Has the time finally come for you to start looking for your first home? As a first-time homebuyer, there’s so much excitement and anticipation in finding that perfect place to call home. According to the National Association of Realtors (NAR), in 2018, 33% of all home buyers were first-time homebuyers.
While it’s an exciting time, it can also be nerve-wracking with all the steps that need to be successfully navigated before the keys to a house become yours. So, before diving headlong into the search, use our checklist for first-time homebuyers to not only understand the process but also to make the process easier.
Checklist for First-Time Homebuyers
✅What can you afford?
✅Deciding Where to Live
✅Choose a Real Estate Agent
✅Find a Lender and Get Pre-Approved
✅Begin the Home Search
✅Offer accepted! What happens next?
✅Closing on Your New Home
Buying a new home, whether you are a first-time homebuyer or a seasoned pro is a process. Nothing happens immediately and it’s important to prepare for some bumps along the road—because they will happen. However, preparing in advance and knowing the entire process makes it easier.
What Can You Afford?
What you can afford is critical. Taking a long hard look at debts, assets, as well as monthly income and expenses, must be done before you begin the search. Too many people make the mistake of finding “the perfect home” only to determine that the costs associated with owning and maintaining the home is way more than they ought to consider spending or could even attempt to spend.
A rather standard formula to use for calculating your debt payments as well as how much a mortgage payment should be the 28/36 Rule.
Basically, that means that no more than 28% of your gross monthly income should be spent on housing and no more than 36% should be spent on total debt service which includes not only housing, but also car payments, credit card debt and student loans.
Deciding Where to Live
At the outset of your search, create a list of what’s important to you in a neighborhood or area to live. Is it schools? Maybe shopping? Distance to your work or other locations? Once the list is created and ranked, it’s time to start exploring.
Now’s the time in the real estate search process to explore neighborhood and communities. Check out online reviews and information on the area to find the areas that meet your criteria as well as staying in line with the amount of home you can afford.
Choose a Real Estate Agent
Having the right real estate agent can make all the difference in your home buying process. Speak with friends and family to find out who they have used and what their experiences were with each agent.
Online searches in your local area for agents that have excellent reviews on sites such as Yelp or Google as well as seeing which agents are active in your market are important.
Find a few agents that you can interview and see how comfortable you are with them. Dig into their experience with first time home buyers. When you’ve found one that seems to understand you and what you are looking for, it’s time to move forward!
Find a Lender and Get Pre-Approved
It wasn’t that long ago that you were able to find a home and then go shopping for a lender and financing. However, that’s all changed and now it’s important that you get pre-approved by a lender before you begin your search.
The plus of being preapproved means sellers will be more likely to take your offers seriously. Sellers will choose a pre-approved buyer over one that isn’t, all other factors being equal.
Begin the Search
Now it’s time for your agent to start earning their fee! Make sure that the agent has all of the information in terms of what you are looking for, areas to focus on as well as the pre-approval loan amount that’s been provided by the lender.
Armed with this information, the realtor can now come up with properties that might be of interest. Each property that you see will help an agent understand a bit better exactly what you are looking for.
Generally property searching with an agent will take 2-4 hours at a time, so make sure your schedule will allow for that.
Finally! You have found your dream home and it’s time to start submitting an offer. Here’s where your agent’s expertise really becomes important. Making sure that the offer is as enticing as possible and that you cover all potential questions or issues is critical. A top-notch agent will excel at the negotiation process and help you find the best property at the best terms possible.
Offer Accepted! What Happens Next?
Congratulations, you’ve taken a huge step towards becoming a homeowner. Having a home accepted by a seller and “under contract” means it’s time to get down to the nitty gritty.
And that means LOTS of paperwork. In fact, it’s highly likely that you will never have had to come up with so many pieces of paper nor had more inspections scheduled and done. Ask your realtor to schedule all the inspections such as appraisals and home inspections while you focus on giving all needed documents to the lender and answering any questions they may have.
If any issues arise from any of the inspections or if the appraisal states that the value is less than the purchase price, it doesn’t have to mean the deal is over. Negotiations on purchase price, seller contributions or home buyer rebates are all options that you can explore so that you can complete the home purchase.
While seller contributions and negotiating purchase price are tactics many know, home buyer rebates aren’t as well known.
It’s actually a simple and frequently done option of insuring that a real estate transaction closes. A home buyer rebate is when the buyer’s agent accepts a lesser real estate commission of either a specific dollar amount or percentage amount and gives those funds to the buyer.
Eventually, the buyer completes all lender requirements, all inspection issues get resolved, and the lender submits the loan for approval.
Once the total “loan package” as it’s called is reviewed and approved, it’s time to move to loan closing. According to the Mortgage Bankers Association, the average to close all loan purchases is 45 days.
Closing on Your New Home
Closing on your new home is exciting. A loan closing simply means the final purchase of the property. While there is a mountain of loan documents to review, sign and have notarized, in the end, the home is yours!
Purchasing a new home is exciting and fun. It can also be stressful if it’s something that is new to you. That’s why the checklist for first-time homebuyers can help ease the stress and insure a smooth and successful purchase.