The Breakdown Of Buying Your First Home

Buying your first home can be a daunting experience because there are some steps involved that you are not accustomed to. You are probably concerned about affording a home. However, you can be assured by the fact that many first time home buyers have completed the process successfully and without difficulties. Success comes with good planning and preparation. We have put together a breakdown of buying your first home which includes the steps in the entire process from the beginning through to closing. While these steps are easy to follow, you may feel more comfortable talking with a mortgage broker before you start. A broker is an independent source of help who works for you and not the lenders.

Review Your Finances And Then Get Pre-Approved For A Mortgage

There are several reasons for this being your first step. Real estate agents will want to know your pre-approved amount so they can find homes that you will be able to buy. Another reason is the assurance you will have from knowing that an expert has determined that you can afford a specific amount of your income for a house payment. You will also learn how much money you will need to put down. While you may not be able to get an exact number for the closing costs, you will get a good idea about what they will be. It is important that you plan for closing costs which are due at the time you sign the mortgage documents at the closing.

Your First Mortgage

As a first time home buyer, you may find that an FHA mortgage will work best with your financial situation. The credit requirements are more lenient and the down payment will be lower. Your pre-approval will stipulate the type of mortgage you have qualified for.

The Earnest Money Due When You Can Make An Offer On A Property

Earnest money is paid to a third party to hold until closing at which time it is deducted from your down payment amount. The purpose for requiring an earnest money deposit is to assure the seller that you want to buy their home. Otherwise, the seller could find their property off of the market for a long time without it being sold. If there is a reason why the sale should not be completed, such as a home inspection report that identifies serious problems, then your earnest money is refunded. Your real estate agent will include in the purchase agreement all conditions which will result in your deposit being returned.

Appraisal

The appraisal is required to assure the lender that the home is worth what you have agreed to pay for it. This is also an assurance that you need to have since the purchase is an investment for you. If the appraisal comes back at a lower price, then you may be able to negotiate a lower sales price. If you cannot, then your earnest money will be refunded.

Home Inspection

This is a most important step because you will want to know every problem the home has. You will need to know if costly repairs will be required, and whether these will affect getting a mortgage on the property. Even newer homes should be inspected since construction defects can be encountered.

Closing

This is the moment when you take ownership of the home. To do this, you will have to pay the remainder of the down payment, which is the amount after the earnest money is deducted, and the closing costs which should be provided to you a few days before the closing. You will be given a list of each item included in the closing costs.