Guide to First-time Home Buying Process

April 5, 2021 . buying a house, first time buyer home, home buying, process of buying a house,
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Purchasing your first house can be a daunting process because of the steps involved and the nature of the investment. It does not matter if you are buying the house as an investment property or residing in it; the whole process requires time, effort, and attention to detail. Here is a guide to making your first home purchase experience more convenient. 

What to Know When Purchasing Your First Home with a Loan

People who are buying a house for the first time often struggle with where to start. Maybe you feel comfortable completing the paperwork, performing a search for an ideal home, meeting a realtor (agent), etc. but what you don’t know is where to start, and what comes first?

Whether you are a first-time homebuyer or you’ve had real estate experience, your financial condition is what dictates the whole process. If you are using a loan, pay attention to what you can spend on the house upfront and what you’ll conveniently afford once your monthly payments start. 

Here are a few questions you should be asking yourself. 

  • Do I have enough money to pay as a down payment? 
  • Am I buying the house as an investment or for residential purposes? 
  • Should I buy a newly built house?
  • Do I trust my current job to keep me afloat for as long as the mortgage payments continue?

You will be surprised to know that these exact questions interest your lender too. 

It’s not wise to throw away all your life’s savings for covering the upfront costs of the house. Set aside nearly 40% of your total earnings for the home buying process, as experts like to put it. 

When buying your first home, you’d often see yourself comparing its comfort to the difficulties of living in a rented space. Most of the time, you think it costs less to own a home than it does to rent one. That’s not entirely true. When you own your home, you have to prepare yourself to spend on everything associated with it, from regular maintenance to fixing things that like to act up all of a sudden, such as plumbing, A/C, electrical appliances, leaky roofs, etc.  

First Time Home Buyer Checklist

Let’s quickly reiterate the steps of buying a home with this checklist so you can finish it like a real estate pro.  Your major home-buying involves; 

  • Clearing your liabilities
  • Evaluating home purchase budget and obtaining a preapproval letter 
  • Learning and exploring the steps involved in the process of buying the house
  • Putting a significant amount down 
  • Budgeting your spending  for loan repayment
  • Settling on the preferred mortgage 
  • Keeping in view the loan duration (the longer you have your loan for, the more in interest payments you will be paying)
  • Gathering documents and financial information

Buying Your First House – The Process

The process of buying a house or anything else in the world starts with evaluating  your existing and future financial standing. It is not enough to see your current financial condition. An equally important part is to gauge where you will be financially five years from now and how heavy or light the repayment process will be.

Just like any other process, prepare to buy your first home with additional expenses in mind. Your initial calculations may tell you that you have to spend a certain amount, but you will realise additional costs as you continue through the home buying process.

For example, your initial assessments pivot around the down payment. As things progress, you will realize the expenses associated with the real estate agents for their services, closing fees etc.. all add up.

Again, the question is if your financial health enables you to take care of all those things. In a nutshell, start the home buying process with a financial audit and accept the following factors into account.

  • Credit Score
  • Credit History
  • Savings
  • Career Growth
  • Current Earnings

In addition to knowing your financial circumstances, you have to know what you want in a house. You can call it another part of the financial audit process because the type of house you want to buy dictates the costs you will have to bear. 

Before buying a home, make sure you keep in mind your growing family. If you have married recently, you will have to think about the growth in your family that will take place over time. A house with two bedrooms might be enough for you today, but not if you have children. 

Programs That Facilitate Your First Home Purchase

Immaculate credit history, high credit score, or a six-figure salary are great but if you dont have these, there are still unique options available. Having a low credit score or lack of financial strength can’t completely block your way to owning a house these days.

The purpose of such programs is to allow people with less than a perfect credit score to be in the house they have always dreamed of. If you think your financial condition might not let you buy a home, look at these programs designed specifically for people like you to make owning a house a possibility. 

