering the price, and negotiating with a seller. An excellent real estate agent can do this easily for you. Having the right real estate agent can make a tremendous impact throughout the process of buying a house.
When you are looking for a real estate agent, ask your friends and family for referrals, see online profiles and reviews, and chat with a few different agents before selecting one.
Furthermore, home purchasers do not need to be concerned about the cost of a real estate agent.
Many first-time homebuyers are unaware that the seller almost always pays both the seller's and buyer's agents. As a result, you can usually get free assistance from a buyer's agent.
9. Begin Shopping
The exciting part begins after you know exactly how much you can spend and that you'll be able to buy any house that fulfills your mortgage lender's requirements. Let's go shopping. You and your agent should quickly learn which areas and property types are a better fit as you fill out the forms and visit more homes.
10. Offer and Negotiate
After finding your dream place, It's time to make an offer. Your real estate agent will walk you through the process and, in many situations, will be in charge.
Your offer will be determined by a variety of variables, including the market value of the house and price range, all additional offers(if available),
Your purchase offer will be accepted, declined, or countered by the seller. If the seller rejects your offer, you can make a counteroffer. You can also negotiate on the seller's offer after reviewing the house's market value and other factors.
Lets Buy the House!
It is the final and closing tab on your buying process. You are done with a mortgage approval, accepted offer, an inspection of the house, and appraisal. You might need to bring the following items to the closing table:
Money for a down payment and closing charges.
Documents related to your loan, such as your closing disclosure.
Proof of homeowner's insurance is required.
Identification such as a driver's license or a Social Security card is required.
Final Thoughts
Buying your first home is an emotional, overwhelming, and subjective decision of your life and comes with lots of nervousness and work. At this time, the best approach to begin hunting for your first house is with complete information. That is why we created the "essential checklist for first-time house buyers in the first place. As you have checked the checklist, you can understand how important these steps are, and if you follow them, you can get your dream home in a less hectic & organized way.
Found this article interesting and serving the purpose? Explore more exciting articles from KC Mortgage Guy here.
AUTHOR BIO
Will Foster | First State Bank Mortgage Senior Loan Officer
I became a mortgage lender in 2010, right after the "bubble" popped, and the mortgage industry underwent an incredible transformation. This has given me a unique advantage in the fact that I have never known anything other than the highly-regulated world we now live in.
Throughout my years of experience, my primary goal has been to keep up with the constant changes in the industry so I can help my clients investigate all of their options and maximize savings. In addition, because I specialize in Conventional, FHA, USDA, Jumbo, portfolio, and VA refinances and purchases, I can help a wider variety of individuals, families, and investors identify and secure the right loan to best suit their future interests.
The mortgage process can be a little confusing and even overwhelming these days with all of the regulations. I guide my clients through the process from start to finish, and I try and make it as painless and hassle-free as possible.
