When getting into an undertaking like buying a home, we want to do our research. Agents will help us and walk us through to the end, but we should always stay informed with the intent of understanding.
What should you know before you get into the process? The basics, and we can deal with the rest as it comes so as to not mentally overload ourselves and get process paralysis. So, let's walk thru some points that will have you feeling confident when you're standing with your Realtor to make your first purchase.
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Prep Work
The most critical part of the process is the purchase, so make sure you understand the budget and it's implications. If you used to rent, owning a home is much different. Beyond financial responsibility, it's a property you're now responsible for handling. There are alternatives which remove some of the managerial burden, like condos, and the point remains the same: do your research, find what's best for you, and make sure it works logistically as well as emotionally.
Your Down Payment
You'll want a down payment saved up. As a first-time homebuyer you might qualify for a down payment as low as 3.5% with an FHA loan, even with that knowledge you will want to save more than you might guess. That's why you do your research, know which lender/loan you'll want to use, and move from there.. Industry standard is 20% down, which is a lot of equity to sink into something so far from liquidity. Study your options.
Save for Closing Costs
Sometimes sellers will help pay closing costs as a move of good faith towards buyers. We suggest having no expectations, but remember that if you have a good agent they're capable of nudging deals for you. The closing costs usually clock in around 2-5% of the amount spent on the property, so if you're saving 4% for an FHA loan down payment, you'll want something closer to 7.
The Move
Account for the truck/moving company, depending on your situation.
Improving Your Credit
The better your credit, the more you'll find the deal leans in your favor. To see our articles on credit scores, CLICK.
Choosing a Mortgage
As a first-time homebuyer, research FHA loans and their alternatives. You probably don't have to sink all your liquid equity into a one family. You could get a fourplex, live in one unit, and earn double what your mortgage costs every month. Research your financing options.
Conventional Loans
Those FHA loans are government backed loans from qualified lenders. These conventional loans are from private lenders, and though you can find deals for as low as 3% down, the prerequisites to secure the loan are less lenient.
FHA
We have another article dedicated to FHA loans.
VA
VA loan programs offer terms for 0% down. That's right. V.A. stands for Veteran Assistance. If you qualify, it's potentially a great move.
USDA
If you live in a rural area, the USDA may offer you a loan with 0% down terms.
First-Time Buyer Assistance
There are a lot of opportunities for first-time homebuyers to finesse the system. The government wants to make it easy for you to commit to these huge purchases that ensure you will stay where they want you. If you're smart, you can shift the situation into your favor, so continue your research. Speak to the experts and consider all of your best options.
Pre-Approval
There are many agents who wait to work with clients until they have a pre-approval letter secured. Some agents won't even let you tour a home without one. Beyond screening buyers, it's massively helpful to the whole process knowing that the person interested can buy it. Once you have an idea about how you want to fund the purchase, you can get a pre-approval letter from your lender that says "we're ready to commit ___ amount of dollars."
Finding Your New Home
You can start researching on your own while your agent taps their sphere. You can contact us at Castles Unlimited and we will pair you with a Realtor specialized in what you're looking for.
Where To?
The location is critical, as well as the actual feel of the area. We can drive thru an area and know nothing about it. It helps to have someone with intimate familiarity with the area. At Castles Unlimited, we've held it down in Newton Centre since 1985. We're experts in the Greater Boston Area, and excited to get you into your new place.
Buying Your First Home Tips
You've got a wealth of advice at your disposal over at BUYER TIPS.
Home Inspections
Home inspectors come in and check the whole house for anything you'll want to know about. They ensure the home is in good condition, or at least good enough to sell, and will give you the thumbs up when all is clear. If things go otherwise, your seller may agree to lower the price, or pay to have something fixed. You were allowed to spectate those inspections before Earth turned to a masquerade ball, but it's worth asking about.
Negotiations
We are in a seller's market, and bidding wars are prevalent. That said, negotiations are always on the table, even when "they're not." We're all human. If you are unfamiliar with the market, which you probably are if you're reading a first-time homebuyer article, we'd suggest letting your agent do the heavy lifting. If you're business savvy yourself and think you could do a better job, then outsource. Screen agents, find one you see some of your own talent in, and set them to the task.
Home Insurance
Yea, the fun part. Enjoy insurance agents. (CLICK)