You know want to buy your first home — you’re just not sure where to begin. And no wonder: learning to buy your first home can be a long, intimidating process, full of gross stuff like math, legal documents, and cutthroat competition. But have no fear: First-time buyers just like you do it all the time, and we’ll walk you through the process.
First, you’ve got to make sure you’re emotionally and financially ready to buy your first home. Hopefully you’ve spent the past few years getting yourself on solid financial footing — that means earning a steady income, saving up for a down payment, and improving your credit so you can qualify for a mortgage.
The first step to buy your first home, is finding the home! There’s no harm in dropping in on open houses before you’re officially ready to buy, just to get a feel for the market and what you like and don’t like. But once you’ve got your finances squared away, it’s time to get started in earnest.
If you’re renting, begin your search about six months before your lease is up, says Marie Presti, owner/broker at the Presti Group in Newton, Mass. “For the average home buyer, it takes two to three months just to find a property, and once you put in an offer, that’s another six to eight weeks,” she says. However, in markets with a lot of competition and little inventory, the search can take even longer.
It’s a good idea to start with a first-time homebuyer class, which will introduce you to the process as well as some trustworthy real estate professionals in your area. “Definitely consider taking a first-time homebuyer class to learn as much as you can, so it’s not as scary,” Presti says. Completing such a class is often a requirement of first-time homebuyer loan programs anyway, so it’s good to get this under your belt early.
Around this time, you’ll want to start assembling your real estate team, beginning with a buyer’s agent and a mortgage lender. (Later on, you’ll need a real estate attorney, home inspector, and insurance agent, too.) Ask around, read realtor reviews on Zillow or Trulia, or see if your class instructor has any recommendations for a buyer’s agent. If you like and trust your realtor, they can generally steer you toward other local pros they’ve worked with in the past, from loan officers to insurance agents.
State laws vary, but a buyer’s agent will represent your interests throughout your home search and negotiate on your behalf, and generally receives a cut of the commission from the seller when you finally buy a home (meaning you don’t pay them directly). Choose someone with a deep understanding of the local market — and whom you trust to look out for you.
Begin with a brief consultation with your agent so you’re on the same page – they need to know what you’re looking for. Presti gives her new buyers homework, instructing them to come up with a list of their top five “must-haves” — non-negotiable features a home absolutely needs to have, which might range from central air to a certain town or location – and then prioritizing them. “And if you’re buying a property with someone else, they should do the same thing separately, and then the two of you should get together and combine that list into one priority list,” she says. “That can take weeks and weeks to do.”
Then, Presti tells them to make ranked lists of their top five “wish-list” items as well – and merge the two lists together. Unless there’s significant overlap between the two of you, this list will often contain a combination of jettisoned must-haves from the first pair of lists. But every feature you can remain flexible on opens you up to more potential homes – and price ranges.
Listing these criteria will help you stay focused on what really matters to you when you’re viewing a house, Presti says. “If people just start going to look at houses and they don’t have this prepared list, they go in and if it has a nice kitchen they suddenly think it’s great. They look at the cosmetics, and that should be one of the last things you should focus on,” she says.
“First, look at whether it meets your criteria, what’s important to you. Second, the structural aspects — how old is the furnace, the roof, the windows – before you start looking at whether it has a stainless steel dishwasher,” Presti says. “Because as a homeowner, you can absolutely change the inside of your house or condo anytime. You own it, and you can always fix it up over time. But you can’t pick up a house and move it away from a busy street.”
You should also get pre-approved for a mortgage before you start visiting homes. For one thing, if you find your dream house right away, you might miss out as you fumble for financing. But it will also give you realistic expectations about what you can afford. “I usually suggest you do that early on, because it can be surprising and upsetting when a buyer finally goes to the lender and asks for preapproval, and they find out their credit score is lower than they thought or they don’t have the purchasing power they need,” Presti says.
to buy your first home it typically the easiest regarding credit approval. Chances are, you won’t already have a large monthly payment from another source, therefore freeing up a lot of potential income.
Compare a few different lenders and mortgage products online, including those offered by local credit unions if you’re eligible and the low-down-payment, first-time homebuyer loans offered by your state’s housing finance agency.
You’ll need to gather pay stubs, tax returns, and other financial documentation for your mortgage application. Keep these in a folder for the duration of your home search, since you’ll need to provide them again when you finalize your mortgage (or if your 90-day pre-approval expires).
With a buyer’s agent on your side and a pre-approval letter in hand, you’re now ready to stalk listings and scour the earth for your dream home – and make an offer, if you find it.
When you find the right house, your agent will help you write up and submit an offer. A good buyer’s agent will try to glean some details about the seller that might improve your chances (and determine whether you ought to submit a personal letter as well), and will know the local market well enough to ensure your bid is competitive.
“Your agent’s job is to find out the motivation of the seller, whether there are other offers, and what’s important to the seller when looking at offers,” Presti says. With that intel, you may be able to make your offer more appealing in small ways. “In a lot of cases, they’ll learn that, sure, the money’s important, but it’s not the only thing. Maybe it’s really important to them to close on a particular day.”
You’ll usually need to include a deposit with your offer, called earnest money, which might be $1,000 to $10,000 or more. This money is applied to the purchase price if your offer is accepted, and returned to you if not — but if you end up violating the terms of an accepted offer, it’s gone.
Think you’re ready? Time to go out there and buy your first home!