While many of us fantasize about the day when we’ll be able to buy our first home, we don’t think about the numerous steps that must be taken before we can do so.
The process of purchasing a home is far from simple for first-time buyers, and looking at listings online or attending open houses is only the beginning. If you’ve never purchased a home before, we’re sure you have questions about the process — and we have the answers.
This comprehensive guide will walk you through the entire process of purchasing your first home, from saving to understanding your financing options, finding a Mortgage Company, and negotiating an offer. You can buy your first home with confidence now that you’ve read this.
Steps You Can Follow When Buying for Your First Home:
Determine the amount of money you need to save
Before you begin your search for your dream home, you should have a good idea of how much you want to spend and how much you can afford. Calculate the numbers as soon as possible so you know how much to save and how long it will take.
Before you buy your first home, you should budget for a number of expenses.
The Down Payment
Your down payment is the most important expense to plan for. The down payment is a percentage of the home’s purchase price that you must pay in advance in order to qualify for a home loan. While many people strive for a 20% down payment, the type of home, mortgage company, and mortgage loan you choose will all influence how much of a down payment you actually need.
There are conventional loans available for first-time home buyers with good credit that allow down payments as low as 3%, so don’t let the thought of a 20% down payment deter you.
When the time comes to close on a home, be prepared to pay. Closing costs are fees and expenses that must be paid when a home is sold. The buyer pays the majority of the closing costs to the mortgage lender, but the seller must also pay some closing costs (primarily committed to the real estate agents).
Closing costs typically range between 2% and 5% of the loan amount. In some cases, the seller will pay a portion of the closing costs or cover the cost of inspections, so you can try to negotiate either option during the contract process. Meanwhile, prepare for the full bill and save up for the anticipated closing costs.
Costs of relocating
Whether you decide to move down the block or across the country, you’ll need some money set aside to cover the costs of your relocation. When you move into your new home, you may need to set aside some money to cover the cost of repairs, appliances, and furniture. It’s useful to have some wiggle room here.
Consider the following costs: Renting a moving truck ($50 to $2,000, depending on how much and how far you’re moving), hiring a moving company (up to $2,300 for long distances), or using a moving container ($700 to $5,000, depending on the brand, size, and distance) are all moving costs that can quickly add up.
When it comes to having a buffer for any repairs, appliances, or pieces of furniture, having some savings on hand can help you tackle those projects sooner rather than later. You could spend as little as a couple of hundred dollars to hire a house cleaner or as much as a few thousand dollars to have someone paint your house for you.
Examine your financing options
Unless you can afford to buy a home with an all-cash offer (which most of us cannot), you should think about your financing options. There are a few steps to take in order to find the best financing option for you.
Step 1: Examine your credit report
Spend some time working on your credit score before even thinking about applying for a mortgage loan with a mortgage company. When applying for a mortgage, your credit score can have a significant impact on whether you qualify, how much you qualify for, and what your interest rate will be.
If your credit score is lower than you would like, you can raise it by paying all of your bills on time, paying off debts, and keeping your credit card balances low.
Step 2: Investigate your mortgage options
There are several types of mortgages available, and it is worthwhile to do some research to determine which type of mortgage is best for you.
- Conventional mortgages: A conventional mortgage is one that is not guaranteed by the government and is obtained from a bank, Mortgage Company, or online lender. There are conventional loans for first-time home buyers that require as little as a 3% down payment.
- FHA loans: These loans are insured by the Federal Housing Administration and can have down payments as low as 3.5 percent.
- USDA loans: USDA loans are for rural home buyers and are guaranteed by the United States Department of Agriculture. USDA loans frequently do not require a down payment.
- VA loans: Designed for current and former military service members, VA loans are guaranteed by the Department of Veterans Affairs and typically do not require a down payment.
Collaborate with the best real estate agent possible
When it comes to selecting a real estate agent to work with, you can get referrals from previous buyers and should interview multiple agents to ensure they’re experienced in your area, have a communication style that works well for you, and are a good fit for your needs. Do not be afraid to ask probing questions. Take your time here, because having the right real estate agent on your side will make the entire process a lot less stressful.
Select the best home for you
Once you’ve found a great real estate agent to work with, you’ll have a guide who will accompany you to open houses and help you find the right home for you. Keep an ear out for any unusual noises or odours when attending an open house. Take a close look at the outside of the house as well to get an idea of the overall condition.
Buying a home can be a hectic task as it involves many aspects from arranging the finances to choosing the right home. We hope this blog helps you in making the right decision. If you’re thinking of buying a home but looking for a mortgage then don’t worry, we’re here to help.
PierPoint Mortgage is the topmost mortgage company in the United States who has helped thousands of homeowners to own a house, we will walk you through every step.