So you’re ready to buy a your first home? To assist in the understanding of this process below are the things you need to know before shopping.
- Get Pre-Qualified by the lender of your choice. Many sellers require this before reviewing an offer. Don’t miss out on the home of your dreams because you were waiting. There are many options for financing, USDA with 0% down, FHA with 3.5% down, and conventional loans with 5% – 20% down.
- Choose a Realtor®. As a buyer, this won’t cost you a thing. The seller pays commission in most transactions. If you don’t know and agent, ask friends and family for recommendations. If they are at a loss, search local real estate websites, most feature agent profiles. Be sure to choose someone familiar with the market where you are looking to buy. Your Realtor® needs to be someone you are comfortable with and have confidence in.
- Start Shopping! Your Realtor® will help with this and can set up customized searches to send you new listings that match the criteria of your home search. When you’ve found the home(s) you’d like to see, contact your agent to schedule a date and time. Remember many homes are owner occupied and require 24+ hours notice.
- Once you’ve selected a home, its time to make an offer. Ask your agent to provide you with recent comparable sales and discuss with them a good starting price if you’re unsure. Usually it’s best to start below what you want to pay, so there’s negotiating room. However, there are times your highest and best offer will be required with particular listings.
- Your offer has been accepted. Congratulations! Your agent will forward the contract to you, the sellers agent, your lender and the closing agent. Now is the time to get serious with inspections and communicating with your lender.
- Next deliver an earnest money deposit (most sellers prefer 1% of purchase price, or a $500 minimum). This deposit typically due within 3 days of sellers signature. This money is deducted from your total purchase price and can be refunded as long as the contract is canceled within the specified contingency period on your contract.
- Now your agent should line up home inspections. A typical home inspection is optional and done by most buyers to ensure the condition of the home is satisfactory. If unacceptable conditions are found, this is the time to re-negotiate or cancel the contract (if the issues can’t be resolved). There are other inspections that may be required for insurance purposes or to meet the loan requirements. One example being most insurance companies require a standard 4 point ($100+) for any home over 20 years old. Other inspections may be necessary for your loan; water sample ($30+), septic inspection ($250+) and possibly a termite inspection ($125+).
- If the inspections come back satisfactory or you feel you’ve been able to get a fair concession from the sellers for the needed repairs, please proceed with your loan. Once your lender has all information needed from you and you advise you’re ready to move forward, they will order an appraisal ($450+).
- During this time your agent will begin lining up the survey ($500+), if the home is in a flood zone an elevation certificate will also be required ($100+). It is suggested to have these items completed simultaneously to save time and money. (This is an expense that can be paid at closing.)
- Once all inspections, appraisals and survey’s have been completed, we are ready to proceed with closing. The entire process from contract to closing is typically 30 to 45 days. Closing is when you’ll be working with the title/closing agency and your lender to finalize the purchase of your new home. While some items must be paid out of pocket when services are rendered, closing is when the bulk of the money is due from you. The closing agency will require your payment to be made with by cashier’s check or wire transfer. While closing day can be very stressful, it’s also the day you’ve worked hard for and the day you get keys to your new home! Phew, I promise it’s worth all the stress and headaches!
When asked about money needed for a purchase, I always suggest having at least $5000 on hand. There’s no magic formula, but this proves to be the least I see buyers spend on closing. This figure will vary based on the sales price, inspections required and type of loan. Its possible to ask the seller to pay for certain closing costs, but this must be done upfront when negotiating your offer. We all dream of owning a home, and I believe every hard working America deserves that privilege. However we must be prepared for the expenses associated. Need blinds, go buy them. AC goes out, its on you. There’s no longer a landlord or property manager to call for repairs. When considering this step in life be smart and be prepared! I’d love to help you find a home and earn a commission, but not unless you’re truly ready financially. It is my privilege and honor to assist you in this life changing adventure!