Where you reside in the US does not matter because such programs are available in every state. Take a look at some of these programs and see which one can put you on the path to becoming a house owner. 

Easing the Down Payment

One of the biggest challenges for most people who are about to buy a new house is paying the down payment. The FHA loan might assist you in doing just that. Don’t pay the entire down payment. A small portion of your upfront cost will qualify you for this loan type. However, you must ensure that you have a specific credit score or else you might not enjoy the perks of the program.

The ideal credit score for you to benefit from this program is somewhere near 585. If you fulfil these preliminaries, you can see the dream of having your own house becoming true.  

Program for Specific Professionals

If you are associated with the medical, law enforcement, educational, etc., fields, you can benefit from this program. Interestingly, for those who qualify, this program can slash the price of the house halfway. You can gather more information about qualification and benefits by visiting the US Housing Department website. 

Program for Countryside Homes

A USDA loan will help you buy a house a little away from the urban population. While you can finance the home wholly with this program, you will have to have a high credit score to qualify. Any oversight of this critical piece of info may result in outcomes that you wouldn’t like.

Program for buying homes with Bank Of America.

Bank of America has allocated $15B to help multi-cultural borrowers and immigrants buy affordable homes with their new affordable home solution. Subject to approval, Bank Of America clients will get $10,000 towards their downpayment and an additional $7,500 grant. Bank Of America is making it a no brainer to get the loan you need for sustainable homeownership.

Step by Step Guide to Buy Your First House

  • Step 1 – Financial Evaluation

Affordability is the most crucial concern you must address before you even commence the process. Any vagueness about your financial conditions can lead you into an unpleasant scenario. Do you have the funds to bear the upfront cost of the house? Write this one as the most crucial  consideration among other steps to buying a home.  

  • Step 2 – Go for the Right Loan Type

Some people can ignore this part in the steps for buying a house. You have to dedicate some time researching, evaluating, comparing, and sifting through the many loan options out there. Pay attention to the eligibility requirements for each loan and opt for the one you know will best suit your needs. While some help you accommodate the upfront costs, others are designed to keep your payments convenient. 

  • Step 3 – Choose the House You Like

That’s the most exciting step of buying a house because you now get to look at the home you will be living in. It’s quite an experience to go through the listings and see the pictures of the houses imagining yourself living in them. Don’t let yourself get off the track, which is what happens to plenty of individuals who bring so mesmerised by the shiny new homes that they forget their initial requirements. Stick to what matters to you and what you can pay for, and create a list of potential properties.

  • Step 4 – Get Qualified for the Loan

If you have followed the previous steps, you should face no trouble taking care of this step. You have your finances in place, and at this point, you have probably done a thorough assessment of the affordability of home purchase. Next is to furnish all of this data to the lender and qualify for the loan to make your first big purchase possible. 

  • Step 5 – Finalize Everything

Congratulations! You have managed to accomplish one of the most challenging tasks in life. Before you take the keys and enter your shiny new house, make sure you have read everything in black and white, and the selling party has handed over the necessary papers to you. 

Home Buying Tips 

Try to keep every process smooth and on track.

  • Understand and implement methods to elevate credit score
  • Don’t switch jobs too often – it sends a negative message to lenders
  • Put up to 20% down if you can
  • Research to sift through the best options and pick the most suitable
  • Ask questions and gain knowledge about credit score improvement

How Richr is Helping First Time Homebuyers

When buying a home, Richr helps buyers make offers on homes and gives you, the homebuyer, up to 3% cashback while getting homeowners insurance and obtain title all in one place. For example, if you buy a home for $300,000 and the buyer’s agent commission is 3%, Richr will give you back $9,000 at closing to reduce your closing costs. 

Summing Up

All in all, home buying is a one-of-its-kind experience that can be thrilling and overwhelming at the same time. That is why first-time buyers need to have the correct details to navigate the entire home purchasing process.  The guide, in this regard, includes valuable information for people looking to buy their first house.

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