Are you a first-time homebuyer?
We break down what to expect with this simple step-by-step guide to buying your first home.
There’s no easy way around it: Buying a home requires a lot of work.
While the process is typically long and laborious, a little bit of knowledge is all it takes to become a smart, prepared first-time homebuyer. With a little patience, flexibility, and help from an experienced, reputable agent, you’re set up for a relatively stress-free experience.
Your journey to becoming a homeowner begins here. Follow these steps to start your path to homeownership on the right foot.
1. Get your finances in order
The first thing you want to do once you decide to buy a home is to organize your finances. As soon as possible, you need to check your credit score and make preparations to be a good candidate for a mortgage.
Steps to prepare your finances to buy a home:
- Check your credit report for derogatory marks and address them.
- Don’t open any new lines of credit or close any existing lines of credit.
- Pay down or, if possible, pay off existing debt.
- Request higher credit lines (but do not use them) to improve your debt-to-credit ratio.
- Set aside money every month for a down payment.
2. Shop around for a mortgage
You want to educate yourself on the mortgage market before you start shopping around for a home. Knowing current interest rates, understanding what affects your rate, and estimating your monthly payments are crucial to setting your budget.
One way to figure out what type of mortgage will work best for you is by getting pre-qualified or—if you want to take it a step further—pre-approved for a loan.
The benefits of getting pre-qualified or pre-approved:
- It will allow you to more accurately calculate your home-buying budget.
- You can speak to a professional about what a mortgage entails.
- You’ll get an estimate of what type of loan you qualify for.
- It will help you determine your monthly mortgage payments.
- Sellers and agents will take you more seriously as an earnest buyer.
3. Figure out what you can afford
Once you’ve found a mortgage plan that fits—or at least have a better idea of what type of loan you can afford—you should calculate your budget.
Movoto’s Buyer Tip: You should figure out your budget only after you have your finances organized and know that now is a good time for you to purchase. You also want to estimate your costs on the higher side to account for unforeseen costs and moving costs.
The best way to figure out your budget is by adding up estimates of all the costs related to your new home. These costs typically include:
- Down payment for mortgage
- Closing costs
- Property taxes
- Insurance
- Maintenance costs
- Homeowners association fees
- Inspection and application fees
- Real estate lawyer fees
- Regular mortgage payments
4. Find an agent
Theoretically, you can search for a home without the assistance of an agent, but this is not recommended. Having someone who knows your needs, understands the real estate market, and knows how to negotiate will make your search easier.
Ideally, you want an agent who:
- Always acts with your best interest in mind
- Is experienced, reputable, and knowledgeable
- Has a personality that fits your needs
- Helps you understand current market conditions
- Works with you to manage your expectations and guides you to homes that fit
- Negotiates with the seller for you
- Solves any problems that arise
Start your agent search at Movoto to get connected to top agents in your area and utilize your network to get referrals from friends and family. Be sure to speak with a few agents to ensure your personalities jibe before you make a final decision.
5. Define your needs
Once you begin the search, the vision for your dream home will begin to take shape. Some of the details you want to figure out at this time are the location, size, type of home, and condition (whether you want a newly constructed home, an existing one, or a fixer-upper).
Movoto’s Buyer Tip: The location is easily the most important factor in home shopping. Location is important not only for your current needs but for future selling prospects as well. Make a list of the most important things you want in a neighborhood, such as being close to work or near a good school. This will help guide your home search.
Be flexible. As you start to see properties, it will be almost impossible to find a home that checks every one of your boxes, and your list of must-haves will change. Keep an open mind and you’ll find something that satisfies your most important needs.
6. Find you home
With online listings at your fingertips and the assistance of your agent, searching for your dream home is easier than ever. Movoto and other websites give you access to local listings and a variety of quality homes to tour without leaving your couch.
Don’t jump in and buy the first house you look at and don’t be disheartened if you can’t find something that makes you happy after seeing several homes. Visit a number of homes in your price range to see what you can get on your budget, then pick your top homes and check them out again. Visit the homes you’re interested in at different times of the day to see the house and neighborhood at different hours.
7. Hire a good lawyer
As with your real estate agent, you want to hire an experienced real estate lawyer familiar with the home-buying process. Ask for recommendations from friends and colleagues, then check out anyone you’re considering online. Make sure they don’t have any serious complaints against them, that they are licensed, and that you can work well together.
8. Make an offer
When you find a house that could be “the One,” make a reasonable offer based on the comparable homes you’ve seen. Your offer can be below the asking price, but if it’s too low, a seller may reject you outright instead of coming back with a counteroffer. Your agent will advise you on what a reasonable offer is.
If the housing market is in a rut, your chances of success with a lower offer are generally better. Likewise, if the seller is eager to unload the property because they have already purchased another home. However, in strong markets like San Francisco and New York, it’s common for bidding wars to happen and properties to go for over asking.
Your offer should have three basic components, which your agent will help you put together:
- Price: The amount you are offering to purchase the home.
- Terms: These should cover any other financial or time factors relative to the offer.
- Contingencies: These are clauses that will release you from the deal if you come across a problem with the home, such as an issue that comes up during the inspection.
9. Negotiate a deal
If your offer was below the seller’s asking price, you should expect a counteroffer that is between your number and the original. You can make your own counteroffer if the seller’s new price is still above what you’re willing to pay. You will continue to go back and forth until both parties are satisfied.
Be cautious about how much you haggle the price. Too many counteroffers could annoy the seller and put an end to the negotiation.
10. Inspect your home
Once you and the seller have reached a deal, you’re in the home stretch. However, it’s important that you take the time to have the property professionally inspected to ensure your investment is exactly what you understand it to be.
An inspection is your last chance to surface any problems relating to the home that weren’t explicitly stated in the disclosures. You may believe everything the seller has told you about the property, but this is your opportunity to have an unbiased professional give you feedback about the home’s condition.
Here are the key discoveries from a professional inspection:
- Damage to the structure, roof, or foundation, which could occur from poor construction, water damage, shifting ground, or mold.
- Any issues with the plumbing, wiring, heat, gas, and other utilities.
- The estimated cost of repairs to fix any damage that the inspector finds.
Don’t be too concerned with small things that appear in the report. Don’t sweat any easy fixes like loose doorknobs or faulty light switches that are listed in the report. It’s the inspector’s job to mark all issues no matter how small.
11. Finalize your mortgage
If the inspection yields positive results, it’s time for you to submit the application—along with an application fee—for your mortgage. This should be relatively simple if you’re already pre-approved. Ask the lender to lock in your rate until you close on the house.
Movoto’s Buyer Tip: About a week after you submit your application, check in with the lender to make sure there’s no missing paperwork. You don’t want a mistake on your part to hold up the application’s evaluation.
12. Prepare to close
In addition to gathering all the necessary paperwork, you should stay in touch with all parties involved in the sale to deal with any potential problems as they arise. Prior to closing, you should:
- Conduct a final walkthrough with your agent.
- Confirm that you have all of the paperwork.
- Confirm that you have the proper funds for closing.
- Stay on top of your finances and avoid making any large purchases.
All that’s left to do is sign the paperwork for the mortgage and sign and verify all documents during the closing. Then you can finally call your new property home sweet home.
