Top Tips for First-Time Homebuyers: A (Simple) Guide
HOMEBUYER'S CHECKLIST
❑ 1 - Contact me at (813)7Realty (813-773-2589) or [email protected]
❑ 2 - Find a lender
❑ 3 - Submit loan application with supporting documentation
❑ 4 - Find the right home
❑ 5 - Submit your offer
❑ 6 - Expenses to Close
❑ a - Earnest money (deposit)
❑ b - Home inspection
❑ c - Appraisal
❑ 7 - Additional Items to complete while waiting
❑ a - Home Insurance
❑ b - Home Warranty?
❑ c - Utilities
❑ 8 - Questions for current owners
❑ 9 - Close on your loan
Buying a home might seem really hard. There are so many things to think
about, like getting a loan, checking your credit score, figuring out the home's
value, and dealing with lots of paperwork. It can feel pretty overwhelming,
especially if it's your first time. But it doesn't have to be scary.
Acknowledge This Lifetime Achievement
As you take the first steps on this journey, focus on the excitement you feel. Homeownership changes lives – it’s that simple. It gives you more stability, more stake in the community, and a greater sense of pride and accomplishment.
Don’t worry – no one expects you to know everything about the process up front. Instead, focus on your homebuying goal and how achieving it will change your life. Let the experts help you along the way with the finer details. Your job is to think about what you want, what you need, and who’s going to help you achieve your goal.
Build Your Knowledge and Your Team
When it comes to buying your first home, seeking out information about homeownership and the homebuying process is the first step. Before you can make one of the biggest and most impactful purchases of your life, you need to understand what it takes to become a homeowner and why homeownership is so worthwhile. That’s where the experts come in.
If you're like most people, buying a home will be the largest purchase of your life, many times more expensive than most vehicles. You may decide to buy a vehicle on your own (although if you've never done this please take someone experienced with you); but please, don't attempt to purchase a home on your own. It can cost you much more in the long run.
CONTACT ME
Although not required, utilizing the expertise of a trained, experienced and licensed professional who can guide you through the entire process allows you to relax and know that you will realize every advantage and benefit possible. I’m an experienced real estate expert with numerous certifications. It would be my honor to help you in these critical endeavors.
Wherever you are in the US, I’m here for you— to guide you through your home search process.
FIND A LENDER
There are numerous sources to obtain a home loan – banks, credit unions, mortgage companies, and mortgage brokers just to name a few. I personally prefer using a mortgage broker. It is my experience that they can generally find the best loan with the best rate for you.
SUBMIT LOAN APPLICATION
Some agents will have you search for a home before doing this step. I think it’s better to get approved for the loan first and then get serious on the home search. Getting pre-approved for the loan can take a few days and most sellers will not even accept an offer on a property until you are pre-approved.
To get approved for the loan you should complete the lender’s application and submit the required documentation. The documentation will vary if you are self-employed. At a minimum, all lenders may need:
• Your tax returns.
• Your bank statements.
• Recent W-2s and pay stubs to prove your income.
It’s best if you have these gathered and organized before applying so this step doesn’t slow you down or delay your purchase.
FIND THE RIGHT HOME
Your next step is frequently the hardest; finding the right home (but you can relax, I’ll help). Start by determining what type of housing is right for you and your finances - a single-family home, a duplex or a villa, a manufactured home, a modular home, new construction, or a condo (condos can be tricky).
I like to have my clients do a short survey. This survey only takes a few minutes and will help you determine what your wants and needs are. By the way, there is a difference between wants and needs. Please complete the survey at this Google Link and let’s talk about your wants and needs.
HINT: During the search process check the property’s flood zone code (see home insurance).
SUBMIT YOUR OFFER
If you’re wondering whether you need a Realtor to buy a house, the answer is no. But going it alone can be a risky process. As your Realtor I will make sure that you are protected so you don’t you’re your deposit, and know in advance what you will be obligated to pay by creating a closing cost estimate for you.
As a professionally trained and licensed real estate agent I work on your behalf and advocate for your interests. In most cases, the sellers will have a Realtor working for them; so you want someone on your side, who has your back in negotiations, and can help you understand the complex terms and loopholes in real estate contracts. You might spend $20,000 or more buying a car on your own, but wouldn’t you want a trained expert by your side when spending a quarter of a million dollars or more on a house.
EXPENSES DURING PURCHASE PROCESS
Earnest money
After the offer is accepted by the seller you are required to submit earnest money, usually within 3-business days. Earnest money is an amount of money you put down to show you’re serious about purchasing the home. It’s also known as a good faith deposit. It’s typically around .5% - 2% of the sale price and is held in an escrow account until closing. If all goes smoothly, the earnest money is applied to the buyer’s down payment or closing costs. If the deal falls through due to a failed home inspection or any other contingencies listed in the contract, the buyer usually gets their earnest money back. Protecting your earnest money is a prime reason to use a Realtor.
Home Inspection
Before you buy a home you should have it checked out by a professional home inspector. I know, buying a home is expensive enough as it is; so why would you spend hundreds more if it isn’t required? Simple, to protect the hundreds of thousands of dollars you are about to spend! It might also save you money on your home insurance.
