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First Time Homebuyer

So You Are Ready to Buy Your First Home?

Smart step! Homeowners can build their wealth faster than renters. Before you begin looking for your dream home, there are a few important steps to take. A home is usually the largest purchase you will ever make and an excellent reason to do your homework. Here I have provided a few steps to help you get started on the path of owning a home. With the constant fluctuation of the real estate market, it is important to be prepared when you are ready to make the purchase.

Save, Save, Save! You should count on making a 20% down payment to qualify for a loan. This would be $20,000 for every one hundred thousand of purchase price. There are grants available to first time home buyers, and doing research online for different companies offering to help you qualify for said grants could reveal many opportunities to help you purchasing your first home. The amounts can vary from ten to thirty thousand, and are well worth checking out. Free money is always nice! With or without a grant, you will need to watch what you spend three months before applying for a loan. Lenders look at spending habits so everything you buy shows a pattern and can make or break a loan. Also, avoid moving into your new home without having money saved up in case of an emergency.

Along with saving for your down payment, you will want to start keeping track of your credit score. Remember, the higher your credit scores the better rate and options for a loan. There are credit reports available online, and many of them for free. If there is an error on your credit report, it needs to be addressed as soon as possible. Many of these sites also have useful information that can teach you about the effects of every financial decision you make.

Your next step is to find a lender. The increase in new laws for home loan lenders can make them appear unreasonable and impossible to make an agreement with. Hang in there. Due to the past difficulties in the lending industry your lender will ask for proof of everything. Some information they will want you can have ready before you even have your first meeting, such as the last two years of tax returns, pay stubs for the last three months, proof of employment for the last two years, and three months of your bank and credit card statements (even the blank pages). They will likely ask for more but having these things ready will get you started on the right track. At the end of this process you will receive a pre qualification form to give to your REALTOR®. You will not be able to present an offer without this form.

Now for something more exciting! You can start a list of everything you are looking for in a home. What aspects are most important to you about a home? Sometimes, these lists will have to be adjusted to fit into your price range, but your REALTOR® will help you with that. Are you ready to build sweat equity and do a fixer-upper? Or maybe you would rather approach only cosmetic things such as replacing carpet and painting walls? There are also plenty of move in ready homes if you would prefer! You should consider how you feel about all of these before you meet with your agent so you know what you are willing to put forth into your new home. Together you will go over your price range and your wish list, and your REALTOR® can start to find you homes that meet your ideals.

Eureka, you have found a home that is perfect! Once you find the perfect home it is time to sit down and write an offer. Your REALTOR® will research the area the home is located in to see the current market value to help you narrow down the price to offer. One thing to keep in mind is that the asking price is just that-the asking price. At this point your agent will write your offer and you will need a deposit check, which will be credited towards your down payment if your offer is accepted, along with the offer to show you are a serious buyer. Your agent will contact the sellers’ agent. Your REALTOR® will keep you up to date on all of the agreements and forms needed.

Once the offer is accepted it is time for inspections. Usually these are done the first ten to fifteen days after the offer is accepted. Time is of the essence, and your REALTOR® will be able to keep this time line on track for you. If any problems appear from the inspections, your REALTOR® can discuss with you the various options in addressing them. You may ask your REALTOR® for advice but ultimately the decision is up to you. Once all inspections are done and approved, you will want to call the utility companies and arrange to have them switched to your name on the date of closing. Your REALTOR® will provide you a list of all the names and numbers that you will need to call. This is not something you will want to wait on doing as it will be hard to get by if the power is not turned on when you are moving in, and having internet service is almost impossible for most of us to live without.

ESCROW! The escrow company will have done all of the research on the history of the home and they will make sure all of the documents necessary are ready to transfer into your name. You will need to get your down payment into the escrow account prior to the closing day; usually about a week ahead of time is what you should aim for. This will help prevent delays in the closing the escrow. At this point your loan will be ready to transfer to seller. After you sign all of the documents it will usually take a few hours for your loan to be funded. Your REALTOR® will bring you your new home keys as soon as the process is complete.


Dana J. Grimley


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