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First Time Home Buyer

First Time Home Buyer, home buying, how to hire realtor, top realtor

Home Buying Process

15 Steps to guide the first time home buyer through the home buying process.

First Time Home Buyer Guide

Whether or not you are a first time home buyer or a veteran, purchasing, selling or refinancing, home buying can be an overwhelming process. Learn how the process works from beginning to end. Explore how much of a home you can afford. Avoid common mistakes made by first time home buyers and hire the right team to be your advocate. Here is how it all works!

Home Buying, Real Estate, Realtor, Farmingotn Valley, West Hartford Real Estate

1.    Clean up your credit!

Bad Credit Report

Before you start shopping, clean up your credit and save for a bigger down payment so that you’ll qualify for a better mortgage rate and avoid costly fees. A good mortgage broker will be able to help with that. Without having the ability to obtain financing you will be wasting your time looking at homes. It can take some time to do this. Once you find out your credit is good or you have cleaned it up be careful what you purchase in the time prior to buying a home. Avoid opening new accounts or making large purchases (like financing a new boat or car) right before you apply for a mortgage.

 

2.    Get Pre-Approved!

It is extremely important to have a lender verify your income, assets and credit and give you a pre-approval letter. Make sure you understand the difference between getting pre-approved and pre-qualified.  Pre-qualified means you simply gave information about your financials to a lender and they gave you a rough ballpark figure of what you can afford. Pre-approval means a credit check was run and you have given paperwork regarding your financials to the lender. Mortgage loan fixed rate real estate realtor home buying first time home buyer

Sellers want to make sure that you have been pre-approved before allowing their home to be previewed and entering into a contract. The benefit to you as a buyer is that it gives you an edge with sellers looking for a seamless and quick sale.

Your mortgage broker should give you a clear understanding of FHA loans (government backed loans), fixed conventional loans, and variable rate loans. Understand your options and find the best rates.

The Federal Housing Administration (FHA) – insures the loan, so your lender can offer you low closing costs and low down payments.

 

 

 

Another added benefit is that if you want to make your home more energy efficient like adding Solar or Wind Technologies you can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.Objections to Solar

Technologies you can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.

 

 

 3.    Set your budget and stick to it!

A mortgage is likely to be the largest and longest loan of your life. As a first time home buyer, you’ll want to be in the best financial shape possible to qualify for a good rate and get the right loan for your needs.

The amount of mortgage you can obtain is usually based on a debt to income ratio. What this means is that all your monthly home payments should not exceed 36% of your gross monthly income.

Just because you qualify for a certain amount it is not suggested that you buy the most home you can afford. You know your budget and you should stick to it. Don’t overspend! Many buyers fail to take into account closing costs, property taxes, home owner’s association fees, homeowners insurance, and PMI.

If your down payment is less than 20 percent of the selling price,  you may end up paying PMI insurance that is required by the lender which protects the lender in case you default on your loan.  In short, your mortgage payment can increase 20%.
Once you find a comfortable payment and a good program all the hard work you have put in will now pay off.

4.    Have a clear idea of what you want and need!

So many people believe that there is a “perfect dream home” out there waiting for them. The reality is that there is not one home but many that can suit your purposes. You will likely own more than one home in your lifetime so be happy with your investment. No matter what the price range it is unlikely that you will ever get everything on your dream home wish list.  

Some new buyers fall in love with a home and have a tendency to overlook the defects of a home and think it will be easy to fix at a low price. Others fall in love with the décor and often find on moving day that the empty home they just purchase lost some of its charm. It is important to look beyond the fancy photography and furniture and buy a home with good bones, one that is a sound financial investment and fits your family’s needs.

Train near house

Once a young couple fell in love with the first home they saw at an open house. They wanted to buy it the next day. After previewing the home for them I realized that this property had very little of the requirements they needed and the beautiful décor was influencing them, not to mention the train that ran through the back yard! Having young children, this was not a good choice for them. I told them that we need to look at several more homes and if they still wanted this one then so be it. They ending up purchasing a different home and they were grateful for the guidance.  

