Purchasing a house is perhaps one of the biggest purchases many make in their lifetime. Research puts the United States homeownership rate in the second quarter of 2022 at 65.8%, a slight increase from 65.4% in 2021.
Of this 65.4% in 2021, 34% were first-time home buyers. While being a first-time buyer can be both an exciting and frightening experience, the statistics above prove that you are not alone.
This article provides a step-by-step guide on buying your first house, avoiding costly mistakes, and making the best out of your home-buying experience.
Tips on How to Buy your First House
Having decided to purchase your first property, these are a few tips you must know and consider when buying your property:
Find a Lender
The choice of mortgage lenders or financing institutions is a major step in purchasing your first property. This step must be handled thoroughly as its impact lasts for several years after the purchase has been completed.
When choosing a lender, it is important to consider their interest rates, down payments, additional fees, and repayment periods to ensure that these terms are favorable and suit your needs.
Get a Pre-Approval Letter
The next step is to obtain a mortgage preapproval from your lender stating that the lender has offered to finance your purchase with a particular amount under certain terms. Obtaining a pre-approval letter gives you an advantage over other buyers by demonstrating to sellers that you are a serious buyer.
It is important to note that your lender will review your credit history, debt-to-income ratio, and other financial documents to verify your income, assets, and debt. Depending on the mortgage lender, you could get a preapproval in as little as one business day. However, it usually takes a few business days to be finalized.
Find Yourself a Realtor
No rule in the real estate industry makes it compulsory for buyers to engage the services of real estate agents. However, it is advisable to hire professional and experienced realtors to ensure ease and protection from start to finish of the buying process.
A good realtor will get you the best properties that meet your needs at the best prices, guide you through the negotiation, handle all necessary documentation and investigations, and, most importantly, oversee the closing. When scouting for realtors, you can begin your search on the internet or seek referrals from recent buyers around you.
After selecting your potential realtors, during the interview, inquire about their experience with assisting first-time buyers and how they plan to help you find a home, especially those not on the market yet.
Work with Your Realtor to Find Your Dream Home
One of the perks of working with a realtor is it increases the likelihood of finding your ideal property -whether it be a single-family unit or a condominium- within your budget in record time. Due to the vast network of contacts and knowledge of the market available at their disposal, realtors are invaluable to buyers looking to find the best property in the market.
When searching for property, consider your budget, the location of the property, the safety of the environment, other surrounding neighborhoods, and its proximity to necessary amenities important to you, such as schools and hospitals.
Come Up with an Irresistible Offer
After finding an appropriate property, proceed to make an offer on the property. This is a crucial aspect of the procedure that must be handled with expertise to prevent your offer from being rejected. Your realtor would guide you on how to draw up a strong offer that would be accepted.
They will also assist you in deciding how much money you want to offer for the house, ensure that the necessary documents are contained in the offer, and inform you of important conditions you want to ask for.
Some experts advise going the extra mile, especially in a highly competitive market. This entails adding little gestures such as flowers or the seller’s favorite cookies -if you are privy to this information. Bear in mind that you may also be offered a counteroffer for different reasons, such as a change in the property’s value after appraisal.
Send the Offer to the Seller
Once your offer has been drawn up, it is sent to the seller, typically through your realtor. Most of the time, this is done via email, but it can also be sent to the seller’s residence via mail or eBay. Your agent must also inform the seller’s agent so they can look out for your offer.
Open Escrow
Once your offer has been selected, and an agreement has been reached with the seller, an escrow account is opened – typically by your realtor. This enables a neutral third party to protect the money and documents of the two transacting parties and only release each to the respective recipients when all of the terms of the contract are met.
An escrow typically takes about 30 days to close so as to enable the lender to verify your financial security and the value of the property in question.
Have an Appraisal
One of the important requirements to meet in order to obtain financing from a lender is to carry out an appraisal of the property in question.
This is typically carried out by an approved appraisal company, usually, one that the lender suggests. Lenders do this to confirm the actual market value of the prospective property and ensure that they are not issuing loans higher than the property value.
The most common method of appraisal is the comparison approach which compares the prospective property to at least 3 recent sales in the area. This method typically uses properties sold within the past 12 months to provide an up-to-date picture of the current market.
Run an Inspection
Before purchasing a property, employing a professional inspection agency to carry out a thorough house inspection is paramount, regardless of the state of the property. This gives you a general idea of what you are getting into in terms of the quality, safety, and overall condition of your potential home.
It also helps you draw up a comprehensive budget to foot additional expenses, such as repairs that may arise while acquiring the property. On the other hand, you can negotiate to have the seller make the repairs or give you a discount on such expenses.
Sign the Documents
This phase involves signing all documents related to the purchase of your property, including loan documents, to finalize the deal. It is important to hire a professional solicitor to handle all legal affairs related to your property in order to ensure you are well protected before signing any of the documents.
Your realtor would also inform you of the documents you are required to bring along to the closing, such as a means of identification, i.e., a government-issued ID card and all other necessary documents.
County Recorders will Record the New Ownership
The process of acquiring a property does not end with the payment and signing of documents; it is necessary to have the purchase documented with the appropriate authorities. After closing the deal, your title or escrow agent typically files for the original deed of the property in the appropriate government office in your county.
This document legally proves that you are now the owner of the property. When there are no discrepancies in the title of the property, this process typically takes a couple of hours from the closing to a few weeks.
Final Thoughts on Buying a House
Purchasing a first property can be a life-changing experience for anyone. However, like any other transaction, it is important to conduct thorough research and employ the required professionals. This is to help you avoid incurring losses and possibly legal issues during the purchase process.
