There so many things to consider when buying a home. The process can feel particularly overwhelming to first time home buyers, but a little bit of research can help tremendously. We compiled the most helpful tips for first time home buyers that will help before, during and after your home purchase.
Don’t be Afraid to Ask Questions
It’s normal to have a lot of questions as a first time home buyer. You might feel nervous about asking these questions if you’ve never purchased a home before, but we encourage you to ask away! Be honest with your real estate agent if you don’t understand something so you can avoid surprises later on in the process.
Being a first time buyer can feel like you’ve entered a whole new world with its own terminology and specific ways to navigate the process. This can feel overwhelming at first, but you’ll get more comfortable with it all as you move forward.
It is vital to select an outstanding real estate agent and lender for your home buying team. They can guide you through the process, provide resources, and answer any questions you have along the way so you can make the best decisions for your specific situation. If you feel that your team is not getting back to you within a reasonable time, reach out to them to strategize about how to improve communication. Don’t be shy: timely communication is an important part of your representation.
Related Reading: Steps to Buy a Home
Give Your Finances a Tune Up
Make sure you do your homework before applying for financing. As a first time home buyer, it is very important to review your financial situation. You’ll be several steps ahead if you already have a budget and you diligently track your spending. But don’t worry if you’re just getting started.
Start by looking at your credit card statements, checking account activity and regular bills. Create a list of your income and expenses. There is a good chance that reviewing your expenses will help you identify subscriptions that you can cancel or other costs that you can eliminate. This will help you prepare for upcoming cost of buying your first home.
This is also a good time to gather all documents you will need for a mortgage application. You can save a copy of the PDFs in a dedicated folder so it will be ready when it’s time to apply for the loan.
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Shop Around for a Lender
Many first time home buyers think that looking at homes is the first step in the journey to home ownership. While house hunting is the fun part of buying a house, it’s important to select your team first. You’ll need to find an experienced REALTOR that you trust. Then it’s time to search for a lender that will assist you in the financial part of the home buying process.
Just like your REALTOR, the lender should emphasize education, excellent service, and take the time to answer all your questions. Ideally, the lender will visually lay out all financing options since the various options can quickly get confusing.
Get your consumer credit score from your credit card statement or Credit Karma and have it handy when speaking to lenders. Keep in mind that your consumer credit score will usually be a bit higher than your mortgage credit score.
Avoid choosing a lender simply because they are at the bank where your checking account is. Sometimes friends and relatives will recommend a lender as well but it’s important to do your own research. Lenders come in all shapes and sizes. There are banks, credit unions, mortgage companies, and government agencies. Each type of lender has different requirements and fees associated with them.
You’ll want to shop around for the best rate and terms for your personal situation. You should interview at least 3 lenders and compare their service and fee sheets. Do they take the time to address all of your questions or did you feel rushed? Does their communication style match what you’re looking for? Pro Tip: there’s no need to pay to pull a credit report and a credit score when you are still shopping around.
Lastly, you really need an apples to apples comparison when choosing a lender and a program. Once you have a specific home budget in mind, pick a sample home listing that the lender can use to estimate closing costs, provide various options for the loan, and suggestions on what works for your situation.
Shopping around for a financing will help you learn:
- Which loan program might be best for you
- An estimate of much money you will need for a down payment and closing costs.
- That each lender has their own strategies to the home buying process.
- It’s not always the lowest interest rate that determines the best financing for you.
Related Reading: Tips for Choosing a Lender
Find the Right Mortgage Program for You
Many times the specific mortgage program is selected when the first time home buyer selects their lender. But don’t feel that you are tied down to one specific loan. Just because you qualify for a VA loan, it might not be the best option for you. There are still opportunities to change the program until you are under contract. Sometimes it’s even possible to change after you’re under contract.
Related Reading: Choosing a Mortgage
Be Specific with Your Wishlist
Some first time home buyers tend to just want to get out and start looking at homes without a strategy. This can quickly make the house hunting process feel overwhelming. Get specific about your budget and deal breaker items so that you can focus your energy on the right homes.
Fully Review the Documents
You will fill out all of your documents online until you get to closing. It’s important to have access to an electronic device with a larger screen to display those relevant documents. It’s ideal to have a desktop computer or a laptop, but a tablet will suffice if it allows you to fill out and/or sign your documents digitally. You will also need to provide more documents to the lender once you’re under contract.
Related Reading: Home Buying: Review Documents
Earnest Money
Once you’re under contract, your first task will be to provide earnest money to the earnest money holder. Earnest money is a good faith deposit and shows the seller that you are committed to buying their home.
Related Reading: Deliver Your Earnest Money
How much are your closing costs?
Many costs can be estimated ahead of time. But details of exact closing costs will be determined after you are under contract.
Inspection
Schedule your home inspection with an inspector you trust. The cost varies among inspectors and depends on the square footage of your home and the number of services you request.
NEVER buy a home without a home inspection. EVER!
Related Reading: Should you attend the home inspection?
Appraisal
The appraisal is requested by the lender and paid for by the buyer. The lender wants to ensure that the price paid for the home is appropriate and will approve a mortgage only for the amount listed in the appraisal. The seller will not see the appraisal.
Related Reading: What is an appraisal?
Closing Day
There is a lot of activity right before closing. The buyer and the seller are packing and getting ready for their move. The realtors are diligently working through details to get to a smooth closing. The lenders are working with the title company to get all numbers calculated and confirmed. Closing paperwork is generated.
Time to sign! You have purchased your first home! Congratulations! Keep your settlement statement on hand for your taxes next year. Call your lender or realtor if there are any questions. That’s what we are here for!
We are excited for you to have started this brand new wealth building journey. Know that you are never alone when challenges arise. From now on you are paying your own mortgage and not your landlords.
Tips for first time home buyers after closing
- Change the locks: It’s important to change the locks as soon as you move in, especially if you don’t know who has copies of the keys.
- Set up your mortgage payments. You can do this either via your bank’s bill pay system or set it up directly via the mortgage companies web portal. If your home owners insurance is NOT included in your mortgage payment, it’s time to set that up as well.
- Make a list of any needed repairs or updates: As you settle into your new home, make a list of any repairs or updates that need to be made. This will help you prioritize and budget for these expenses.
- You might receive a very official looking notice to pay $89 for your deed. Do not pay it! The deed will be mailed to your home after it has been recorded at the local Recorders Office. If you are not sure, call your lender or your agent.
- Familiarize yourself with the home’s systems: take some time to learn how the heating and cooling systems, appliances, and other systems in your home work. This will make it easier to use them effectively and spot any problems that may arise.
- Keep your home safe: Make sure you have smoke detectors and carbon monoxide detectors installed and working properly. Consider getting a security system or other safety measures to protect your home.
By following these tips, you can make the transition to your new home smooth and enjoyable. Good luck!
Related Reading: Home Buying: Wrapping Things Up
Are you ready to move forward with buying a home? Give us a call to get started 719-219-9739 or email susanna@co-regroup.com. We’re here for you for every step of the home buying journey.
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