Buyers need a basic overview. This is especially true for first-time home buyers who aren’t familiar with the process. Bear in mind that the steps in the home buying process can vary from state to state, depending on local custom. 

You don’t have to hire a buyer’s agent if you prefer to go to open houses and look through a mumbo-jumbo of homes online, but hiring an agent will save you time.

Here’s why:

An agent can send you listings directly from MLS that fit your parameters, and you won’t waste time looking at active short contingent listings that are under contract.

Agents often know of new listings coming up that are not yet on the market.

You can waste the agent’s gas and not your own when you tour homes.

Some agents will preview homes for you.

An agent can generally spot overpriced listings and advise you accordingly.

It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for private mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.

There are lots of mortgage options out there, each with their own combination of pros and cons.

Popular first-time buyer loans are FHA loans because the minimum down payment requirement is much less than a conventional loan. However, if you are thinking about buying foreclosures, for example, conventional buyers tend to get priority with REO banks.

You can ask your agent for a referral to a mortgage broker or check with your own bank/credit union. Compare the types of mortgages available to you and your GFE.

Owning a home is expensive—much more expensive than renting, even if your monthly house payment will be similar or cheaper than your current rent amount. That’s because when you own a home, you’re responsible for all the maintenance and upkeep costs. And those can add up fast! So, before you even think about buying your first home, make sure you’re debt-free and have an emergency fund of three to six months of expenses in place.

When you get into a home with no payments (besides the mortgage) and have a nice big emergency fund, you’ll have the cash to pay for huge expenses that suddenly come your way. You’ll be able to love the life you’ve set up for yourself because stress and worry won’t be part of the equation!

Now once you’re debt-free, I want you to stay debt-free. So, as you’re shopping for your first home and getting excited about decorating and filling it with new furniture, be mindful of your budget.

The spender in me knows that’s easier said than done. When my husband, Winston, and I moved into our first home, I had so many visions for what our home could look like! It was hard for me to accept the fact that I could only decorate one room at a time, but I knew our future money goals were more important than me spending all our savings at the furniture and home stores. 

You might have some empty rooms for a little while, but your budget and your future selves will thank you! And if you find yourself thinking, Oh well, I’ll just put it on credit—stop right there! Debt is dumb. Plus, taking on new debt in the middle of buying a house could delay your approval for a mortgage and make you miss out on the perfect home. Don’t do it!

Before you get emotionally attached to a beautiful house, check your monthly budget to determine how much house you can afford. You need to leave room in your budget for other things, so make sure your monthly housing costs (including HOA fees, taxes, insurance, etc.) are going to be no more than 25% of your monthly take-home pay.

If saving up to pay the total price of a house in cash isn’t reasonable for your family’s timeline, at least save for a down payment of 20% or more. Then you won’t have to pay for private mortgage insurance (PMI), which protects the mortgage company in case you can’t make your payments and end up in foreclosure. PMI usually costs 1% of the total loan value and is added to your monthly payment.

In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent’s commission. Calculate your expected closing costs to help you set your budget.

When you’re touring homes during open houses, pay close attention to the home’s overall condition, and be aware of any smells, stains or items in disrepair. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems like the air conditioning and the heating are.

If other potential buyers are viewing the home at the same time as you, don’t hesitate to schedule a second or third visit to get a closer look and ask questions privately.

In some states, a home inspection is conducted before buyers make a purchase offer. In other states, a home inspection is a contract contingency. A contract contingency means a buyer has the right to cancel the contract. You might not want to be locked into buying a home that has a faulty foundation, for example.

Sellers are generally not required to make repairs if problems are discovered during a home inspection. A home inspection is for the buyer’s edification. However, sometimes when a buyer gives a Request for Repair to the seller, rather than blow the deal, the seller will often agree to repair.

Your first home is a big purchase—maybe even the biggest one you’ll have ever made up to this point in your life! Because of that, you don’t want to risk messing this up. A real estate professional will take the weight off your shoulders by helping you find a home, negotiate a deal, and see the process through until closing.

For even more personalized ways to save money on your new home purchase, call Mitzi De La Cruz directly at (916) 871-8132!