Buying a home can be both exciting and stressful for first-time home buyers. You might alleviate some of the typical anxieties by learning as much as possible about the process. From the first steps of determining your budget and securing your loan to then finding a home, you can proceed with confidence when you know what to expect. It can also help to utilize the expertise of a professional advisor to help you navigate the home buying process.
Before proceeding with a mortgage, it’s important to determine what you can afford. Not only will you be responsible for the monthly mortgage payments, but you will also need to pay for home insurance, maintenance expenses, and possible homeowner association fees. Saving money to pay for your down payment is important. Lenders have different requirements for down payments, but generally, the higher your down payment, the lower your monthly payments will be. Calculate your monthly income to see what you can afford for your housing budget. Lenders typically recommend that consumers’ monthly mortgage and housing expenses not exceed 31 percent of gross monthly income.
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Once you know your budget, it’s time to find a lender and secure a loan. It’s helpful to request a copy of your credit report so you know your credit score. Your credit score can play a role in the type of financing you can get and the interest rate offered to you by a lender. Many buyers approach a few different lenders to explore various financing options. Banks, credit unions, savings and loan associations, and mortgage companies are the different lenders you might use for financing. Once you find a mortgage that fits your needs, you can apply for pre-approval with the lender. To proceed, you will need documents to verify your employment, income, and credit history. The lender will process your information and return a decision about the loan you can receive from this lender with terms and rates. Once you have this paperwork, you can use it to confirm your financing once you get to that point in your search for a home.
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The Home Search
After determining your budget and securing your loan, it’s time to find a home that you wish to purchase. If you have requirements concerning location or features of the home, make a list to use to narrow your search. For example, if you need a certain number of bedrooms or you wish to live in a specific school district, these requirements will determine where you search and which homes you consider. The search for a home may be easier if you use a professional advisor. A real estate agent can be helpful, because this professional has access to databases of homes for sale. The agent can help you find homes that fit your criteria. An agent can also schedule showings to enable you to tour homes that fit your requirements. After searching for and assessing homes, you can narrow your list to make an offer on the home you want to buy.
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Offer and Acceptance
An offer to purchase is a legally binding contract. Your offer will include the price you want to pay for the home, special provisions for the sale, and specific items that you want to be included in the transaction, such as appliances. An offer may also include specific contingencies that must be resolved for the sale of the house, such as inspections. The offer stipulates a date for the resolution of contingencies and a specific date for closing of the sale.
After submitting your offer to the seller, the seller has the option of accepting the offer or counter-offering with different terms. If the seller counter-offers, you will need to review the different terms to see if you want to accept them. If you accept these terms, you can accept the counter-offer and you have a binding contract. If you don’t accept the terms, you can submit another counter-offer with different terms. These negotiations often take time and effort. A real estate agent can provide beneficial assistance during this phase of the process, because the agent has expertise and training in these negotiations.
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Contingencies and Closing
After acceptance of the offer by both parties, the work begins to satisfy any contingencies written into the terms. Typical contingencies include inspections, financing, appraisal, and title search. For the home inspection, a professional inspector will examine and assess the entire home to find any issues. If the inspector finds problems with the structure of the home or in areas such as plumbing or the electrical system, the inspector will present a detailed report about the issues. The buyer then has the option of proceeding with the contract or ending it because of the problems. Once all contingencies are resolved and satisfied, the contract proceeds to closing. The closing often occurs at the lender’s office. At this meeting, the buyer, seller, lender, and agents meet to sign all legal documents for the financing and official transfer of the property between seller and buyer. Payment of closing costs and agent fees are also processed at this time.
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