Guide for First-Time Home Buyers
Buying a home can be overwhelming. There are multiple steps, requirements, and processes that can be confusing for anyone, especially, a first-time home buyer. To make things easier, we have broken down these steps so you can better understand and prepare to buy your first home.
1. Determine whether you're ready to purchase a home
As a first-time homebuyer, buying a home can be challenging. There are many things you should consider before deciding whether or not you’re ready. Specifically, your credit score, debt-to-income (DTI) ratio, savings, and timing. The right timing is different for everyone so be sure to consult a financial expert and a mortgage loan expert to help decide what’s right for you.
2. Set a down payment goal and establish how much you can afford
Once you decide it’s the right time for you to buy a home, it’s time to get your personal finances in order. You will need to save for a down payment, closing costs, and other costs associated with a loan. When setting a budget, it’s important to consider your debt-to-income ratio. Consider your income, and any debts you owe, and decide how much you can afford to spend each month on your mortgage. Be sure to keep in mind utility costs, property taxes, and other expenses when deciding your budget.
3. Find the right mortgage lender and get pre-approved
Deciding on a mortgage is a huge commitment, so it’s important to work with a great lender. A mortgage lender will give you a pre-approval letter stating how much you can afford based on your income, credit, and assets. A pre-approval letter will show real estate agents you’re serious about buying a home, and it can give you an edge when competing with other home buyers.
4. Begin the search for a home
Once you’re pre-approved, now is the time to explore homes available on the housing market. While not necessary, it’s recommended to work with a good real estate agent to help you buy a home. Do you want access to public transportation? Is the home in a good area? What are some characteristics of a home that are important to you? A real estate agent will consider your criteria when buying a home and your budget to find the best options for you.
5. Make an offer
Now that you’ve found your dream home, it’s time to put in an offer. Your real estate agent will help you negotiate a price and the terms surrounding your offer, which the seller will either accept, reject, or provide a counter-offer.
6. Have the home inspected
An important step when buying a home is having the home inspected. Even if the home appears to look perfect, it’s worth having an expert professionally go through the home and look for any problems. If any major issues are found, you’re realtor will want to contact the seller to have them addressed. If you’re realtor is not able to reach an agreement with the seller on your behalf, you may want to rescind your offer and get your deposit back.
7. Close on your new home!
You’re almost there! You’ll receive a closing disclosure detailing what you’ll need to pay at closing and summarizing your loan agreement. Read through it and once everything looks correct, you’ll sign a settlement statement and other paperwork your lender provides, as well as pay your down payment and closing costs. Once you’re finished, you’re now a homeowner!
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