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Are You A First Time Home Buyer?
If you’ve never gone through the process of purchasing a home, it can be quite overwhelming for a first time home buyer. For some, it may not be as easy as one thinks, for others, it may not be quite as hard. What is certain, buying a home is probably the biggest purchase of your life.
I have compiled a list of some tips that can be helpful as to what needs to be done first before looking at homes and then go through the process after you find your home.
Before Looking For Your Perfect Home:
- Start saving for a down payment
A down payment plays an important role when buying a home. It is a percentage of your home’s purchase price that you pay upfront. A down payment of 20% is common, however, many lenders may offer less and sometimes even as low as 3% down for first time home buyers. Talk to several lenders and see what they can offer. But remember, if you put less than 20% down, it may mean higher costs and also paying for private mortgage insurance. Play around with this handy dandy mortgage calculator and it will put into perspective what your monthly note will be with a percentage down:
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- Check your credit
Your credit score is a key factor when trying to take out a mortgage loan. It will also help determine the interest and possibly the loan terms. Credit Karma is a free source to check credit. Take care of any old debt that may be dragging your score down. If you are serious about purchasing a home, do not make any large credit purchases before or during the home-buying process. Also, it’s a good idea not to open a new credit card account because every time this is done, the lender runs a “hard inquiry” and this brings your score down.
- Talk to a lender
Not only will you need to bring a down payment to the table at closing, but there are also closing costs involved. Your lender will give you a Loan Estimate that includes these costs. Remember, it’s only an estimate. Talk with a good lender. Call and interview several to compare rates.
- Get a Preapproval letter
You must get a preapproval from your lender before you can offer on a home. This preapproval verifies the borrower’s information to determine exactly how much the lender would be willing to lend.
- Choose a Realtor®
Choose a Realtor® that has knowledge of the market area. Check for their license and find out how experienced the agent is. Interview several agents to see which one fits you and hopefully, you will have a lasting relationship with him or her. Hey, first time home buyer! You are on your way to look for your new home!
After You Find Your Home:
- Put in an offer with a reasonable closing date
As a first time home buyer, you may want to throw around all kinds of numbers or ask for unreasonable demands when making an offer. Listen to your Realtor® and his or her suggestions. They know the market and what makes a good offer. Most lenders can close within 30 days provided they have all the financial information.
- Offer with an earnest money check and an option check
Be prepared to write two checks…and earnest money check and an option fee check that is submitted with your offer. Earnest money is a good faith act that shows you intend to buy the home and shows the seller that you are serious. Earnest money is typically 1% of the offer price on the home. For example, if you offered $200,000, the earnest money check would be $2,000. This is payable to the title company and remains in escrow until closing. If stipulated in the contract, you will get this money back towards closing costs. If you are unable to obtain financing within the period in the contract, or if you elect to back out during the option period, this money will be refunded back to you. The earnest money will not be refunded back if you decide to back out of the contract for any other reason after these periods. The option fee check is payable to the seller and gives an option to terminate the contract within a certain amount of days. Typically this is 7 or 10 days and is .01% of the offer price. For example, if you offer $200,000, the option check would be $200. This fee may also be applied to your closing costs, however, if you should change your mind about purchasing the home, this fee will not be refunded.
- Get an inspection
If your offer is accepted, you will use the option period to hire an inspector and work negotiations through your Realtor® with the listing agent. Home inspections normally run $200-$400.
- Have the home appraised
Your lender will arrange for the appraisal which normally costs around $300.
- Staying in touch
Your Realtor® will be staying in touch with your loan officer and the title closer as well as with you to make sure everything is moving along smoothly.
If all goes well with the title company and the lender, it’s time to close! The magic words from your lender are “CLEAR TO CLOSE”. Your Realtor® will schedule the closing with the title company. Make sure you discuss with your lender how much money you will be bringing to the table and what form of payment you will use. It should be either a cashier’s check or a wire transfer. It’s important to protect yourself from wire fraud. As a first time home buyer, know the signs of wire fraud. There will be many documents to sign and once funded, the keys will be handed over to you.
I hope this information helps for all you first time home buyers. Good luck and happy hunting!
As a licensed Realtor® in Texas, Tammy’s business is built on dedication, communication, determination, and trust. She has the ability to cater and adapt to all of her client’s real estate needs.
Professional Designations and Education
- Certified Home Marketing Specialist (CHMS)
- Seniors Real Estate Specialist® (SRES)
Memberships and Associations
- National Association of Realtors (NAR)
- Houston Association of Realtors (HAR)
- Texas Association of Realtors (TAR)
- Lake Houston Area Chamber of Commerce
- Greater East Montgomery Chamber of Commerce