With depressed real estate markets across the country and an often confusing process, purchasing a home is a much scarier prospect than it used to be for first-time home buyers. Knowing the steps to take to get you to your goal is essential. Here is a road map to help you prepare to buy your first home.
When it comes to buying a home it seems like you have to put the tail before the dog. In other words you should figure out how much house you can afford and a lender who will loan you money at an attractive rate with good terms before you go house hunting. Some people are lucky enough to have generous parents or grandparents give them the cash they need for a down payment while others find a seller willing to help them with closing costs. But if you’re not so lucky and have a tight budget, consider government programs. The United States Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) backs low-cost first-time homebuyer loans. If you’re handy and don’t mind a fixer-upper, consider HUD’s 203(k) program that provides one loan that pays for both the house and the work needed to fix it. As a first-time homebuyer you should take your time when it comes to shopping for a loan because rates and terms vary among lenders.
Once you’re pre-qualified for a loan and know how much house you can afford, it’s time to start house hunting. Many real estate agents advise making a wish list of features a home must have in order for your family to live there. Some families feel they need at least a two-car garage or a walk-out basement while others have different priorities like walk-in closets in every bedroom. Whatever your preferences, consider your wish list an exercise in dreaming where you include everything your ideal home would have regardless of what you think you can afford. When you’re finished go back over it with more realistic eyes, crossing off extravagant items like tennis courts and an in-ground pool. Once you’ve whittled down the list you can choose the items that you have to have, items on which you refuse to compromise. Now you’re ready to compare your list with your partner’s. Whatever shows up on both lists are your “must-haves” and items the two of you can’t live without. This gives your real estate agent an idea of what homes to show you and which ones to exclude.
You’ll also want to consider the neighborhood or part of town that’s most attractive to you especially if you have children. Buying a home that’s close to work and your children’s school is ideal and makes commutes shorter and less expensive, putting more money in your pocket so you can pay off your mortgage that much sooner.
Once you’ve decided on areas that you consider good locations, you’re ready to choose a real estate agent. And there’s no substitute for word of mouth. Ask your friends, family and neighbors for their recommendations. A good real estate agent will happily put your wish list to good use, searching the Multiple Listing Service to find your dream home.
Okay, so what do you do when you’ve found the home you want to buy? Prepare yourself for some ups and downs because it’s not always smooth sailing. First, determine how much you want to offer and make an offer. Your agent may advise you to make your highest and best offer if there’s no time to bargain in a fast moving market or to make a low offer, planning for back and forth negotiating in a slow market. This is where agents excel and are your best ally. If your offer is accepted, order your home inspection and homeowner’s insurance immediately so that you can adhere to contract time limits.
Being adequately prepared and working with an experienced real estate agent is essential to smooth real estate transactions. There’s no place like home.