SourceBy Teri SilverChoosing the best commercial real estate to house your business isn’t just a matter of picking a building based on curb appeal. When looking for office or retail space, do
How to Navigate the Real Estate Process for First-Time Homebuyers
Dated: October 5 2023
Finally, it’s time to buy your first house! It’s an exciting time for sure, but where do you start? Inexperienced homebuyers can get lost in a sea of confusion while trying to figure out the real estate process. Knowing how the market works, and how to navigate the waters will help you reach that perfect anchor spot.
Before doing anything, research.
What are adjustable-rate mortgages and how do they vary from fixed rates?
How do property taxes, insurance, interest rates, and down payments figure into the deal?
Credit score, what’s that?
What type of house do you want? Single-family homes offer space but you have to worry about landscape maintenance, while townhomes and condos offer community living but you sacrifice living area. Maybe you’ve always dreamed of owning an Art Deco or Colonial-style home with picture windows.
The more you know about the process before you begin house-hunting, the more realistic your expectations will be. And realistic expectations lead to falling in love with the perfect property and one you can afford.
What’s in your wallet? A down payment is the amount of cash you can pay up-front. First-time homebuyers borrowing money from a bank or mortgage lender need a down payment.
As a standard, down payments are roughly 20 percent of the home’s selling price. But, depending on the lender, a mortgage might be lower. Some organizations like the Veterans Administration may have a better deal for those who qualify, and the Federal Housing Administration requires lower down payments for eligible buyers.
Bad credit will affect obtaining a lower-interest loan. Credit scores are three-digit numbers that indicate how well you’ve paid off credit cards and other debts (like student loans). The idea is for the lender to guess the odds that you will pay your mortgage, and on time. Check your credit score and fix any issues with credit cards or high-interest debts. Pay them off, if possible before pursuing your dream house.
Getting pre-approved for a mortgage loan is one of the most important steps, especially for a first-time homebuyer. Talk to loan officers at a few different mortgage companies to compare their ways of doing business. Mortgage lenders will check into your financial background—debts, income sources, financial obligations—and decide whether to loan you money and what the monthly payment should be. This information lets you search for homes you can realistically afford.
Hire a Real Estate Agent
Having an experienced real estate agent helps new homebuyers understand the ins and outs of the buying process. The seller pays the agent’s sales commission—that means first-time home buyers won’t be paying for help with finding the right house and negotiating a sales price.
Real estate agencies have thousands of house listings to go through and they know the area you’re looking at. For example, the experts at Avast Realty specialize in properties across Georgia, Alabama, and Florida. These experts will provide more detailed information about neighborhoods and price ranges to help you find your perfect home.
Now that you know what you can afford, it is time to get serious about house-hunting. Are you looking for a new build? Fixer-upper? How good are you at DIY projects? Listings are all over the internet. Start there before checking out your favorites in person.
After making an accepted offer, hire a qualified home inspector to check out the house completely. An inspection can uncover hidden issues like mold, cracked foundations, termites, or serious damage. It also gives you negotiating power. If the inspection uncovers significant issues, you can request repairs, a price reduction, or credits for addressing the issues after purchase.
Home appraisals are NOT the same as loan pre-approvals. Mortgage lenders insist on home appraisals, so they can be sure it’s a good investment. Appraisals help establish a listing price for the property and many local governments use appraisals to determine your future property taxes.
Make an Offer
You know what the sales price is, now, what’s your offer? Before making an offer, consider how competitive the real estate market is. Does the house need a lot of repairs or upgrades? Is the seller “desperate” to close the deal? Is it a short sale?
If you really love the house, be careful. Lowball offers are risky. Will the seller come back with a counteroffer? Will you lose the house to another bidder? What are other houses in the neighborhood selling for? Ask your real estate agent for help with negotiating offers and the ultimate sales price.
The buyer-seller negotiation dance can be daunting and stressful (for both sides). Be prepared to increase your offer if you really want the house.
Offer letters are legal documents stating that you want to purchase the house. Consult your real estate agent, or if you’ve opted not to have one, talk to a real estate attorney. Offer letters are an involved process that, if not done properly, can cause you a lot of legal trouble if the seller accepts your offer but you don’t follow through with the deal.
Earnest money is NOT a downpayment, but a showing of good faith that you’re really wanting to close the deal. Earnest money is deposited into an escrow account to be held until closing. The amount of earnest money depends on the home price (usually 5 to 10 percent of the sales price) but that can be negotiated.
Closing the deal, escrow, settlement—they all mean the same thing. After the price, contingencies, and any other sales elements are worked out, the buyer, seller, title agency, real estate agents, mortgage representatives, and others get together to seal the deal. You’ll need the down payment, applied closing costs, and any extra loan processing fees.
No doubt about it, buying a house is not a simple transaction. But when the keys are in your hand, open that front door and smile … It's a new beginning.
Teri Silver is a journalist and outdoor enthusiast. She and her husband live on 5 acres with a vast lawn, three gardens, a farm, a pond, many trees, and a lot of yard work! The best parts of the year are summer and fall when home-grown veggies are on the dinner table.
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