Buying your first home is an exciting milestone, but it can also feel overwhelming. Doing your research beforehand and understanding the home-buying process will set you up for success.
Save for a Down Payment and Closing Costs
The first step towards buying a home is making sure your finances are in order by saving up enough for a down payment and closing costs. A good guideline is to save at least 3.5% of the home’s purchase price for a down payment if you qualify for an FHA loan.
On a $200,000 home, that’s around $7,000. Many conventional loans require 10-20% down. Plus, you’ll need a few thousand dollars more saved for closing costs like home inspection fees, appraisal fees, and more.
Get Pre-Approved for a Mortgage
In the process of saving, an essential early step is to get pre-approved for a home loan. Pre-approval from a lender does a deep dive into your finances to determine a preapproval letter with the maximum mortgage amount you are qualified to borrow.
Being armed with this letter when you make offers lets sellers know you are a serious, qualified buyer whose loan is likely to close smoothly.
The pre-approval process is free and doesn’t lock you into that lender. So shop around and compare options on rates, fees, loan types, and more before deciding on your lender. The people at Colorado-based Mortgage Maestro say that leaning on an experienced mortgage broker can help simplify this process.
Select Your Real Estate Agent
A good real estate agent will soon become your most trusted guide through the home-buying journey. Interview several agents to find one you connect well with and who has in-depth knowledge of your desired neighborhoods along with great reviews.
A full-time, experienced agent will have insights into market trends, pricing, negotiation tactics, and the nuances of contracts that first-timers may miss. Lean on their expertise so you don’t overpay or buy the wrong property for your needs.
As you get closer to making offers and going under contract on a home, it’s time to get fully approved and secure financing with your chosen lender.
Shop mortgage rates again with your preapproval in-hand to snag the best deal as rates and your finances may have shifted. Once your offer is accepted on a home, lock in your interest rate so it doesn’t go up before closing.
Submit Competitive Offers
Ready with pre-approval and a real estate agent? It’s time to tour available homes listed for sale that meet your search criteria.
Once you find “the one”, be ready to make a strong offer if you want it off the market. Real estate markets fluctuate between buyer and seller advantages, but it pays to make your first offer competitive if you love the home.
Cover the Due Diligence
If you are under contract with your offer accepted, take those next 30-60 days before closing not to celebrate, but to tackle essential due diligence to confirm you want to follow through with purchasing the property.
This includes inspections, appraisals, securing insurance, and title work. Once this has been done, it’s time to close.
Buying a home is a major decision that needs thorough preparation and an understanding of the process.
First-time homebuyers put themselves in a strong position to land the home of their dreams by saving for a sufficient down payment, getting pre-approved for a mortgage, finding an experienced real estate agent, securing competitive financing, conducting due diligence on the property, and closing on time.
With keys in hand and paperwork signed, you can truly make your house a home.