You’re not alone if wondering how to buy a home for the first time.
Purchasing a home for the first time is, unfortunately, one of those life skills that nobody teaches you.
So, if nobody teaches you, how on earth are you supposed to know what to expect? How do you know how much you can afford? When do you get to move in?
These are all valid questions.
There are so many milestones that go into purchasing a home, especially when you are doing it for the first time.
We are thrilled that you are looking for your next home here in the Killeen, Harker Heights, and Temple, TX area, and we look forward to being your neighborhood experts.
We will help to explain the purchase process and provide you with a list of questions to ask for first time home buyers. This will help you make an informed and educated decision, and you will be on your way to home ownership.
To make it easier for you as a first time buyer, we explain how to buy a home for the first time in just a few short sections-
- Financing
- Home Search
- Submitting an Offer
- Contract to Closing
- Closing
Financing: The Heart of the Process
Long before you start stressing about budgets and monthly payments, you need to choose a loan officer (lender). You’ll want one that is well-versed in Texas financing guidelines. This is largely due to the fact that Texas has its own quirks when it comes to mortgages.
Once you have found the lender that you’d like to work with, set an appointment to discuss your credit profile, your liquid assets, and what programs are available to you. They won’t be able to go over your qualifications until they understand the entire picture of your particular situation.
The loan officer will probably ask you a series of questions to assess the situation. They will also ask you for some initial documents to verify the information that you have given them is accurate.
This information will start to outline which products and programs should be considered.
Different Types of Home Financing
There are three programs that most people will turn to when buying a home. They will use FHA loans, VA loans, or Conventional loans to suit the buyer’s needs. Each has a list of specifications that must be met in order to get the buyer to the closing table.
Here are the minimum down payment requirements for various loan types:
- FHA loans – 3.5%
- VA loans – 0%
- Conventional loans – 5% (Some buyers can qualify for 3%), with PMI
Remember, loans are not cookie cutter products. You should compare various loan types to see which meets your financial goals the best.
Once you have discussed the various loan types with your loan officer, they should be able to give you a good idea of how much home you qualify for. This number should be based on the loan type that you chose, the assets you have available, and your monthly payment with the included principle, interest, taxes, and insurance (PITI) amounts.
You should then be issued a pre-approval letter. You will want to provide a copy of this letter to the realtor that you have chosen to work with. This will be your golden ticket to begin touring properties.
When you buy a home for the first time you’ll want to ensure your financing is good to go before you start searching for homes.
Searching for your Home
Once you have an idea of what financing best suits your needs, time to get a realtor.
Choosing a great realtor to be a part of your team is crucial as they will be the one in the trenches with you and negotiating on your behalf. They will also help you with your home search as you start choosing your parameters.
The Realtor’s Role in the Process
Your realtor is going to want to ask you what you are looking for in a home, and you will have to have a clear idea of what your needs and wants are. From there, the realtor will be able to set up a home search for your within the local registry (MLS or multiple listing service) to provide you with options.
From the inventory available, you will then choose whether you would like to schedule a showing or not.
If you’ve never been in this part of the process before, you might be a little lost in what is need vs. want.
Here are some common questions to ask for first time home buyers that are often overlooked:
- Will these homes pass an appraisal for my loan type?
- How much are the property taxes?
- Is there a homeowner’s association? If so, how much is the monthly cost?
You will have more questions after this, but these initial questions will give you a good idea if the home should even be considered in your home search. Your realtor will be a great resource in helping you answer them.
You have to remember that real estate is a people business.
When you use a realtor, you have access to their entire network of people and connections in order to help make the search go smoother.
They will usually show you a good mix of their listings, the listings within their network, occupied, unoccupied, etc. They will cast that net as wide as they need to in order to find what you are looking for when you buy a home for the first time.
Submitting Your Offer
Now onto the exciting stuff!
You’ve found the perfect home that checks all of your boxes. You can actually imagine your family getting settled.
It is now time to start discussing putting together an offer with your realtor. They will do their best to advise you and build the best offer that will help you get your house.
Components of the One-to-Four Family Residential Contract (Resale)
The offer is simply the contract that a buyer submits to the seller.
A traditional offer is going to have many pieces that you will need to consider. You will include the obvious details of purchase price, closing date, loan type, etc., but you will have to include some finer details that include those Texas quirks from earlier.
Here is a basic list of what should be included in your offer:
- Purchase Price – How much you are willing to pay for the home?
- Earnest Money Deposit – Deposit on your down payment made upfront and held in escrow, generally around 1% of the purchase price.
