Buying your first home can be stressful. Trust me I know I was in that boat as well. One thing looking back that I wish I had when buying my first home was a road map on how buying a home would work. I didn’t know what HOAs were or how the whole lending process worked. Because of that I thought I’d write this article and discuss the 6 things to know before buying your first home. Everyone says knowledge is power. So, knowing what to expect before starting the process is key to reducing the stress of buying your first home. So, let’s discuss the 6 things to know before buying your first home.
Get Pre-Approved for a Home Loan
Pre-Approval for a home loan is the first step in the pre home buying process. Getting pre-approved can take up to a day. The pre-approval can last up to 6 months. Meaning you have up to 6 months before you have to get pre-approved again. This part of the pre-home buying process is the simplest so I’m not going to go in a lot of detail. But this is the most important step. So, I will walk through it with you. The reason why your pre-approval is important it shows that you are serious about buying a home.
The first step is filling out a mortgage application and supplying your Social Security number so the lender can do a credit check on you. You’ll also need to provide extensive documentation of your job history, assets and liabilities, income tax returns, etc. If you are a Self-employed buyer may need to provide additional documentation. Which include your 1040 tax returns, including all schedules.
Being a Self-employed home buyer puts you at a little bit of a disadvantage. Self-employed home buyers are able to write off more of their expenses for their taxes. Which makes it harder to qualify for a mortgage, because it hurts your debt-to-income ratio.
VA Loans also have a slightly different route as well. For VA Loans, lenders will start by asking about your homebuying goals, military service and employment history before continouing with a hard credit inquiry (wiht your permission of course). Credit score cutoffs for VA loans can vary by lender, but a 640 FICO score is a common minimum.
Check out the Veteran affairs page for additional details.
Have a discussion with your loan officer if you have questions about documentation needs. Understand that the faster you get this paperwork back to the lender, the faster they can move to verify information. As well as finalize your loan for preapproval.
Contact Real Estate Agent and Start Search
Now that you’ve gotten the pre-approval process out of the way! Congrats on completing the first step! you now need to contact your Real Estate Agent and start the search for your new home! This process typically starts with the Real Estate agent asking you a series of questions to get an idea of what you are looking for. Such as, how many bedrooms, bathrooms, pool or no pool, etc. From here the Real Estate agent will do an online search for the houses in a few areas of your choosing.
Once they get a list of houses for you they send them your way and you choose the houses that you like! That’s it! Now this leads us to the next step and that’s picking your location.
Now comes the decision on where you want to live. Maybe you want to live closer to the nightlife or maybe you are ready to get away from that life and want to live in the suburbs. The faster you decide where you want to live the faster you can get to the process of looking at houses. Home buying is a mix of being quick and agile while also being methodical. This can either be difficult or easy, but that’s up to you.
Pick Houses to Look At
This is probably the least time consuming of any of the steps. Once you’ve decided on a location start picking houses that you’d like to look at. It’s as simple as that. Once you’ve picked a few houses we move to the next step of looking at HOA fees and tax rates for your location.
Look HOAs and Tax Rates
This may seem complicated but if you have a competent Real Estate agent everything should be late out for you. To keep it brief I’ll give you a tidbit of informaton on both Tax rates and HOA fees. For tax rates, they differ per zipcode or county, so keep that in mind when conducting your search. HOA fees (Homeowners Association) is an expense that owners from a specific residential property or district must pay. They help maintain all properties, amenities and common areas within the association. Once you have gone over HOA fees and Tax rates you are ready to take a look at the houses that you have picked.
Look at Houses in Person
This is the best part of the home buying process. Looking at the possiblites that you have selected. When touring the houses you’ve picked there are a few things to keep in mind. Higher value homes have a very competitive market, they go quickly. In the market today houses are going for up to $40K over asking price. So, understand that just becaues you’ve picked the house and are touring the house doesn’t make it a done deal. Don’t fall in love with every house and keep your expectations leveled.
There you have those are the 6 things to know before buying your first home. For most first-time home buyers understanding what the path entails is the hardest to digest. Being lost is a very dizzying experience. Everyone’s been there.
I wrote this article to ease up a lot of that stress for you guys. Because not knowing what to do is why being a first-time homebuyer is stressful. So, having that knowledge is important to get the house you want with the least amount of stress possible. Eliminating the stress of uncertainty will help you focus on getting that dream home you always wanted.
I’ve written a few articles regarding how to start on your wealth journey and you can check them out here!