A Step-by-Step Beginner's Guide to Buying Your First Home

Buying your first home can be both thrilling and intimidating. As you step into the real estate market, it’s easy to feel overwhelmed by the information and choices available. But don't worry! This beginner's guide will walk you through a clear, step-by-step process, ensuring your journey is both smooth and enjoyable.

Step 1: Assess Your Financial Readiness

Before you start searching for homes, it's crucial to understand your financial situation. Evaluating your savings, income, and expenses can make a big difference. Here are key factors to think about:

• Savings for a Down Payment: Aim for 3% to 20% of your desired home price. For example, if you want to buy a home priced at $300,000, plan to save between $9,000 and $60,000. If you choose a no-down payment loan, allocate this money to closing costs.

  
  

• Credit Score: A good credit score can lower your mortgage rate, saving you thousands over time. For example, a score increase from 680 to 740 can save you around $30,000 in interest over a 30-year loan!

  
  

• Monthly Budget: Take stock of your income and expenses to see how much you can comfortably spend. Aim to keep your mortgage payment below 28% of your gross monthly income.

  
  

With a clear picture of your financial health, you're ready for the next step.

Step 2: Find a REALTOR®

Once you've decided that you're ready to start the home buying journey, your first actionable step is to find a great REALTOR®. Trying to navigate pre-approvals, negotiations, and legal paperwork by yourself can be stressful and chaotic. Finding a real estate professional such as a REALTOR® can make or break your home buying experience. Here are some reasons why you should hire an agent:

• They're Real Estate Experts: They act as an expert guide in the real estate market

  
  

• Expanded Search: They have access to a huge database of property listings, as well as off-market properties

  
  

• Negotiating Power: Agents are pros at negotiating and know how to get a deal accepted. They'll be in your corner and help you negotiate the best deal.

  
  

• Experts in the legal work: Agents have expert knowledge in the paperwork, scheduling, and legal tasks involved in such a large purchase so nothing gets missed.

  
  

• Wide Connections: REALTORS® have connections to trusted attorneys, inspectors, lenders, contractors, and more.

  
  

• Experience: They're experienced in the home buying process and will simply it for you

  
  

• They're almost always free: The seller typically pays the commission.

A great REALTOR® will walk you through the home buying process, guiding and advising you every step of the way.

Step 3: Get Pre-Approved for a Mortgage

Securing a mortgage pre-approval is essential for shaping your home-buying budget. This step lays the groundwork for your financial capabilities. Here’s why pre-approval is vital:

• Know Your Budget: Pre-approval provides you with a clearer understanding of your price limit, helping you focus your search effectively.

  
  

• Strengthen Your Offer: Sellers are more inclined to consider offers from pre-approved buyers. This shows that you are serious and financially prepared.

  
  

To get pre-approved, you’ll need to share documents like pay stubs and tax returns with your lender. If you aren't sure where to get pre-approved, your real estate agent can connect you with a trusted lender

Step 4: Define Your Needs and Wants

Once your finances are in order, it's time to clarify what you're looking for in a new home. Think about the following:

• Location: Consider how important proximity to work, schools, and parks is to you. Are you looking for a bustling urban environment or a tranquil suburban neighborhood?

  
  

• Size: Determine the number of bedrooms and bathrooms you’ll need. If you plan to start a family, consider future needs as well.

  
  

• Features: Identify must-have features, such as a garage or a backyard, versus nice-to-haves, such as an updated kitchen or a pool.

  
  

By being specific about what you want, you’ll make the search easier and more enjoyable. It will allow your agent to narrow down some home listings to tour and ensure that you're only looking at homes that match your needs.

Step 4: Start the Home Search

Now comes the fun part—house hunting! Here are some strategies to enhance your home search:

• REALTOR®: Your REALTOR® will set you up with an online portal that you can both add, review, and set up showings through. Your agent can offer valuable insights and suggestions, as they know the local market inside and out.

  
  

• Online Listings: You can also search for homes on your own. Use reliable real estate websites to filter homes that meet your criteria. Websites like Zillow and Realtor.com are great starting points. Set alerts for new listings to stay updated.

  
  

• Open Houses: Attend open houses to truly experience neighborhoods and homes. Ask questions about maintenance, utilities, and neighborhood issues that may concern you.

  
  

Keep an open mind; your dream home might differ from your initial vision.

