First Time Homebuyer Checklist
The homebuying process especially for a first-time homebuyer can be a daunting process. This article is meant to provide you the basic steps on what you can expect from the beginning to the end of your home journey.
- Find a Real Estate Agent – on most transactions you are not required to utilize a real estate agent but we highly recommend it. They can help facilitate the geographic area, style of home and the needs and wants of what you believe you are looking for in a home. Once they have focused you on these factors then they can begin searching for homes for you to view with them. They act as your advocate and will help you find the home, make an offer, negotiate the terms and shepherd the process to closing. Hall Financial offers a network of the best real estate agents in Michigan if you need one.
- What Can You Afford? – the recommendation in this part of the process is to contact a mortgage broker and lender and work with them to figure out what you can afford. Obtain a mortgage preapproval with a lender who reviewed your income and asset statements along with pulling your credit report. A preapproval is good for 90 days and can be easily renewed for another 90 days. Your real estate agent will ask you for this typically before house hunting to ensure they are working with a qualified buyer. Most lenders can approve you for a mortgage payment plus your recurring monthly car and credit card debt up to 45% of your qualifying income. If in excess of 45% you may want to pay down or off some debt or adjust your purchase price expectations.
- Start Looking for a House – now that you have steps 1 and 2 done above you can begin to start looking at houses which are in your price range. When looking at homes look for two items; the features of the home because you will not find everything on your wish list so you can begin to define what is important and what is not and secondly; look at the quality and soundness of the house. Are there any cracks in walls, evidence of water in the basement, is there visible exterior maintenance you can identify? Know your home inspection will catch a lot of this after the offer is accepted but you may eliminate placing an offer if you see noticeable defects.
- Make an Offer – now you are ready to make an offer. Your real estate agent will be a great asset to you to determine the initial offer. They will know what values are doing in the neighborhood you are looking in and whether housing prices are increasing or decreasing. Increasing price markets are also termed Seller’s markets and decreasing price markets are typically buyer’s markets. There are several contingencies you may want to place within your offer such as mortgage and home inspection but other less used ones such as repairs you may want the seller to make prior to closing. Once the offer and the terms are accepted you will be asked to provide an EMD or Earnest Money Deposit of 1-3% to show good faith of your intention to buy and close on the home as long as contingencies can be met.
- Home Inspection and Home Appraisal – now it’s time to have the home inspected. We always strongly recommend one is performed though it is not required. A licensed inspector will scrutinize the structure for condition of the property along with all mechanicals. A very thorough report will be provided noting any issues or concerns. If these are significant you may need to renegotiate the terms or ask for repairs from the seller. Once the inspection is clear the home appraisal will be conducted to determine the house is sufficient collateral in value and condition for the mortgage company to lend on.
- Closing – once the appraisal is reviewed and the mortgage company has fully approved your mortgage the loan is termed “Clear to Close” and you are ready to set a firm closing date, time and location. The mortgage company will provide you a form 3 days prior to closing with all the final terms and closing costs. This document is called the final Closing Disclosure. You will need to bring proof of identification. Typically, money from you has been provided via wire prior to closing or you will need a certified cashiers check from your financial institution. A title company will facilitate the signing of the documents from both you and the seller.
- Enjoy your new home! – you will receive your keys and get ready for you new adventure of home ownership!
As always, contact your Hall Financial team with any questions as we specialize in helping first time homebuyers through this process.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.