Being a first time home buyer looking for property in the Mid Atlantic can be overwhelming. It can be a stressful event that has financial obligations. However, you should not let fear of the unknown stop you from achieving the ultimate American dream of becoming a homeowner. If you follow these 15 must do’s for first time home buyers carefully, the process is simple and can even be an enjoyable experience.
1. Determine your Home Budget
As a first-time home buyer, you need to have a precise idea of how much you can afford. How much money can you borrow for your new home? Contact a mortgage lender with specific experience to help you run the numbers. Depending on your finances, you can decide if you want to purchase a home based on what you can afford or based on what you can borrow. It’s best to think about this prior to moving forward with the next steps. If you are going to purchase your home with a co-borrower, then it would be ideal if all parties agree on this and come up with a ballpark home price.
2. Determine your Credit Score
You should get a copy of your credit report and evaluate it. Your mortgage company will pull your credit, but knowing it at the start of the process is really beneficial. There are different online sources that will help you get a free credit report. This way you can easily fix any potential error before searching homes, rather than handling it when closing the loan. Consult with your mortgage originator to deal with any credit related issues. A major point to ensure you can buy a home with a pre-approval issued by a lender is to keep your finances during this period steady. Stay in your job, don’t go on a shopping spree, don’t go and buy a car or add more charges to your credit cards. Want to get into a home as a first time home buyer, keep your finances steady.
3. Select a Mortgage Lender
As a first-time home buyer, mortgages can be a bit confusing – so simply put you are asking a bank to loan you money to borrow from for the next 15 to 30 years. So, they are taking a chance on you and as a result, the mortgage banker will ask you for financial documentation. This is used to understand the risk of loaning you money to buy a home and over time you pay the bank back.
The mortgage that best suits you depends on:
- Your current financial situation
- How long you want to stay in your home
- If your income is fluctuating or steady
- Whether or not your financial situation will change in the next few years
Prepare the Documentation
You will need the following documents to complete the mortgage application:
- Pay stubs
- Bank and/or other asset statements
- other documents as required by your lender.
NOTE: Please note that each lender will want to run your credit, so if you give them permission to run a credit check, this impacts your credit score. It’s important to shop around for the best mortgage fees and rates during this period. This gives you a chance to find the best loan for you.
4. Know your Status – Pre-Qualified vs. Pre-Approved
Your mortgage lender may tell you that you are “pre-qualified” for the loan. This can certainly confuse you when you believe you can qualify for the given amount. Pre-qualification only checks little information about your finances. You need a “pre-approval” to get more information (your credit and other factors) verified and have a better idea of how much you can afford for your home. This also helps you to save time searching homes outside your price range. If you don’t have a “pre-approval” letter from the lender, there is no guarantee that you get a home loan based on your finances. Get a PRE-APPROVAL LETTER from your lender, this will give you confidence that you have a home loan commitment and allow you to proceed with the home buying process in confidence.
5. Find a great local Realtor
Don’t call your friend or your neighbor as your REALTOR® — this can be a costly mistake. Identify the areas you want to live and how far you are willing to commute for work. This ensures that you have done some homework in the areas you are seeking to find your home. Then find the best local realtor who can identify properties in these areas. You will want to work with a Realtor because they represent your interest. There is buyers agent, who represents the buyer and there is sellers agent, who represents the seller. To keep things simple, you will want to ensure you have an excellent experienced local Buyer Agent, representing you in finding and securing your home.
Find out more about New Home Program Realtors – what makes them unique and how they help thousands of first time home buyers get into a home.
6. Searching for your perfect “Home”
Typically, if your finances are in order and you are ready to move forward a NewHomeProgram.com Mid Atlantic REATOR® can identify homes that meet your requirements. They will check the entire market and identify the ones that would best fit your needs. Then will review each of the properties identified together online and select a set of 3 to 5 properties to visit. In a seller’s market, you will want to identify the property you love and make a solid offer. Low ball offers are usually wasted time and effort on all parties because often there are other buyers ready at a better price point to purchase it. In a buyer’s market, you will have more opportunities to work with the seller on price and other details to get a deal done. Connecting with an experience real estate agent, they will be able to help develop a strategy and navigate you through the home buying process.