Almost every contract I write for a home buyer in Florida includes a home inspection contingency. This provides the buyer with an opportunity to conduct an inspection to identify issues with the home prior to purchasing. This contingency allows you the opportunity to cancel the purchase without penalty within the timeframe specified in the offer. It may also present an opportunity to renegotiate the price on the house or require the seller to make specific repairs before you finalize the purchase. Check my reviews, I’ve saved many home buyers significant money during the home inspection phase.
In some situations, you can include home inspection clauses in contracts for a newly built residence. In new home construction, inspections are generally done over phases – Foundation, Pre-drywall, and final.
A home inspection should provide homebuyers with a holistic look at the quality of the entire home. Your home inspection should include a 4-point (HVAC/electrical/plumbing/roof), water heater, appliances, Wood Destroying Organisms (commonly called a termite inspection, but it checks for more than just termites), roof wind mitigation (can save you money on insurance), plus well, septic, pool, and/or spa (if applicable).
Appraisal
The lender will order an appraisal of the home to determine the estimated market value. Depending on the lender, you will pay for this appraisal at or before closing. I recommend coordinating with the lender to order the appraisal after the inspection period. This prevents the cost of an appraisal if you are not moving forward with the purchase after the inspection.
The appraised amount is the maximum loan amount. If you offered more than the appraised value you will need to pay the difference out-of-pocket, renegotiate with the seller for a lower price, or cancel the contract. Every offer I write for you has an Appraisal contingency. This leaves that decision up to you— pay out of pocket, renegotiate, or walk away.
ADDITIONAL ITEMS TO COMPLETE BEFORE CLOSING
Home Insurance
Buying a home is probably the largest purchase you will make in your lifetime. Good home insurance is important. Make sure you shop around for the best coverage. Unfortunately, some insurance companies will not provide coverage in all areas. If you don’t know where to start for this, please ask me. I can guide you through this.
Before you get locked into a home purchase talk to an insurance company to get an estimate for the property you are considering purchasing. I’ve seen many purchase agreements get cancelled because the buyer underestimated the cost for insurance.
You must set up home insurance coverage prior to closing. Your lender will require the details of your coverage to ensure it meets their minimum requirement. The first 15-months of coverage is included in your closing costs.
After closing, the lender will require insurance payments and real-estate taxes paid into an escrow account. Each month you will pay slightly more than 1/12th of the annual insurance bill and real-estate taxes with each monthly mortgage payment. This is referred to as PITI (Principle, Interest, Taxes and Insurance) The lender will then use the amount collected in the escrow account to pay your insurance bill and real-estate taxes each year. Check the property’s flood zone code. In some flood zones the lender may require additional flood insurance. In Florida you want flood zones X or X500 to avoid flood insurance. If required make sure it fits in your budget.
Home Warranty
Unlike home insurance, a home warranty is optional, but it may help ease your concern for large, unexpected expenses that may come with home ownership. A home warranty is not the same thing as home insurance, which covers major perils such as fires, hail, property crimes, and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions.
A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home’s major components, such as the HVAC, plumbing, and electrical systems. A home warranty may also cover major appliances, such as washers and dryers, refrigerators, and even swimming pools.
Some home warranties can only be purchased at the same time as the home. I can discuss this with you in more depth during your home buying journey.
Set Up Utilities
Remember to allow enough time to get all utilities ready for your new home. As I guide you through the process, I can help with this. I have a service that can assist you to determine your needs and then get all utilities set up for you. This is a free service I provide to all my clients.
QUESTIONS FOR CURRENT OWNERS
If you are purchasing a pre-existing home the person that knows the most about this home is the current owner. They can pass a lot of information on to you if you just ask. Here is a list some of the questions you may want to ask:
• Current codes for: alarms, electronic door locks, garage door
• Online “ownership” of conveyed items, such as video doorbell
• Transfer of termite bond
• Recommended or previously used service providers: cable/internet, electrician, plumber, pool maintenance service, landscaping, tree trimming, security monitoring
• Installers and/or warranties for: appliances, pavers, roof, security cameras / alarm system, storm shutters, windows and sliders, solar system, HVAC, water heater
• Paint colors used throughout home
CLOSE ON YOUR LOAN
Finally, in coordination with your lender and the title company we will set a closing appointment where you will sit down with an assigned notary to sign your papers and close on your loan. This is also when you will pay your closing costs, including any down payment.
Although down payments vary from $0 to as much as you can afford, you will have other costs – state taxes, inspection, appraisal, home insurance, and property taxes are some of these additional costs. These costs generally are 3%-5% of the purchase price (in addition to your down payment). I can assist you with these costs by seeking concessions from the seller and/or mortgage company.
THE BOTTOM LINE
Congratulations, after you get through these steps you are a homeowner. It can be a difficult process. Missing or delaying one of these critical steps can cost you time and money. But remember, your first step should be to contact me. I’ll guide you through the entire process.
If you would like more information now, without contacting me, please jump over to my buyers page where I have several guides for buyers. If you are eligible for a VA loan please check out my VA Home Loan guide.