First Time Home Buyer Guide

Congratulations on decided to buy a home. The process of buying your first home can seem confusing at first. You might be asking yourself a million different questions about how to get started and how to buy a home. You are not alone. I have worked with many first time buyers and have gotten hundreds of different questions about the process. I took some time to think about my past clients experiences while purchasing their homes and organized their most common questions and answers into a helpful guide/timeline. While it will not answer every one of your questions you may find it as a useful resource to determine what to work on first and what to expect along the way.

  1. Lifestyle and type of home – Brainstorm what works for you now and down the road. Think long term if possible. What is your current lifestyle and needs for a home? What type of property best suits those needs? Imagine your life past your current situation and what your life may bring in the coming years. Are you are planning to start a family, change jobs, get married, or any other factors. Considering many of these factors may change what or where you are looking for. Based on this conclusion start determining locations that work and a wish list of criteria (bedrooms, bathrooms, size, garage, fireplace, etc.)
  2. How much home can you afford – Online calculators are a great tool and may get you close on what your final payments will be, but they do not take into consideration the full picture of your finances. Many calculators also skip over or leave out closing costs on the loan, inspection costs, any needed upgrades/repairs after closing, prepaid insurance premiums, and local tax rates. My suggestion is look at your monthly budget and decide how large of a monthly bill you are comfortable with. Try to adjust your current budget for this amount to see how it fits in your monthly budget. For example if you think that a $1,500 monthly mortgage payment fits in your budget and your current rent is $900 a month try setting up a savings account and save the difference between the two. Once you are comfortable with a payment amount it’s time to find a lender which will determine what purchase price that amount equates to.
  3. Find an experience lender – Finding an experienced lender that understands your budget and finances and will find a loan product that works for your financial situation is crucial. A lender will look at your financial situation and account for all factors and costs associated with buying a home. A lender typically starts with the pre-approval/pre-qualification process by looking into your credit and finances and determine what you would be approved for overall or a payment amount as suggested above. There are many different types of mortgage products out there for many unique financial situations and having professional guidance will help you make a more informed decision.
  4. Start looking for a home – After laying the proper groundwork in the first three steps you are ready to start looking at homes. By now you should have a good idea where you would like to live, what type of house fits your lifestyle, what you can afford, and a lender pre-approval if the right house presents itself. Many buyers start this step by going to open houses. This provides them with a glimpse on price range in a certain locations. While open houses are a great place to start my suggestion would be to meet with a Realtor and discuss what you are looking for. A great agent will take an hour or two and discuss all of your home search criteria. The agent can then help guide you to neighborhoods/towns that have the types of homes you are looking for in your price range. This also gives you a change to interview the agent to make sure they are someone you would like to work with.
  5. Finding your perfect home. Now that you’re starting to hone your search a little and know what and where you want to be. How do you decide which home is right? Some buyers have an instant A-HA moment and some gradually come to a conclusion. While some homes fit exactly what you want many clients decide on a home through some form of compromise. Making the final decision can be tough and knowing what you are willing to compromise on can help. My suggestion is to always focus on how you/your family will use the spaces in the home and make sure the home will function for them. Considering this along with the right location and features/finishes you will know when the right one comes along.
  6. Time to make an offer – You found the one! Time to write an offer to the seller. This is where your Realtor will guide you through the process of offering and complete your offer for you. Making decisions on offer price vs the current market, contingencies to ask for, and timing of the offer deadlines is where your realtor will be the most help. Your offer to purchase is a contract between you and the seller and controls price, timing, finance availability, inspection rights, testing rights, and much more. Your agent will help you with these decisions and also present your offer to the seller. Once you and the seller agree to terms and everyone signs the offer is accepted. It is then time to start working on the contingencies in the offer.
  7. Financing Approval – Your lender will use your agreed upon offer to start a final approval for your loan based on the actual accepted value of the offer and the location of the home. An appraisal will be requested to assure the bank that the agreed price matches with the actual appraised value of the home. It is best to get your mortgage lender working on this as soon as possible to avoid any delays. Depending on the length of time and the lenders pre approval process your lender will request all needed documentation again. A good lender will keep you informed of the steps during the process.
  8. Inspection – You looked at the home as thoroughly as possible and have a good idea of the overall condition but I would still recommend a professional home inspection. A great home inspector is an absolute necessity. Ask for referrals by friends, real estate agents, or call and interview the inspector on his home and inspection knowledge. Inspectors should be state licensed and have a few years of experience under their belt. They will take a few hours and inspect all visible parts of the home from top to bottom to ensure the house is working properly.
  9. Inspection Results – Hopefully there is no items on your inspection and the home is perfect, but chances are there will be some. Should you go forward with the purchase or should you cancel. It all depends on the severity of the items and what the seller and you can agree to. Depending on how your inspection contingency was drafted during the offer you can try to come to an agreement on the seller fixing the items, crediting you for a future fix, or a price reduction. Discuss this with your Realtor at the time of the offer so you can determine how to draft the inspection contingency and have a plan to address items before they are found.
  10. Closing – About a week out from the closing date your lender will start to producing your final closing numbers for down payment, mortgage closing costs, any prepaid insurance and taxes that will be due at the closing. The transfer of the properties title will typically be handled by a Title company on the day of closing. After an accepted offer the title company works on insuring that the property can be sold and title can properly be transferred from the seller to the buyer. On the day of closing the Title company handles fund transfers from your lender and payment to the sellers. They also file the new deed with the county. Closing is typically a smooth process when the transaction is managed properly.

I hope this has helped you out some. As I explained at the beginning it does not capture all the questions I have been asked as a Realtor. There are many additional small steps in the process of buying a home and each home and client is unique. If I missed one of the questions you were hoping to get answered please feel free to contact me and ask.

Tyler Rufenacht

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