First Time home buyers
If you’re one of the many first time home buyers at the point in your life where buying makes sense for you, take a moment to congratulate yourself, and continue reading!
A lot of first time home buyers think owning a home is similar to renting but with the benefits, like owning pets and animals or your choice of paint colors. Although this may be true, there is a price attached, like mortgage payments, property taxes, and home maintenance. It’s important that Boise and Southwestern Idaho home buyers are prepared for all sides of a home purchase.
Buying your first home can be one of the most exciting and overwhelming experiences that you will ever undertake. Should you become a "client" or stay a customer? Should I have a home inspection or no home inspections? "Signing Day" vs. "Closing Day"? And all the other confusing real estate jargon!
This first time home buyers guide can help make buying a house a smoother process and experience. These tips will also reduce "some" of the stress and possible surprises that come with buying your first home.
One Surprising Thing You Don’t Need
If you haven’t spoken to a professional mortgage lender or advisor about what it takes to buy a home, you may be under the impression that you need a flawless credit score, a huge chunk of cash saved for a down payment and make a certain amount of money before you can qualify to buy a home. However you may be surprised! Reality is, none of those things are completely accurate.
Lenders aren’t necessarily looking for a perfect credit score or specific dollar amount in your bank account. What they are really looking for is your ability to pay your mortgage, without the potential risk of defaulting on your home loan.
The one surprising thing you don’t need is to spend a lifetime to save up a large amount of money. While there are some benefits to making a down payment of 20%, like avoiding private mortgage insurance (PMI) payments. On the other hand you may be able to buy a home with as little as 3% down, or less.
Closer Than You Think
If you can show a lender that you have steady employment or verifiable income along with other adequate assets, you may be closer to buying a home than you think.
One of the biggest benefits to buying a home is the amount of money you may be able to save compared to renting. Renters often pay over half of their income on rent, leaving little left for savings or their future.
Homeownership may provide some pretty serious financial benefits for the average buyer as well. Homeownership is one of the leading ways to build wealth for most Americans. Some of those benefits include:
As first time home buyers, if the only thing stopping you is the fear that you may not be able to afford a home, think again. You may be closer than you ever imagined.
Tips To Home Ownership Success
1. Write Out a Budget
Most people dislike writing a budget, but for first-time home owners this is a must! You'll need to know how much house you can afford and more importantly, what kind of house payment you can realistically afford each month.
2. Find a Great Mortgage Broker or Lender
We recommend comparing at least two lenders/mortgage brokers to see who will give you the best terms and rates. Many first-time home buyers are just starting out and may not have a large down payment for a home, try finding lenders who are familiar with FHA and IHFA loans. These loans give first-time home buyers like you much better interest rates and require less of a down payment.
To find out about some of our preferred lenders!
Tips To Successfully Finance Your Future
3. Get Pre-Approved for a Mortgage Loan
When you're in the process of buying your first home, the next step is getting pre-approval for your home. Pre-approval is a "good faith estimate" from a lender you choose. This will give you a reasonable idea of what costs you'll encounter with a mortgage loan and how much you can expect to pay as a down payment. This is one of the most important first steps in buying your first home.
When you contact a lender for pre-approval, it is important to have certain information ready. The lender will ask for records which substantiate the information you've provided during the pre-qualification process. These records include pay stubs, bank statements, tax returns, etc.
Tips To Successfully Finance Your Future
Some of the things you’ll need:
Once you complete this step, the lender will provide you with a pre-approval letter that contains a down payment and monthly payment amount for which you “pre-qualify”. A good lender will be able to provide this information to you immediately and correlate that amount to a purchase price. This letter is very important to have on hand when you are ready to make an offer on the home you've selected.
But first, meet with a Realtor® to identify your needs and wants in your home purchase.
Tips On Choosing Your Team
4. Find the Right Realtor®
First time home buyers may be wary of finding a Realtor®. Everyone always wants a great agent, but how do you determine who is a fit for you?
Most real estate agents work with buyer's for free, as a first time home buyers you won't be expected to pay any of the real estate agents commissions. The selling party instead pays a predetermined commission for both the seller's agent and the agent that represents the buyer. A great Realtor® can lower the amount of stress that goes with purchasing something as important as a house and can help negotiate the best deal for you.
That being said, never work with any real estate professional, who wants you to make decisions quicker than you feel comfortable doing. If you get the impression that asking questions about the purchase or process isn't OK, find another real estate professional!
Next – Discover Your Wants and Needs
We’ll sit down together to discover the type of home and area you want to live in, and works best for you. It's important that we identify your needs and wants in a home prior to searching for your dream home.
Some important items to identify include:
With this information, we will narrow the search and zoom in on your perfect home. As you preview homes, your search criteria can change. Its important to relay your needs/wants as they change so that we can select additional homes that meet these needs.
One of the things you probably decided on early in the process is what kind of house you'd like. It was probably the first thing in your head even before you started a budget or talked to a Realtor®.
Now it's time to dream a little! How many bathrooms will your family need? How many bedrooms will your require? Do you need a home office or area to run a home business? Do you want a one or two-story home? Now, consider this, could any of these desired items be a hindrance if or when you go to resell your home later? With your Realtor's help, you can know the answer to these questions.
With the help of your agent, you‘ll have narrowed down the location, features and important considerations you want in your new home and you've put them in their order of importance to you. Now, all that's left is for your real estate agent to provide several possible choices for you.
You Found The One!
Making an Offer to the Seller
Like marriage, home-buying is one part love, one part legal transaction, and starts with a proposal. When you're ready to buy a home, making an offer is important: oral promises are not legally enforceable in real estate sales.
Realtors® will have a variety of standard forms that are kept up to date with the changing state laws.
With all the information you've given your Realtor®, you can both come up with a strategy and write and offer to the seller. We’ll come up with some ideas about how you're going to negotiate an offer to the sellers. Keep in mind your offer should also be contingent on what kind of information you get back from a home inspection.
The Ultimate First Time Home Buyers Guide
Basic Contingencies
First time home buyers should be aware there are a some important contingencies that need to happen before you can “close” on your new home. Generally this period can take 3 - 6 weeks from the time you make an offer 'til you close on your first home.
Other Basic Contingencies
The appraisal will need to be at least the amount of the purchase price, otherwise the lender won’t fund the loan for the home. What did the house appraise for?
Pre-approval process, although you went through your pre-approval loan process, your loan application will now go through the underwriting process and your actual formal approval for the home loan. Have you gotten the final approval on your loan?
Once you go through all the contingencies, you‘ll be on your way to closing on your new home as first time home buyers!
For more on purchasing your first home, check out the 14 steps to buying a home.
Considering purchasing a home?
If so, we would love the opportunity to meet and help you find the right home for you.
