Thinking about buying a new home for the first time, but don’t know where to start? First-time home buying can be exciting and fun, but without some guidance, it can also be a bit overwhelming! Hoss Group strives to make the process as easy and stress-free as possible. We’ve helped hundreds of first-time home buyers find their perfect home with ease, and we can do the same for you! If you’re ready to get into a new home in the next few months, here’s how to get started.
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Step 1: Financing & Pre-Approval:
Getting pre-approved with a lender is the most important first step you can take when preparing to purchase your first home. Without speaking to a lender and reviewing your finances, you won’t truly know what your budget is, which can make it difficult, if not impossible, to start touring homes. Not to mention, many sellers will ask to see proof of your pre-approval letter before letting you view their home to make sure you’re a serious buyer. Your realtor will also need a copy of your pre-approval before they can submit any offers on your behalf.
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So, how do you choose the right lender for you? Hoss Group recommends choosing a local lender over a big bank lender. Why? Local lenders are often easier to get in touch with compared with those at big banks who are often unreachable in the evenings and on weekends. However, it’s important to feel comfortable with your lender, so make sure you shop around for the best rates and incentives! Many lenders offer first-time home buyer incentives, as well as incentives for certain professions, such as doctors, nurses and teachers.
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You won’t need to worry about multiple hits on your credit report when shopping around either. The credit bureau is able to see that you’re shopping for mortgage interest rates and will only count one of the credit pulls toward your credit. Once you’ve chosen your lender and have been given an approved budget – the fun begins. It’s time to go shopping!
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Step 2: Choosing your realtor
Once you’re pre-approved, it’s time to find a realtor who can help guide you through the process. Hoss Group recommends interviewing multiple realtors. Just like your lender, you want to make sure you choose someone you’re comfortable with and trust. Afterall, this may be the biggest investment you ever make!
When interviewing a realtor, a few questions to ask include:
- How much experience do they have?
- When/how often are they available for showings?
- If they’re out of town, do they have someone who can show you homes on their behalf?
- If you’re in a multiple offers situation, how will they help ensure you win the deal?
- Why do they think they’re the perfect fit for the job?
Aside from interviewing realtors, make sure you check out their online reviews and ask your friends and family members if they have a realtor they’d recommend. It’s always great to work with a realtor who has a proven track record of great customer service.
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Step 3: Finding the perfect home
Now that you’ve chosen your realtor, it’s time to have some fun! Your realtor will set you up on an MLS search portal, which will email you a list of homes that fit your criteria. As you go through the list, make a list of favorites. If you’re starting to feel overwhelmed with the selection, choose a day or evening to go drive around certain areas and neighborhoods you like. You’d be surprised how much this helps narrow down location!
Once you’ve made a list of your top 3-5 homes, reach out to your realtor to set up some tours. Remember, most people only see about 5-8 homes before they find “the one,” so don’t panic if one of the first homes you see is the one you decide to move forward with!
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Step 4: Writing the offer
You’ve found your dream home – now what? It’s time to put in an offer! Your realtor will first run a Comparative Market Analysis (CMA) on the home. This report takes a look at homes that are for sale or have sold in the same neighborhood over the last 90-180 days. This will help both you and your realtor decide if the home is priced well, if it’s underpriced or if it’s overpriced for the neighborhood. From there, you’ll work together to come up with a fair offer price.
Once you set a price, your realtor will write up the offer and send it over for you to sign. Don’t be afraid to ask questions! Remember, you want to know what your rights are as a buyer in the contract, so make sure your realtor walks through each page with you so you fully understand what you’re signing. Once you’ve signed and are comfortable with the terms, it’s time to submit to the seller.
Depending on the situation, you will likely go back and forth a few times with the seller until an agreement is reached. Once both parties agree to the terms and sign, you’ll officially be under contract!
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Step 5: The option period
Now that both parties have signed, you have an “executed contract.” The execution date is Day 0 of the contract (real estate days are calendar days, not business.)
Upon execution, two checks will need to be delivered within 48 hours:
- The first check will be your option fee. This is typically around $150, and is made out directly to the seller. This secures your “option period” – You are essentially paying the seller to take the home off of the market for between 5-7 days during which you have the unrestricted right to terminate the contract. This is when you will hire an inspector, and any other specialist you may need to take a look at the home. This is also when we will negotiate repairs with the seller.
- The second check is your earnest money. This is typically 1 percent of the sales price and is made out directly to the title company. The title company will deposit that money into an escrow account for you, and it will come back to you at closing as part of your down payment/closing costs.
Next, it’s time to hire an inspector. Inspectors cost between $350 – $800, depending on size of house, and other items that may need to be inspected. The inspector will check everything in the home from your foundation to your roof to make sure the home you’re purchasing is in good condition. Once the inspector is done, they will generate a report of deficiencies found in the home. From there, you and your realtor will come up with a list of repairs you’d like the seller to make.
Once presented to the seller, you may negotiate back and forth for a bit until you reach an agreement on repairs.
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Step 6: Appraisal
Now that repairs are agreed upon and you’re out of your option period, your lender will order an appraisal. This tells you how much the bank is willing to pay for your home.
An appraiser will look at similar comparables to what your realtor looked at in the beginning. If the appraisal comes in at the price you offered, that’s great! It means the home met value. If the valuation comes back higher than what you offered, even better! That means you have automatic equity in your home. If the appraisal comes back lower than what you offered, you’ll want to ask the seller to come down to the appraised price.
If the seller says no, and this is your dream home – you can pay the extra money out of pocket. If you’re not comfortable with that or you’re unable to financially, you can terminate the contract. Your 1 percent earnest money is protected under the appraisal clause in the contract, so you will get it back if you terminate over a low appraisal.
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Step 7: Don’t jeopardize your closing
You’re almost there! Repairs are made, appraisal has been met and your financing has been given the final approval by your lender. But don’t go out and buy any new furniture yet!
Why? Any major, new purchase on your credit card could impact your credit score which could cause an issue with your financing. To be on the safe side, don’t do anything that could potentially impact your credit score negatively such as make a big purchase (like a new sofa), pay off any credit cards or open any new lines of credit.
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Step 8: Closing time!
On the day of closing, the sellers will sign documents, you will sign documents, and once you get word from the title company that the transaction is “funded,” the keys are all yours!
Hoss Group recommends not booking the moving truck for the day of closing, but instead wait a day or two. In the off-chance closing is delayed, you don’t want to have to cancel movers at the last minute.
From the time the process starts until you move in, you’re typically looking at about 30 days. Ready to get the ball rolling? Call Hoss Group now to set up your first-time homebuyer consultation and let’s get you into a new home before the holidays!