5.    Get your team in place

Teamwork, real estate team

 

Start looking for a competent real estate agent from a reputable company, a real estate attorney, a great home inspector, and a local mortgage broker.

Hire experienced professionals that will be true advocates for you. Although today the internet is full of information to guide you, the need for personal help may be surprising.  A good buyer’s agent can help you find listings and guide you through financing, inspections, and negotiations. Negotiation skills are extremely important!

6.    Choose the right real estate agent for you:

Top 21 Questions To Ask When Interviewing A Realtor!

There are many good agents out there to work with and you want to choose an experienced agent who is actively following the market daily and available to show you new listings when the arise. Chemistry is important as well. You want to choose someone who is trustworthy, reliable and likable. They should always have your best interests in mind and protect your financial interest.

Be clear how you would like to be communicated with and how often. Don’t be afraid to ask questions.
You will be spending a lot of time with this person over the next few months and it should be pleasant and fun!

Should I just work with listing agent?

Most sellers list their homes through with a company and have hired an agent to market their home. These agents work for the seller, not you.
You need an “exclusive buyer agent that will represent you though the home buying process. Understanding Buyer/Broker relationships when hiring an agent is very important! . You should understand the duties and responsibilities of the parties, what services will be provided to you, and what will be the cost to you, if any.

realtor real estate buyer broker contract attoney buyer representation

Should I hire a part-time agent vs full-time?  Local agent or not? How do I know they are qualified?

You want to choose a full time experienced professional agent who is actively following the market every day and readily available to show you new listings.
Finding a neighborhood expert is especially important in areas where moving a block can raise or lower the value of a home by $120,000. Local agents are aware of changes in the community and properties that will be coming on the market.

How important are technical skills when hiring an agent?

Having an agent that is technically savvy, business minded and great a negotiator is a must in today’s world of internet marketing. An agent that knows how to run a book of business, stay on top of transactions and important dates is a must. Be sure to read agent reviews and testimonials from past clients.  Clients today want an immediate response and information at their finger tips.

Make sure the agent is licensed by the state and belongs to the National Association of Realtors and has agreed to abide by NAR’s stringent code of ethics.

Bottom line is you want to choose someone who is trustworthy, reliable and likable. They should always have your best interests in mind and protect your financial interest.  You will be spending a lot of time with this person over the next few months and it should be pleasant and fun!

7.    What kind of attorney do I need?

I always suggest that you get a lawyer who specializes in real estate on board right away to review your contract before it is fully executed. A lawyer can help you avoid some common problems with a home purchase or sale and will be aware of any changing laws.  Buying a home will probably be the largest and most significant purchase you will make in your life.. A real estate lawyer is trained to deal with any special problems that may arise. You should never use the seller’s attorney at a close. They represent the seller’s best interest not yours.

8.   Get educated on what is out there to buy!

Today’s buyers have information at their fingertips and many start their home search on the internet.  This is a great place to start keeping your budget, location preference, and lifestyle in mind. You can get ideas of what properties are going for but keep in mind that computers comparing homes don’t hold a candle to a market analysis report produced by a LOCAL real estate agent. Your agent should be able to show you what the fair market value is for the homes you are interested in.

I always suggest driving by homes you are interested in or perhaps taking a walk nearby before setting up showings. Photos can be very deceiving. Try to be flexible when looking for your dream home. Have your priorities of “must have” and “nice to have” in order.  If you are buying with another person be clear that you have the same goals in mind i.e.: if one wants a fixer upper and one wants “move in condition” it may be impossible to rectify the two.  Attend some open houses.

9.    Search for a home

Your first step here is to figure out what town or neighborhood you want to live in.  If schools are important to you be sure to check out the board of education website for test results, graduation rate etc. Buying in a town with a good school system will help your home retain or increase its value.  