- Closing Date – How quickly you are willing to close? Most sellers want to close as quickly as possible.
- Seller’s Concessions – Buyers can request to the seller to assist in paying for closing costs.
- Right to Inspections – Buyers can request that the seller allows inspectors in to complete their reports.
- Contingencies – Transparency between the buyer and seller letting both parties know that there are outside factors that could effect this transaction. For example, a buyer must sell previous home.
- Option Period – A period of time in which the buyer can back out while still receiving their earnest money back without penalty.
Once the details are sorted out, your realtor can submit your offer to the seller for review.
Signing the Contract
This is where your excitement will really begin as you sign your offer. You’re so close to being a home owner!
However, you have to keep your cool, because the seller can choose to offer you a counter offer. This is where they may alter the details of your offer to better suit their needs. You will then get the option to counter again, accept, or reject the terms.
You, as the buyer, will sign the completed contract with everything we discussed. Your real estate agent will then send it to the listing agent of the seller. The listing agent will then present the offer to the sellers for a decision.
If the seller agrees to the terms of the contract they will sign and send a copy of the contract back to your realtor.
You’re now under contract!
Keep in mind, the offer process is not complete until both sides of the table have agreed to move forward with the transaction and everything is signed.
Contract to Closing Process
If the contract is signed by all parties then you are ready to have another conversation with your loan officer.
They will ask you for a copy of the purchase agreement, discuss your initial loan structure, and potentially more documentation. They will also be prepared to assist you with scheduling your appraisal and inquire about your home inspection.
If you are confused about the difference between appraisals and home inspections, know that you are not the first, and you will not be the last.
Appraisals
An appraisal report is used to validate that the subject property is with the purchase price. Home inspections are completed to go over the condition of the home with a fine-toothed comb.
Nine times out of ten, a satisfactory “as-is” appraisal is going to be required by your lender to move forward with you financing. However, this often causes confusion when it comes to home inspections.
Home Inspections
A general home inspection, typically, is not going to be required by your lender upfront. Buyers request a home inspection to ensure the large investment that they are about to be making is a good one.
Once the report is received, it can be used as a bargaining chip with the buyers to complete necessary repairs around the home before closing.
On occasion, an appraisal report will request the assistance of an inspector to address certain, specific issue.
For example, the appraiser might notice a water stain on the ceiling and request a roof inspector to check for leaks. In this scenario, an inspection would be required versus being optional. Some lenders may require some repairs be made prior to financing. These are called lender required repairs.
This is why most industry experts are going to suggest that a buyer requests a home inspection upfront. This allows the buyer to not only have an idea of what is to come, but it also informs them of repairs that may be more of a headache. It may be a better option to move on to another house.
Good thing you have that option period!
At the end of the day, when you hire someone for a service, it costs money. The goal is to keep as much money in your pocket as you can while still protecting your investment.
If the reports check out and all of your documents are received, your loan officer will be able to work with processors, underwriters, title, and attorneys to get you ready for closing.
Closing the Deal
Now, you breathe. You are almost a first time home owner!
If the underwriting team has confirmed that you are good to go, the loan officer will confirm with the realtor that the closing can be scheduled. Please know, from this conversation until you get to the closing table, there will be a mad dash to solidify the last few details.
Once the lender is able to confirm your closing date, they can now begin to balance with the closing agent to confirm that all parties are working with the same numbers. This will include any tax adjustments, prepaids, realtor commissions, AND your cash to close, if any is required.
Start Getting Your Funds Ready to Buy a Home for the First Time
Your realtor and/or your loan officer should have discussed with you if you will be using a cashier’s check or a wire transfer to present your funds.
You will be given your final numbers in enough time to go to the bank to complete your transaction. However, you will want to make sure that this is completed before you go to your closing.
When you get to the closing table, you will be walked through the entire packet by an attorney or notary. They should be able to answer a majority of your questions, but if they cannot answer a loan-specific question you need to call your loan officer!
This cannot be stressed enough.
If something is incorrect in your paperwork and you sign it anyway. Nothing can be addressed after you walk away from the closing table. Your realtor and your loan officer will be able to help you navigate the situation, if it were to occur.
If everything is correct and signed, then you are now a homeowner!
In some cases you may walk away with keys in hand, other times it may take a day or two. Funds have to clear the deed has to be recorded, and then your keys will be ready to be picked up.
Learning how to buy a home for the first time really isn’t as intimidating as it might seem upfront. However, part of that ease will come with creating the best team possible of a knowledgeable realtor and loan officer that are in your corner 100%.
Their expertise is paramount when it comes to navigating tough transactions.
