Purchasing a home for the first time is a big step and is one of the most significant purchases you will make in your lifetime. That's why it's important to understand the challenges you may face when buying a home and to follow a first-time homebuyer checklist to minimize the issues you may encounter in the home-buying process.
Prepare financially
Making a big purchase like a house will require an examination of your financial situation. You'll have to determine the price of the house and the payment amounts each month that you can reasonably afford without straining your financial constraints. Here's a checklist for preparing your finances for purchasing a home:
- Determine your budget
- Save for a down payment and closing costs
- Check your credit score
- Get pre-approved for a mortgage
The budget you established for purchasing a house will determine the amount you'll save as a down payment. The more you save for a down payment, the lower your payments will be each month and the less interest you'll pay on the principal. Experts agree that 20% of the house's purchase price is ideal when saving for a down payment.
It's a good idea to check your credit score. If it's lower than 620, you'll want to take steps to get that credit score higher to qualify with most lenders. Once you have your down payment saved and your credit score reasonable, you can start the mortgage pre-approval process. Applying for approval early in the process will help uncover mistakes and errors on the application and allow you to fix those that could affect your interest rate and ability to buy a home.
Identify house characteristics that will conform to your budget and needs
Now that your budget is set and you have pre-approval for your mortgage, it's time to take the following steps to determine the non-negotiable factors your house needs.
- Identify property types and features, sizes, and locations that conform to your budget
- Consider future needs and lifestyle changes
Once you determine the nonnegotiables, you can look for houses that fit those basic requirements and your budget. If you have plans for marriage, children, family growth, career, or lifestyle changes in the future, consider those while looking. Accommodating future plans is important because buying and selling a house in a short time may incur financial consequences. So, you'll have to ensure you'll want to live in the house long term.
Search for a house based on those needs
Use your nonnegotiable list to select properties, then take the following steps to narrow the field:
- Research neighborhoods
- Visit open houses and showings
- Evaluate properties based on your needs and budget
When researching neighborhoods, consider if there is a lot of real estate activity in the area. Chat with neighbors to get their point of view of living in the neighborhood. Visiting open houses and showings allows you to envision yourself living there and to look for apparent defects and limited features.
Make an offer on the house you select
You've finally found the house that fits your nonnegotiables and your budget. It's time to make an offer. You don't have to offer the asking price. Make an offer based on what you've seen and on the competitiveness of the market that you're buying into. Complete the following steps to present a fair offer:
- Understand the local real estate market to compare prices
- Decide on a fair offer price
- Negotiate with the seller
Following this checklist, you can confidently negotiate with the seller without worrying that the offer is too high or too low.
Get a home inspection and an appraisal
Take the following steps to properly inspect and appraise the house to ensure that you're getting the value you expect for what you're paying. Inspections will uncover any significant damage or repairs that need to be done. At the same time, appraisals will confirm the house is worth the price you're paying for lenders to approve your mortgage.
- Hire a professional home inspector
- Understand the appraisal process
- Negotiate repairs or price adjustments based on inspection and appraisal results
The home inspector will look at the structural quality and safety of the interior and exterior of the house and property and ensure that everything that makes a home habitable works. The appraiser will inspect the condition of the interior and exterior of the house, measure the square footage, and evaluate the home's features and fixtures. They will also do research that compares prices of similar homes sold in the area.
Close the deal on your dream house
It's exciting when it's time to close on your house. Finally, you'll have the keys to your new home. If everything is in order and you know what to bring to the closing, it can take one to two hours. The following checklist will ensure the closing process goes as smoothly as possible:
- Understand what closing costs you'll have to pay and how you'll pay them
- Review and sign the final paperwork
- Prepare for the move
Closing costs are usually 2% to 6% of the loan amount. Closing costs can add up to thousands of dollars, so saving for that and the down payment is important. If you're paying the closing costs from your personal checking or savings account, the funds must be in your account for at least 60 days before you can use them toward closing costs. You can also roll closing costs into your mortgage, but you'll also be paying interest on that.
Move into your new home
Make sure you follow these steps to ensure a smooth move into what you'll be calling home for years to come:
- Set up utilities and services
- Plan for home maintenance and improvements
- Celebrate your new home
Welcome home!
Follow the first-time homebuyer's checklist for a stress-free process
When you take one step at a time on the checklist for first-time homebuyers, your first-time homebuying experience should be worry-free and exciting. The checklist includes everything you need to know, from financing to closing, making the process for you more simplified.
If there is something that you're still not sure about, seek advice from an experienced real estate agent to help you through the process.
If there is something that you're still not sure about, seek advice from an experienced real estate agent to help you through the process.
Unlock the door to your dream home with Duston Leddy, a trusted name in real estate. Experience unparalleled dedication, expertise, and personalized service. Explore what makes this team unique, and discover your perfect property today.
*Header photo courtesy of Duston Leddy
