You’ve weighed the pros and cons of renting versus owning a home. You are employed with a good credit profile.
Now, you’ve decided it’s time to buy a home. You’re probably asking yourself, “What’s next?” Here is a quick guide for first time homebuyers.
- Get pre-qualified or pre-approved for a mortgage. Work with a loan officer who can help you understand all of the aspects of financing a home. A loan officer can either pre-qualify or pre-approve you for a home loan. Pre-qualification is an estimate of how much you will qualify to borrow, and should be free. Pre-approval actually starts the loan application process and requires a credit check and other documentation, and some fees may apply.
- Choose a real estate agent. Once you know how much home you can afford, we recommend finding a real estate agent who can help you shop for a home and guide you through the home purchase transaction. You may spend a lot of time with your agent, so choose someone with personal and professional qualities that match your style.
- Shop for a home and find one that meets your needs. It is exciting to shop for a home, but first time homebuyers need to be realistic when shopping. Give a lot of thought to the things you want in a home versus the things you need. One suggestion is to make lists. List the things your home must have; make another list of amenities that would be nice, but not essential. Your agent can help you keep things in perspective, and armed with your pre-qualification or pre-approval, he or she will be able to narrow the search to homes that you should be able to comfortably afford.
- Make an offer on a home. Once you have identified a home that suits your needs, your agent will help you to present the home sellers with an offer to buy the home. The offer includes a proposed sale price for the property. It also includes contingency clauses that state your offer depends on results of a home inspection, your ability to get a mortgage for the amount needed, and/or other stipulations. When you make an offer, you nearly always make a “good faith” or “earnest money” deposit that shows you are serious about completing the home purchase transaction. If the offer is accepted you and the seller will both sign a home purchase contract.
- Contact your loan officer and let them know your offer has been accepted. You and/or your real estate agent will need to provide your lender with documents to complete the home loan process. For example, your lender will need a copy of the home purchase contract, along with any personal financial documents needed to underwrite the home loan. Loan processers and underwriters may handle the details. While your agent has guided you through the home search process, your loan officer will act as the guide through the mortgage application and underwriting process, keeping you informed about where things stand during this period.
- Close the home purchase transaction. Depending on where you live, you may meet with an escrow agent to close the home purchase transaction. In many states, attorneys handle these details. Depending on state law, there could be multiple attorneys present at closing to represent the different parties to the transaction. In any case, a lot of things happen during “closing.” Your lender transfers funds to pay the home sellers. You receive and sign final mortgage documents. You nearly always have to pay certain costs with a cashier’s check at closing. These costs typically include but are not limited to agent’s commissions, attorney fees, home inspection fees, title insurance and title recording fees. Earlier in the process, your lender will have provided you with a good faith estimate of the applicable closing fees.
- Take the keys to your new home and enjoy! Enjoy your new home … keeping in mind that homeowners should be prepared for the costs of ownership, including routine maintenance of the home and unexpected repairs.