The path to home ownership can be daunting, especially to first-time buyers. There’s no shortage of regulations, documents, and deadlines, and transactions often fall through at the last moment. Buying a home can be frustrating.
Our goal here is to provide you with a roadmap. We’ll take you through the process of purchasing a house, starting at the beginning. You’ll learn to identify your preferences; determine how much home you can afford; and decide on a mortgage loan that suits your circumstances and tolerance for risk. From there, we’ll help you get started looking at homes for sale with the goal of making an offer.
The following should not be considered an exhaustive tutorial. Instead, consider it an overview. It will give you a bird’s-eye view of the entire Buying A New Home process.
Determine Your Needs And Preferences
Not everyone buys a house for the same reason. Some purchase a home because their families need more room. Others are preparing to make the transition from renting to owning. Still others want to move to certain locations, such as neighborhoods near their jobs or well-regarded schools. Identify your reasons for looking at homes for sale.
Think about square footage, and the number of rooms you’ll need. Consider the services or businesses you’d prefer to live near (e.g. train station, shopping mall, etc.). Thinking about these details in advance will help you find the house you want.
Review Your Financial Circumstances
Request a copy of your credit report so you’ll have a good grasp of your entire financial picture. Then, consider how much money you have available for a down payment. Since the most recent real estate market collapse, lenders are tightening their rules. You may be required to put down 10 percent or more of the purchase price.
Also, think about how large a mortgage payment you can absorb. Don’t forget to allocate funds for maintenance, repairs, property insurance, and a host of other expenses that are a part of home ownership. Once you have a good idea, you’ll need to hunt for a mortgage loan.
Decide On A Type Of Mortgage Loan
A traditional loan usually has a duration of thirty years, and a fixed interest rate. The lender will likely require that you put a down payment equal to at least 10 percent of the house’s purchase price. Some lenders require a higher percentage.
Another form of mortgage loan is an adjustable rate mortgage, or ARM. The rate moves up and down with prevailing market interest rates. These loans have proven dangerous for homeowners who failed to plan properly for a rate increase.
Some mortgages can be shifted from the current owner of a house to the new owner. The new owner essentially assumes the loan. These loans are often attractive since there are seldom points to pay, and the interest rate is often below market rates.
Also, check with the Federal Housing Administration (FHA) to see whether you qualify for a special loan. These are designed to help first-time homebuyers and low-income buyers purchase homes.
Search For Suitable Homes For Sale
It’s a good idea to hire a real estate agent to manage the details of buying a house. This is especially true for first-time buyers who are unfamiliar with the process. Your agent will narrow the list of homes for sale based on your preferences and needs. Once you find a suitable property, make an offer to the owner (through your agent).
Most sellers will want you to place an earnest money deposit on the house while they take it off the market. The deposit should be held in an escrow account. It is typically applied to the agreed upon purchase price of the property during the close.
You’ll need to hire a professional, licensed inspector to thoroughly inspect the home. He will check for termites, plumbing and electrical problems, issues with the foundation, and many other potential problems. Don’t skip this step.
You will also need to have the property appraised by a licensed appraiser. Your mortgage lender may require you to choose from a list of approved appraisers in your area.
Closing On Your New Home
Finally, with the home inspection completed, the appraisal delivered, and all last-minute items addressed, you’ll be able to close on your house. The necessary documents are signed to transfer title, and the funds held in escrow are released to the seller.
The home-buying process we’ve just described includes many details we did not mention. But if you’re a first-time buyer, it does give you high-level perspective that will prepare you for the road ahead.
By: Lawrence Reaves