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Home Buyers Guide: Step-by-Step Guide for the First-Time Home Buyer

The steps to buying a house might seem complicated at first particularly if you're a first time home buyer. Between down payments, credit scores, mortgage rates (both fixed-rate and adjustable-rate), property taxes, interest rates, and closing the deal, it's easy to feel overwhelmed. There's so much to think about when buying your first home!

However, if you familiarize yourself with what it takes to buy your first home beforehand, it can help you navigate the real estate market with ease. So let's get started!

In this step-by-step guide, you'll learn what it takes to buy your first home, from beginning to end. Whether it's your first time in the real estate market or you're an experienced homeowner who wants to brush up on your skills, this list has you covered.



Step 1: Start gathering a down payment

The very first step every first-time home buyer should tackle is to figure out their finances. Buying a new home (particularly for the first time) requires a mortgage, where a lender fronts you the money and you pay it back over time. However, in order to get a mortgage, you'll need some sort of down payment.

So how much do you need?


Ideally a down payment on a mortgage should be 20% of the home's price to avoid added fees, but if you don't have that much of a down payment, don't worry. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages (e.g., VA loans or a USDA loan).


Step 2: Check your credit score

Did you forget to pay off a couple of credit cards? Unfortunately, it'll affect your credit score.

In addition to having a down payment, a first-time home buyer will need a decent credit score. This three-digit number is a numerical summary of your credit report, a detailed document outlining how well you've paid off past debts like for credit cards and college student loans.

A lender will check your score and report in order to estimate the odds that you will deliver your monthly payment, too.

In turn, the lender will use this info to decide whether or not to loan you money, as well as how much and at what interest rate. If a lender sees some late payments on your credit cards or other blemishes in your credit report, this can lower your odds of getting a loan with a great interest rate, or perhaps even jeopardize your chances of getting any loan at all.

So it's essential to know your credit score, and take steps with those overextended credit cards and high-interest debts to bring your credit score up to snuff.


Step 3: Get pre-approved for a mortgage

Before you head out home buying, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies.

Each mortgage lender (LendingTree is just one example) will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that's good, because a purchase price that's beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.

As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you're undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you'll have to provide tons of paperwork, but it's worth the trouble since it guarantees you're creditworthy and can truly buy a home.

Before they even meet with a lender, one step home buyers can take to begin understanding what they can afford as a monthly mortgage payment is to plug their info into an online home affordability calculator. This will calculate the maximum amount you can afford as a monthly payment.

Step 4: Find a real estate agent

Purchasing a home is one of the most important financial decisions you will make in your life. Whether you’re buying your first home, looking to invest in a new property, or you’re trying to sell your current property, choosing the right Realtor® is key. My philosophy? I believe that maintaining great relationships, giving back, following through, and following the Golden Rule is the key to success in business and in life. I treat every person the way I wish to be treated.

Having an ethical real estate agent who puts your interests before his or her own is essential. My number one goal is to be sure that you are well represented, consulted and informed throughout your entire transaction. I want to keep it as smooth and easy as possible.


Step 5: Go shop for a home!

This is the fun part! As a home buyer, you can view thousands of real estate listings on my website, lizawarmus.com then set up an appointment!

Since the sheer number of homes can become overwhelming, it's best to separate your must-haves from those features you'd like, but don't really need. Do you really want a new home or do you prefer a fixer-upper? Make a list of your wants and needs to get started, and whittle down your options.


Step 6: Make an offer

Found your dream home? Then it's time to make an offer to the seller.

Ask me how to make an offer on a house that a seller can't refuse.


Step 7: Get a home inspection

A home inspection is where you hire a home inspector to check out the house from top to bottom to determine if there are any problems with it that might make you think twice about moving forward. Think: termites, faulty foundation, mold, asbestos, etc. Sure, a lot can go wrong, but rest assured that most problems are fixable.


Step 8: Get a home appraisal

Even if you got pre-approved for your home loan, your lender will want to conduct a home appraisal. This is where the lender checks out the house to make sure it's a good investment. It's similar to a home inspection, but for your lender.


Step 9: Head to closing

Closing, which in different parts of the country is also known as settlement or escrow, brings together a variety of parties who are part of the real estate transaction, including the buyer, seller, mortgage representative, and others.

Closing is the day you officially get the keys to your new home—and pay all the various parties involved. That will include your down payment for your loan, plus closing costs, the extra fees you pay to process your loan.

Closing costs can be sizable, averaging anywhere from 2% to 7% of the home price.


Step 10: Move in!

Done with closing? Got your loan? Congratulations, you've officially graduated from a home buyer to a homeowner! See, the long-term process of buying a first home wasn't so scary after all, right? Now it's time to kick back and enjoy the many benefits of becoming a homeowner.


#signingacontract #financingyourhome

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