Buying a home isn’t easy. Not only is the purchase of property a major investment of time and money, but there are several phases to real estate transactions that can throw many first-time home-buyers for a loop. Here’s a step-by-step first time home buyer’s guide to help you navigate your way through the journey to home ownership.
Many first-time home buyers are under the impression that they should shop for houses first, and let everything else follow. Unfortunately, this is backwards thinking. In reality, your credit, savings, and pre-approval for a home-mortgage loan come long before the house-hunt.
Money in the Bank
Your first step is savings. Although there are programs available for first-time home buyers, it’s still a good idea to have a healthy down-payment on the home you plan to purchase. In addition to your down payment, you may also be asked to put down a good-faith deposit when you make your offer. Furthermore, there are closing costs involved with real estate transactions that are usually the responsibility of the buyer. Closing costs can be estimated at between one and eight percent of the value of the property being purchased. In addition, you’ll be required to purchase homeowners insurance, pay property taxes, and potentially HOA fees. Your nest egg should be substantial before you begin the process of looking for houses.
Your Credit Score
Your second step is tending to your credit score. To qualify for a home-mortgage loan, lenders review your credit score. Before lenders are willing to loan you funds, they want to verify your borrowing history and your habits for repaying loans. Order copies of your credit report. If there are derisory marks on your report, contact the account holders to make arrangements, or to obtain documentation that your accounts have been satisfied. Also, during the phases prior to home ownership, avoid making any major purchases such as automobiles or furniture. Lenders also consider your debt-to-income ratio. When the lenders see recent activity accruing debt, they’re less likely to approve your loan.
Mortgage Loan Pre-Approval
With your savings and credit in order, it’s time to seek pre-approval for your home mortgage loan. Not all lenders, and not all loans are the same. Lenders have different requirements, interest rates, programs, and timelines. By seeking pre-approval prior to house-shopping, you’re able to shop for the right loan to fit your needs. Check with a variety of banks and lending institutions to find a match that’s good for you. Pre-approval not only sets an accurate budget while qualifying you as a serious buyer, but can also give you an edge with competing offers.
Choosing the Right Real Estate Agent
Next, find the right real estate agent. Not any agent will do. The agent you select should be licensed, an expert in the type of home you’d like to buy, and be familiar with the neighborhoods in which you’d like to live. Take the time to interview agents, ask friends and family who they’ve worked with, and read the reviews online.
Your agent will help you find homes in your budget, desired area, and that match your criteria. When you find the right house, your agent will assist you in submitting an offer, and negotiating when necessary.
The tricky part here is in not becoming emotionally attached to a property before the deal is done. There’s always a risk of competing offers, or that inspections, appraisals, and title searches could reveal problems that may be deal breakers.
After Your Offer is Accepted
Once your offer is accepted by the seller, the house must undergo an appraisal and an inspection. The appraiser determines the worth of the property to ensure the lender the property is worth what you’re borrowing. The inspection verifies the condition of the house to make sure it’s in good order and free of major malfunctions. If any problems are discovered with the property at this time, the terms of contract are negotiable.
The cost for the appraiser and inspector are enveloped into the term “closing costs”, which are due upon closing. Other items included in closing costs are clerical fees, real estate agent commissions, lending fees, and escrow services.
With advanced knowledge and proper planning, you can enjoy your journey into home ownership.
Your real estate agent is the best source of information about the local community and real estate topics. Give Ocala Realty Experts a call today at 352-362-3418 to learn more about local areas, discuss selling a house, or tour available homes for sale.