Do’s and Don'ts for First-Time Homebuyers
Are you about to embark on the exciting journey of buying your first home? Don't worry, we've got you covered! Avoid common pitfalls and make informed decisions by following this list of do’s and don'ts.
Don't: Rush the Process
While the prospect of owning your first home is thrilling, it's crucial not to rush any part of the process. Taking your time offers several benefits and helps prevent costly mistakes. For instance, shopping around for lenders instead of accepting the first mortgage offer can save you over $5,000 in closing costs and interest over the loan's lifetime.
Carefully review each piece of paperwork to avoid major issues. Skimming through due to time constraints might cause you to miss important details or land you in a contract with unread clauses. Your trusted real estate agent will be there to assist you, but it's best to approach the home purchase process with patience, attention to detail, and a level-headed mindset. This will also help you stay stress-free in case of delays or unexpected problems.
Another aspect where you should take a breather is creating a must-have list. Slow down and compile a comprehensive picture of your dream home, considering factors such as location, size, bedrooms and bathrooms, amenities, and other non-negotiables. Categorize the list into dealbreakers and flexible items. By investing time to think through every detail, you ensure long-term satisfaction with your home purchase.
Don't: Sign Anything Without Understanding
Real estate jargon can be overwhelming, leaving you confused and unsure during the process. It's perfectly fine—and recommended—to seek expert help when dealing with complex legal documents. Your real estate agent should guide you through the purchase agreement, explaining each clause to ensure your comfort and understanding. Similarly, your lender should be more than willing to assist you in comprehending the mortgage paperwork, ensuring you're fully aware of what you're committing to.
Don't: Overlook Closing Costs
When budgeting for your home purchase, it's essential to consider closing costs. As a first-time homebuyer, you may not be aware that you'll need approximately 3% to 6% of the home's purchase price to cover these costs. For example, if the median sale price in your area is $400,528, you'll require an additional $12,000 to $24,000 for closing costs, on top of your downpayment.
Closing costs encompass fees associated with the real estate transaction itself, such as deed transfer, title search, loan origination, home inspection, appraisal, and more. Some costs are paid by the buyer, while others are covered by the seller, depending on state laws.
While negotiating, you can inquire whether the seller is open to covering some or all of the closing costs. However, their acceptance will depend on the competitiveness of your local market. If there are multiple offers on the property, sellers may prefer an offer without a request for closing cost assistance. Engage in a discussion with your real estate agent to explore the viability of including this in your offer.
Don't: Fear Walking Away
The fear of missing out can be overpowering while house hunting, but it's essential not to rush into a purchase that doesn't feel right, simply because you're afraid someone else might snatch it. Be 100% confident that you've found the right home, at the right price, with the right terms before committing.
Remember the comprehensive must-have list you created earlier? Stick to it. If your budget and list don't align, consider making adjustments. Don't settle for any house simply because it's available. Remember, you'll likely live in this home for several years, so it must be the right fit. Ignore the pressure and hold out until you find your dream home.
Do: Be Realistic
When reviewing your must-have list, it's important to be realistic. Determine if certain items, such as a fourth bedroom, truly fall under the necessity category or if they could be moved to the nice-to-have list. Assess whether the home needs to be in an exact neighborhood or if a nearby area would suffice.
This isn't to say that you should compromise on every item, but a realistic approach helps you narrow down the list. Evaluate the practical use of each item and ask yourself if it genuinely contributes to your happiness or if it's simply a stubborn preference. By making these distinctions, you'll find it easier to locate a home within your budget.
Speaking of budgets, as a first-time homebuyer, it's important to understand the market in your desired area and be realistic about what you can afford. Your budget might be smaller since you don't have equity from a previous property, and that's perfectly fine. Consult with your real estate agent about your budget and expectations, and they can provide valuable market insights to help align your goals.
Do: Get Preapproved
Before you start your home search, obtaining pre-approval is essential. Why?
A pre-approval gives you:
A clear understanding of your budget.
Locks in your mortgage rate for a specific period.
Demonstrates to sellers that you are a serious and capable buyer.
Speeds up the financing process as the bank already has your documentation.
To get pre-approved, gather quotes from different lenders. When you're ready to apply, prepare necessary paperwork like tax records, pay stubs, bank statements, a list of monthly debts, employment verification, and identification. If your downpayment includes a gift, obtain a gift letter certifying that the funds are not repayable. Renters may be asked for rental information and landlord references.
Once you submit the application, your lender will assess your information and determine if you qualify for a mortgage. If approved, you'll receive a preapproval letter, typically valid for 90 days. You can leverage this letter to make your offer more competitive, showing sellers that financing won't be an issue.
Do: Ask Questions
Throughout the home shopping process, it's natural to have questions. Never hesitate to seek clarification. Whether you need information about real estate laws or have queries about specific properties, your real estate agent is there to help. No question is too big or too small, so ask away. The more informed you are, the more comfortable and confident you'll feel when making your home purchase.
Do: Explore First-Time Homebuyer Programs
Many states, counties, and cities offer financing programs specifically designed for first-time homebuyers. These programs may include grants, forgivable loans, or lower interest rates to assist with down payments and closing costs. Take advantage of these opportunities by conducting a Google search, consulting with your real estate agent, or discussing with your lender. Keep in mind that income limits and educational requirements may apply, so start early and be proactive.
Do: Hire the Right Real Estate Agent
Everyone benefits from the guidance of an experienced real estate agent, especially if you're new to the industry. An expert agent will provide valuable market insights, help you make competitive offers, negotiate favorable terms, and ultimately find your dream home. They are your trusted partner throughout the complex process, providing accurate information and helping you make informed decisions.
If you haven't found a real estate agent yet, reach out to us. We're eager to assist you in buying your first home.
Embark on Your Homebuying Journey with Confidence
By following this ultimate guide for first-time homebuyers, you'll be well-equipped to navigate the process with confidence. Take your time, ask questions, and make informed decisions. Your dream home awaits, and we're here to help you every step of the way. Contact us today to get started on your exciting homebuying journey.