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First Time Home Buyers Guide to Demystifying the Home Buying Process

July 30, 2021

With so many factors and components involved with purchasing your first home, the buying process can seem like an overwhelming and stressful endeavor. First-time buyers who might hold some trepidation with this sort of investment must realize it does not have to be as scary as it seems. With the proper preparation and following some simple guidelines, it can be a relatively painless procedure that can give you the best possible outcome when purchasing your dream home. Let's look at what you can anticipate from the buying procedure itself and what various steps, information, and tools you can use to make your journey to becoming a first-time homeowner that much easier.

Figure Out Your Budget & What You Can Afford

Before diving into the deep end of the housing market, it is essential to take an authentic assessment of your income and expenses to better gauge how much you can afford for a new home. By figuring out your resources right from the start, you won't waste your time looking into houses that aren't in your budget or homes below your ideal price level. Do an audit of your finances by looking into your savings, checking your credit, and reviewing your spending habits, including everything from food, utilities, entertainment, activities, debt, and any other diversified items.

After calculating your financial means, you can then evaluate what type of down payment and monthly mortgage fee to budget for and what kind of loan procedure you will use to finance your new estate. It might be helpful to use a mortgage affordability calculator to assist you in your search to find an affordable price range.

Explore First-Time Home Buyer Programs

Although financing a home can be a daunting experience, there are abundant first-time homebuyer programs that can ease the process. Most states, cities, and counties provide no-interest loans or grants to provide competitive mortgage rates, down-payment assistance, and closing costs for first-time buyers. Some of the most common forms of relief include:

  • Low-Interest Loans - Must be repaid over a specific period of time.
  • Zero-Interest, Deferred Payment Loans - In most cases, no payments on down payment and closing costs are due until the property is sold, the mortgage is refinanced, or the mortgage approaches the end of term.
  • Zero-Interest, Forgivable Loans - Loans are excused over time, and money doesn't have to be repaid if the borrower owns and lives in the home after the time is over.
  • Grants - An outright gift of money.

Several government loan programs can be of some service to first-time homebuyers, making it easier to buy a home with zero or little down.

  • FHA (Federal Housing Administration) loan - If you have a smaller amount of savings or a low credit score, you may be able to qualify for this type of loan for as little as 3.5% down.
  • VA loans - Mortgages backed by the U.S. Department of Veteran Affairs offer 0%-down loans for service members, veterans, and surviving spouses.
  • USDA loans - The U.S. Department of Agriculture offers 0%-down loans, and you may receive 100% financing in designated rural areas

What Type of Home Suits You

Decide what type of home will work best for you and your homeownership goals as you assess all your options when purchasing residential real estate. Whether you are looking into a conventional single-family home, a townhouse, a duplex, a condo, or a multi-family building, you must weigh the pros and cons of each property. By determining the type of home and where you see yourself and your family in the years to come, your decision will become easier to make.

This investment will be one of the most significant purchases in your life, and although you must be flexible, you deserve to have your needs met as closely as possible. Make a list of your primary desires, such as the size of the home or neighborhood, and work your way through more minor details like room layouts and appliances included. By looking through established real estate websites, you will get a sense of prices and available properties that offer essential features for you.

Preapproval For A Mortgage

Once you've figured out your budget and how much you have saved for a down payment, the next step will be to get a pre-approval letter from a lender or mortgage broker. Using the information you gave them will assist them in finding the best potential loan for you and give you a better idea of your monthly payments and the closing cost. It is vital to receive this letter before you put an offer on a house because it shows how much money a mortgage lender has approved you to borrow based on your income, savings, and credit. It proves that you are qualified for a loan to purchase a home.

Finding A Real Estate Agent

Now is the time to find the right real estate agent to guide you through the homeownership process. A loyal and hard-working agent will help you locate the homes that suit all your needs and are within your price range. A good agent will assist you every step of the way, from viewing homes with you to negotiating the purchase process, assisting you in getting a loan, making an offer, or finding other solutions for your particular situation.

Making An Offer and Beyond

Once you have narrowed down your search and have found the perfect home, your agent will help you make an offer that is competitive but fair. The seller will either accept your offer or deliver a counteroffer. When both sides finally agree, you'll be under contract.

Following this agreement, you will want to make sure the home is in the best possible condition, and you will have a trained professional do a home inspection of the property. If everything is in working order, next, you will get an appraisal to determine the property's value, so the lender is sure they are not lending more money than the property is worth. Once the loan has closed, it's important to obtain homeowners insurance to secure and ensure your home structure, possessions, and liability should anything happen on the property.

Closing Time

Once you feel comfortable with all of your decisions, it's time to sit down and go over the closing paperwork. A successful closing calls for everyone and everything coming together with the same plan on the same date, with figures and numbers that match identically. It's time to grab that pen and sign on the dotted line. Phew, congratulations, you are now a homeowner!

With the right real estate company by your side and educating yourself about the home buying process beforehand, your first experience will be a less stressful situation. It is also more likely you will get the home you desire for a price you can afford. Good luck!