Step 5: Make an Offer

Did you find something that feels right? It’s time to make an offer! Here’s how to approach this step effectively:

• Price Analysis: Collaborate with your agent to choose a fair offering price, considering homes that have recently sold in the area. Your agent will create a Comparative Market Analysis (CMA) that compares the home to recently sold homes so you can make sure that you're offering an appropriate price.

  
  

• Contingencies: Include important contingencies in your offer, such as a home inspection and financing, to protect your interests. While too many contingencies will weaken your offer, your agent can guide you on what to choose.

  
  

• Be Ready to Negotiate: Sellers often respond with a counteroffer. Stay calm and open to negotiations. There is more to negotiate than just the price, and your REALTOR® knows this.

  
  

Once both parties agree, you will all sign the sales agreement and will enter escrow. This means you're officially under contract!

Step 6: Schedule a Home Inspection

The next step after entering escrow is to schedule the home inspection, assuming you're deciding to get one. This step can reveal issues that might change your decision. Here’s how to ensure a smooth inspection:

• Hire a Professional: Look for certified and experienced inspectors. Their thorough evaluations can identify potential concerns.

  
  

• Attend the Inspection: While not required, being there allows you to understand any issues firsthand and ask the inspector questions.

  
  

• Review the Report: After the inspection, carefully review the findings. This will help you decide whether to continue the purchase, negotiate repairs, or back out. Your agent can help you make sense of the report if you find it confusing.

  
  

This step is crucial for avoiding unexpected costs later on. Inspections range from $500-$900 depending on the size of the property and how in depth you'd like it to be.

Step 7: The Appraisal

If you are satisfied with the inspection and would like to proceed with the sale, then the next step would be to get an appraisal. The appraisal is ordered by the bank that will be funding the deal. The bank is looking for the appraisal to come back at or above the agreed upon sales price. If the appraisal comes back lower, here are your options:

• Negotiate a lower sales price with the seller to match the appraised value

• Ask the seller to cover the difference

• Come up with the difference yourself

The bank will not allow you to close on the property otherwise. Appraisals typically go from $300+ depending on the home type and size. Certain loans, such as VA, require appraisals to be done by VA-approved appraisers.

Step 8: Underwriting

While the previous steps are being completed, the lender will be working alongside your chosen attorney with the underwriting process. The purpose of the underwriter is to determine how risky lending to you would be, i.e. your ability to close and pay your monthly mortgage. The underwriter's job includes:

• Verifying your employment, income, assets and debts

  
  

• Review your credit history

  
  

• Appraising the property

  
  

• Doing a title search to confirm a clean title

  
  

• Confirmation of title insurance

Underwriting is the most time-consuming process of financing a home, and typically takes a few weeks and last up until the day before you close. The average time it takes to close on a new home is 46 days.

Step 9: Close the Deal

Congratulations! You are almost at the finish line. Your real estate agent and attorney will be present at closing, which is usually held at the attorney's office. Closing the deal involves several key steps:

• Final Walkthrough: Perform a last inspection to ensure the home is in the agreed-upon condition. This is done within 48 hours of closing.

  
  

• Closing Documents: Go through all closing documents thoroughly to understand the terms before signing.

  
  

• Transfer of Ownership: After signing and paying the closing costs, you’ll receive the keys to your new home.

  
  

Take a moment to celebrate this major milestone!

Step 10: Move In and Enjoy

You did it! After all your hard work, it’s time to settle into your new home. Here are some final tips for a smooth move:

• Plan the Moving Process: Develop a moving checklist and a clear timeline. Decide whether to hire professionals or manage the move yourself based on your budget and comfort level.

  
  

• Set Up Utilities: Ensure all essential utilities, such as water, electricity, and internet, are in place before moving in. The seller or your agent should be able to provide you with this information.

  
  

• Personalize Your Space: Once you’re comfortable, take time to decorate and make it truly yours. Enjoy the journey of transforming the house into a home.

Final Thoughts

Navigating the real estate market as a first-time homebuyer might seem tough. But by enlisting the help of a REALTOR® and following this step-by-step guide, you'll build the confidence needed to make informed choices. Remember to take your time, do your research, and don't be afraid to ask for help.

Purchasing your first home is not just a financial milestone; it is a significant life event filled with new opportunities and experiences. Are you thinking about starting your home-buying journey? I'd love to help!