Smart Steps: The Ultimate First-Time Homebuyer Guide for Young Professionals

Many people wish to buy a home. They watch mortgage rates and pay attention to housing inventory so they can make a move when the right home is found. However, other steps must be taken to make this experience a positive one.

Know Your Credit Score

Every first-time homebuyer guide should emphasize the importance of knowing one’s credit score before purchasing a home. Lenders look at this score when determining whether a person is capable of paying a mortgage. This score also plays a role in the down payment a lender will require and the interest rate the borrower pays. If your credit score is low, take the time to improve it before applying for a mortgage or searching for a home.

Financial Assistance Programs

First-time home buyers frequently qualify for financial assistance programs. Some programs require applicants to earn less than a certain amount, while other programs help individuals make a down payment on a home if they agree to live and work in the area for a specified period. Home buyers should research these programs before moving forward with applying for a mortgage.

Establish a Budget

Buyers need to set a budget before house hunting. It’s easy to get caught up in your emotions when you find the perfect house, but it won’t be ideal if the costs of homeownership are high. When setting a budget, determine the monthly mortgage payment, including taxes and insurance. Calculate estimated repair and maintenance costs and figure out how much the closing costs will be. Will they be paid upfront or included in the loan? Work with a financial advisor to calculate these numbers and determine how much you can afford to spend on a home.

Gather Paperwork

Lenders require paperwork to ensure the borrower can repay the funds as agreed. They want to see steady employment and income. A lender will examine a borrower’s debt-to-income ratio to determine how much is left after debt obligations are paid. Gather pay stubs, tax returns, bank statements, and other documents that will provide the necessary proof.

Preapproval

Sellers want to know that a buyer can purchase their home before putting a contract on it. A preapproval letter from a lender provides this proof. This letter informs the seller of the buyer’s borrowing capacity and the associated terms and conditions. Sellers view buyers who present this letter as serious about making a purchase. Preapproval doesn’t guarantee the buyer will receive the funds, and the buyer is not committed to working with that lender.

House Hunting

People often turn to the internet to search for their new home. Working with an agent offers numerous advantages that are frequently overlooked. They help clients find homes that meet their criteria and assist them with viewing these homes. The agent will prepare an offer letter and negotiate on the buyer’s behalf with the seller. The agent may also be able to help sellers find homes that have yet to hit the market.

Learn About Properties

When a buyer finds a home they are interested in purchasing, they need to dig deeper. Learn how long the property has been on the market. If the house has been sitting on the market, there may be problems that are deterring others from making a purchase. When a home is newly listed, buyers need to act quickly so that someone else doesn’t snatch it up.

Determine whether a homeowners’ association exists and review the contract. HOAs often have regulations that property owners must comply with. Buyers need to ensure they are comfortable with these regulations before making a purchase.

Inspect the home to identify any potential issues that may prevent a lender from providing a mortgage. The roof, electrical system, and plumbing should be up to date. If the home has an addition or other renovations have been made, ensure they are up to code. If they aren’t, getting a mortgage may be challenging.

Put In an Offer

Once a home has been chosen, the agent puts in an offer letter. This letter includes information that may help facilitate the sale, such as preapproval from a lender and flexibility on closing dates. A buyer might offer a good-faith deposit that is non-refundable if they back out after agreeing to the terms.

The seller may accept or reject the offer. When an offer is accepted, a contract is then drafted, allowing the homebuying process to move forward. This contract may include contingencies to protect the buyer in the event of issues with the home. If the offer is rejected, the buyer can counter with a higher amount or additional concessions. The seller might also provide a counteroffer. Negotiations are common in real estate transactions.

Secure a Mortgage

Buyers need to compare mortgage options to find the best financial product for their circumstances. A mortgage broker can help buyers find this product. Working with a broker can help uncover the best rates, closing costs, and terms.

Home Inspection and Survey

Hire a home inspector to check the home for potential problems. Use the information contained in the report provided by the inspector to negotiate with the seller. A survey is also recommended to ensure the buyer is aware of the boundaries in case property line disputes arise in the future.

Appraisal

Lenders typically require home appraisals to ensure the home is worth the amount they are being asked to provide. The seller prepares the home for this appraisal, and the lender selects the person who will complete this assessment. The appraiser considers several factors, such as the square footage of the home, when determining its value. If the appraisal is less than the home’s offer price, the lender won’t provide the funds unless the buyer offers a higher down payment or the seller lowers the price.

Closing

When everything is in place, the only thing left is the closing. Before the closing date, the buyer should walk through the home to ensure everything is as agreed upon. The house should be empty during this walkthrough to ensure problems aren’t hidden. If the agreed-upon tasks have not been completed, the buyer may request closing credits to cover the necessary repairs. During the closing, both parties sign paperwork to finalize the transaction.

Buying a home is a significant step in any person’s life. Knowing the process is critical to ensure everything moves smoothly. First-time homebuyers should use all available resources to make this process easier. Once the process is complete, they have a home they love and can afford.