7. Reasonable Offer
The Realtor will provide you comps of the home you are seeking to buy, and what other similar homes sold for in the past 3 to 6 months. This information is designed to give you a guide on how much to offer. The ultimate decision of what to offer is a buyer’s decision and can mean you get the property or not. Watching Flip or Flop, Fixers Upper, Property Brothers are wonderful HGTV shows, but in reality, the real market environment is much more dynamic — so work with your Realtor, he/she has your best interest at heart.
Additionally, if you are looking to get into the foreclosed property, often these deals can take a lot of time and there is no guarantee that you will actually get the property. A foreclosed property has many disclosure issues where the banks don’t have to disclosure issues with the property because they simply don’t know. Investors who purchase foreclose properties take on the risks of the home and typically have cash reserves to address issues to fix the problems.
8. Accepted Offer – Contracts
If you hear from your Realtor that you have an accepted offer, its time to work on a contract. The contract is the agreement of who will do what and by when so that the entire transaction to purchase your home in the Mid Atlantic will go smoothly. This is a very important part of the process, there can be delays in closing due to repairs or issues with the appraisal, etc. Think about your move in the timeline, think about potential challenges that could come up and then work with your Realtor to get this in place and executed. Executed means that the seller and the buyer have agreed to the terms and now you are bound by the legal terms of the contract.
9. Select a Title Company
A title company ensures there are no leans on the home and that the title of the home can clearly pass from the seller to the buyer without any issues. This is called CLEAR TITLE and it means you are set to buy the home clear and free from any issues. The title company works with your Realtor, Mortgage Lender, seller’s Realtor, the home seller, and you the home buyer to get everything coordinated to complete the transaction. They calculate the closing costs, pay the different parties based on the contract agreement, ensure that the taxes are paid correctly, home owners association rules followed, no leans on the home, and all the boundaries as described in the deed.
10. Inspection and Negotiate
It’s recommended you hire a reputable home inspector. Check them out to ensure they are detailed and the reports will provide you with the information you are seeking to understand potential repairs the home might need. Please note that not all repairs are required, some times inspection reports identify issues which are a “grandfather clause” – is not required to be fixed because the home is older than the new rules. Also, it’s important to be aware of what repairs are urgent and must be done and which can be set aside to get done in the future. The goal of this inspection report is to find information that will allow you to negotiate with the seller issues that you believe should be addressed by them. Keep in mind, they are not obligated to do any repairs – this is where negotiation skills come into use. Work with your Realtor to get things repaired and buy the home in the condition you want.
11. Get the Appraisal Done
This is ordered by the mortgage lender to get your home appraised by an official bank selected appraiser. They price the value of the home based on past home sales of similar properties in a similar neighborhood. The bank wants to make sure the value of the home is at or below market price so that it can secure its loan with the real estate you are buying. If the value comes in correctly you are likely ready to move forward with closing on this purchase at a certain date and time.
12. Arrange Homeowner’s Insurance
As a condition of the loan, banks typically require you to purchase homeowners insurance. This ensures the bank’s real estate asset is secured with insurance if there is ever any incidents that impact the value of the property from weather or other damages. It’s best to shop around for this and you can include it as part of the monthly mortgage payment.
13. Conduct a final walk-through prior to closing
Your Realtor will coordinate a final walk through prior to closing. This is an important time for you to double-check that the home is exactly what you agreed to purchase. If any issues arise at this stage, you need to get them addressed because once the closing takes place, you are the new owner of this home.
At the closing be sure to bring valid IDs and any other information requested by the title company to close on time. This is when you sign a lot of papers, ensure the funds are transferred from the bank (funding) to the seller, all involved parties are paid and title records that you are the new homeowner. Keys are handed over to you. Congratulations you are officially a first time homeowner!
15. Celebrate, YOU are now a NEW HOME OWNER
Enjoy being a new homeowner, have a BBQ and invite family and friends over.
There are plenty of specialized home buying programs available including first time home buyers to help individuals become homeowners. There are federal home buyer grants, city and state specific grants to assist home buyers with closing costs. Many types of mortgages are available from Conventional, Balloon, FHA, VA, USDA to help all types of first time home buyers. Contact us today if you would like to get started on the home buying process and see what you may qualify for.