Purchasing your first house can seem like you’re trying to do a million different things at once. So it’s no wonder some first-time homebuyers feel overwhelmed or worried they might make a mistake.
This blog post will look at popular purchasing first house steps to help you get organized, know what to expect, and enjoy the process. We’ll dig into what you need to know before you buy, what to expect from the actual buying process, and how to get the most out of your new home. If you’re purchasing your first house, these steps can help.
Before You Buy
Looking at homes for sale is always fun, but getting prepared before you start looking at homes can help reduce stress and streamline the homebuying process.
1. Can You Afford To Purchase a Home?
Chances are your home will be the most expensive thing you’ll purchase in your lifetime. That’s why it’s essential to consider your finances before you start the process of buying a house.
Start by creating a budget and include any savings you already have. Evaluate your monthly expenses, as well as income from all income streams, such as salary, alimony payments, earned income from any side hustles or profitable hobbies, etc. Since most first-time home buyers will require a mortgage, consider checking your credit score or getting a copy of your credit history — your credit history can impact mortgage rates and monthly payments.
Paying off existing debt before you apply for your mortgage can help you get a better interest rate for your mortgage. Your credit is impacted by several factors, including the different credit types you use (credit cards, personal loans, etc.), how much money you owe, how long you’ve had credit, and your payment history.
2. How Much Downpayment Do I Need?
Homeowners used to be expected to have 20% of the home’s value for a down payment, but thankfully, those days are gone.
A 20% down payment does carry several advantages, including a better interest rate, smaller monthly mortgage payments, and the elimination of private mortgage insurance (PMI), but if you can’t afford the substantial downpayment, there’s no need to worry.
Conventional loans and government-backed home loan programs, such as the Federal Housing Administration (FHA) and the Department of Veteran Affairs (VA), offer down payment options ranging from 0% to 3.5% of the home’s value.
3. Mortgage Prequalification
Some sellers won’t accept an offer from interested home buyers without mortgage pre-approval. But that’s not the only advantage to getting pre-approved for a mortgage.
When you are pre-approved for a mortgage, you know precisely how much you can afford. This is exceptionally important, especially because what you think you can afford and what you are actually eligible to receive can differ. You may initially be looking at homes in the $225,000 range, but lenders may consider you as a reliable borrower for a mortgage of up to $275,000.
Your licensed loan officer will walk you through the process and help you determine your mortgage eligibility amount before you start looking at homes.
4. Find a Real Estate Agent
Your real estate agent will represent you on all offers you make, but the right real estate agent is so much more. Because agents sell houses daily, they are keenly aware of all of the ins and outs of the homebuying process.
Your agent can arrange for you to view potential properties, answer questions, offer insight, prepare offer letters, assist in negotiations, provide documentation, etc. Their comprehensive understanding of the subtleties of home buying can be a significant advantage for first-time homebuyers.
5. Make the Offer
Once you’ve found the perfect home, it’s time to make the offer. Your real estate agent writes up your offer. Your agent also helps you get the house for the best possible price, based on the value of similar homes in your new neighborhood.
Once you and the seller agree on a price, you’ll both sign the offer. This essentially puts the house on hold for you until you finalize the last stages of the homebuying process.
6. Do I Need A Home Inspection?
While a home inspection is not a legal requirement to purchase a home, it can offer crucial insight into the durability of your potential new residence. During an inspection, the inspector will carefully go through the property from the basement to the roof, noting any irregularities, such as outdated wiring, missing roof shingles, cracks in the foundation, gaps in window or door seals, and more.
After the inspection, you’ll receive a detailed report, often with photos, of the assessment. This helps you determine whether the house is worth the price you’re offering. If the report highlights areas that will require extensive repair, you may want to amend your offer amount or even decide not to purchase the house.
The closing is the final step to purchasing your house. It’s also the stage with the most paperwork.
You’ll receive a Closing Disclosure document outlining the fees you’ll have to pay, in addition to the summary of your mortgage details. It’s important that you carefully read through your Closing Disclosure to ensure you have a good understanding of what is expected of you before you sign.
During closing, you’ll also provide proof of funds and pay any closing fees that haven’t been rolled into your mortgage. You’ll also sign off on the mortgage, confirming that you agree to repay the funds you are receiving.
Congratulations! With this last step, you’ve officially just bought a house.
If you’re purchasing your first house, the steps above are just the beginning. If you are ready to buy, have questions about the process, or are curious about how much of a mortgage you can be pre-approved for, reach out to the licensed loan officers at River City Mortgage.
We’re passionate about helping first-time homebuyers. We can’t wait to sit down with you and go over all of the options you have available. We want to help you find the right mortgage product for you and your family and help you get into the home of your dreams.