Buying your first home is an exciting experience. Everyone has their own unique experience, but it is common for excitement to sweep you away and bring about circumstances and decisions you were not anticipating.
Always keep in mind this is a business transaction and that each decision you make will have long-lasting ramifications.
Here are five essential factors that you should know when buying your first home:
Any home purchase begins with the execution of a contract. The purchase of a home is a business transaction. And you are entering into a legal agreement with your seller.
The contract is typically a form document that the real estate agent will have both parties sign. Pay particular attention to the responsibilities of the buyer since you will have specific deadlines to meet.
Your first deadline will be for the mortgage to be approved. You will also have a certain amount of time to have the home inspected, to conduct a title search and for closing to take place.
Many of these terms may be foreign to you. You must become familiar with them because you will hear them over and over during the process.
What’s in a contract?
The contract itself contains rights and remedies for the seller and the buyer. It may require that you place a certain amount of money into escrow. If it does, there will be certain terms that will allow the seller to keep that escrow if you default.
Consider retaining an attorney to explain the contract to you so you do not sign a document that you do not understand.
Unless you are buying your first home with cash, you will need to apply for a mortgage. You need to have an approved mortgage to close on your home.
You should shop around for the best mortgage rates and broker/lender with whom you feel most comfortable. This is important because you will be dealing with your lender regularly up until the day of closing. Try to select a company that you can meet in person and not just talk online.
Get the best rates and obtain a loan estimate from your lender. The estimate will contain the costs you will pay to your lender for getting you the loan.
Make sure to keep within your budget. Lenders often have fees that can become very expensive. Don’t be afraid to ask the right questions and negotiate the fees.
You will have to hire a home inspector to check the property for safety and habitability. The inspector will check the roof, the foundation, the basement. They would also check for termites, asbestos, mold, and structural integrity. You will be able to use the home inspection items to negotiate the price down further if they are significant.
A typical home inspection could cost between $350-$400. Go through the home inspection report carefully. Once you buy the home, these issues are yours to deal with. You do not want to buy someone else’s headache.
If you are applying for a mortgage, you will need title insurance. It insures the title of the home against judgments, unpaid taxes, or the actions of prior owners.
If a prior owner hired a contractor and did not pay them, any liens against the property are the responsibility of the previous owner.
Title insurance will protect you against instances such as this or if taxes or other judgments have not been paid.
Your lender will require a policy to protect them-that is called a lender’s policy. As an owner, you will have the option to have an owner’s policy issued. You should obtain quotes from different title insurance companies before picking one to handle your transaction.
In most states, title insurance companies handle the entire closing. They will collect the mortgage funds and disburse them at closing. They will also likely hold your escrow until the sale is finalized.
The closing date is an estimate. It will depend on several factors. Mainly, it depends upon the issuance of your mortgage commitment. Only once your mortgage has been approved and cleared can you truly schedule the closing.
You cannot close until your mortgage is approved and cleared for closing.
It is very difficult for a lender to give you an exact closing date. Therefore, do not plan movers or anything of that sort just yet. Make sure your mortgage is approved first and cleared for closing.
What to Expect
These are only five of the most important factors that you should be aware of when buying your first home. It is advisable to align yourself with an experienced Realtor and local attorney who handles such matters to limit the number of surprises.
Should there be unexpected circumstances, your realtor and attorney can handle them. If you do not have them on your side, you will be left to handle these matters on your own.
If you have never purchased a property before, consider working with experts.
Remaining aware of the aforementioned is critical. Consult with and retain the most experienced local realtor and attorney. This way, you could cut down on unnecessary stress during what should be a pleasant and enjoyable process. Above all else, focus on what matters: enjoying your new home!