If you have done your homework in the previous step you should have a good idea about the real estate market in the area. For example, if homes are selling fast and over asking price, this shows the area is desirable. Buying during the holidays can be a great way to find a bargain.

 

10.    Make an offer

Handshake

Once you find the house you want, move quickly to make your bid. Once you have hired an agent to represent you, then get advice from him or her on an initial offer. If you’re working with a seller’s agent, devise the strategy yourself and you should have signed a dual/designated agency form.

Your offer will be dependent on how much you really want the house. Is it everything you have dreamed of? Then don’t low-ball. The seller may be insulted and give up in disgust. Your agent should be trying to get you the best deal without having you lose the house to a better offer. Remember, that your leverage depends on the market. In a slow market, you’ve got an advantage, in a hot market, you may have none at all.

Be creative about finding ways to get the house at the price you want and satisfy the seller’s needs. Maybe changing moving dates or having them throw in laundry appliances if you meet their price.  Your agent can guide you there as well.
Once you reach a mutually acceptable contact you should be able to close within 45-60 days from acceptance of the offer.

11.    Enter contract

Have your lawyer or your real estate agent review this document to make sure the deal is contingent upon:

1. Your obtaining a mortgage
2. A home inspection
3. Subject to your attorney’s review
4. The property must appraise at sale price or higher.

You also need to make a good-faith deposit — usually 1% to 10% of the purchase price — that should be deposited into an escrow account. The seller will receive this money after the deal has closed. If the deal falls through, you will get the money back only if you or the home failed any of the contingency clauses.

It is very common to experience “buyer’s remorse” after an offer is made. This is a huge investment and an emotional one as well. So now you might feel it is time to get some 2nd opinions and so you bring friends and relatives to view the property and ask for advice. They have the best intentions in mind but they have not done all the homework you have comparing homes, schools, neighborhoods, prices. They are not real estate experts. So trust that you have sufficiently done our homework and are working with a trustworthy agent that has your best interest in mind.  

12. Secure a loan

Contact your mortgage broker or lender and let them know you are under contract. Let them know what type of loan you are going with and if you will pay points (upfront interest to lower the rate). You may be expected to pay for a credit check at this point, and for an appraisal of the home. Most other fees will be due at the closing.  Look into taking out a homeowner’s insurance policy, too. Most lenders require that you have homeowner’s insurance in place before they’ll approve your loan.

13.    Hire a reputable home inspector?

Home Inspector

The best home inspectors are typically those who have experience in the building industry. You want to work with an inspector who understands the basics of local building codes and requirements. They may be members of National Association of Home Inspectors, the American Society of Home Inspectors or the International Association of Certified Home Inspectors. Many states also have statewide associations, which are acceptable alternatives.

In addition to the appraisal that the mortgage lender will make of your home, you should hire your own home inspector. An inspection costs $1,000 for a big job and takes two hours or more.

You should be present during the inspection, because you will learn a lot about the house. If the inspector turns up major structural problems, like a roof that needs to be replaced, then ask your lawyer or agent to discuss it with the seller. 

You can remedy this in a few ways: You can ask the seller to fix the problem prior to the closing, or deduct the cost of the repair from the final price. If the seller won’t agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract. Read more about how to select a home inspector here.

14.    Close the deal 

Your attorney will give you the final HUD Settlement Statement from your lender that lists all the charges you can expect to pay at closing. Review it carefully. It will include things like the cost of title insurance that protects you and the lender from any claims someone may make regarding ownership of your property. The cost of title insurance varies greatly from state to state but usually comes in at less than 1% of the home’s price. The closing is usually done at the buyer’s attorney’s office where all the paperwork will be signed.

Make sure to call and turn on the utilities, hire a mover, start dreaming about MAKING YOUR HOUSE A HOME!

Make a house a home

If all of this seems overwhelming then skip steps 1-14 and go straight to Step 15! 🙂

15. Call me! 860.966.2112

Make the right move

 

 

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