Buying your first home can be both incredibly exciting and incredibly scary. Not only is it challenging to find the most suitable living space for you and your loved ones, but the process of actually purchasing a house can be difficult to navigate and often creates some real roadblocks for home buyers. 

This article will act as a short guide for those of you who are first-time home buyers, so you know what to expect from start to finish. Keep reading to learn about some of the most important steps you should take when buying your first home and get insight into the ins and outs of making such a big purchase.

Get Your Credit Score In Order 

Before you let a bank or another loan institution review your credit score, you’ll want to make sure it’s in a suitable range. To do that, you have to check your credit report, which pulls data from three big credit reporting agencies – Equifax, Experian, and TransUnion. This report is vital for calculating your Vantage and FICO scores. Fortunately, each of these agencies provides you with a free report once a year, and if you find any errors, you can report them before you apply for financing. 

Your credit score matters because the higher it is, the lower your interest rate will typically be. A credit score of 620 is required for a conventional loan, but you will be in a better position if you have a score of 740 or above. It’s important to keep in mind that the criteria surrounding credit scores differ from one loaner to another.

If you want to improve your credit score, you first have to know which factors have a direct impact on it. Some of the most important factors include: 

  • Total debt
  • Payment history
  • Length of credit history
  • Types of credit used

Figure Out What You Can Afford 

Once you apply for financing and get pre-approved, your bank will tell you the maximum amount of money you can get on a loan. However, you don’t have to wait for that moment — you should get a sense of what you can afford as early as possible. To get a ballpark estimate, you can use one of the many available online home affordability calculators offered by mortgage and loan companies. 

These calculators usually take into account how much you earn annually, your debts, preferred state, loan type, credit score, down payment, expected interest, and more.

Once you have a rough estimation of what you can afford to buy, you have to make a list of all the features that you want your home to have. Here are a few examples of what you can write down: 

  • Square footage and basic layout
  • Number of bedrooms 
  • Type of home
  • Proximity to school districts
  • Preferred location
  • Amount of land or other yard requirements

Get Pre-Approved for a Mortgage

Unless you’re in a position where you can afford to pay for a home with cash, getting approved by a lender will help you see what your final budget looks like. Along with that, most sellers prefer to talk with people who have already been pre-approved for a mortgage. To get pre-approved, you have to go through a process that includes having the lender calculate your debt-to-income ratio and assess your overall financial situation by looking at the following documents and figures:

  • Your income statements and tax returns
  • Bank statements and retirement accounts
  • Current rent, any down payments, alimony payments, and child support payments
  • Records of past foreclosures or bankruptcy
  • Debts like student loans and credit cards

Once you get pre-approved, you will receive a letter that lets you know how much money you can borrow and allows you to submit a pre-approved offer for your new potential home! Handing over a pre-approval indicates to the seller that you have serious intentions, which can make or break an offer — especially in today’s market. 

Start Looking for a Home 

Finding a good home on your own is a difficult task, which is why many prefer to hire a real estate agent to do the heavy lifting for them. In most cases, it’s the seller that pays a commission to the real estate agent, which makes this option even better as it’s also cost-effective. 

If you’re wondering what real estate agents can do that you cannot, here are a few examples: 

  • Give you an idea of what’s happening on the market, including new trends, developments, and buyer demands
  • Provide you with insight as to how much a particular home is worth and recommend an initial offer amount
  • Can negotiate and get you a lower price
  • Knows more about the area and can give recommendations
  • As a professional, a real estate agent typically has connections to trusted attorneys, contractors, and other vendors
  • Has to experience with home buying and will be able to guide you through the process 

When you start looking at a home, it’s vital that you check its so-called “health” with the help of a home inspection so you can make an informed decision. This will allow you to negotiate terms for sale and prepare you for any significant renovations needed in the near future. In other words, getting a full report on the home’s condition ensures that you know what you’re getting into. 

Make an Offer and Negotiate 

Once you’ve found a home you like and get an appraisal and an inspection, you can go ahead and make an offer for it based on the recommendation of your real estate agent. This is where they become truly helpful, as they often have an insider scoop on what the market is like and can help guide you accordingly. When making the offer, along with the CMA (comparative market analysis) calculation, you also have to take into account the following factors: 

  • Disclosures: These include the possibility of natural disasters, structural issues, or unpermitted work. Your seller needs to provide you with this information, so make sure you request it.
  • Closing date: When submitting an offer, you can request a later closing date so that it can fit your timeline. 
  • Contingencies: A contingency is an agreement between you and the seller regarding the conditions that have to be met in order for the deal to go forward. 
  • Earnest money: This is the sum of money that you have to put down when you make the offer in order to show that you have serious intentions of buying it. 

It’s vital to mention that not every offer will be successful, and the process can get disappointing at times. However, try to stay positive even if you don’t get your dream home on the first try. 

Get Homeowners Insurance 

Before closing on your mortgage, you will need proof that you own a homeowners insurance policy. If you already have a home, ask your agent to help you open a new policy. If you don’t yet own a home, then start looking around for the policy that best suits your personal needs. Additionally, some lenders will be willing to help you get а policy that can be paid for through your escrow account. 

Close the Deal and Start Moving

Typically, buyers like to take one last look at the home the day before closing so that they can be certain everything is still in order. It’s also a great way to check if the seller made the agreed-upon repairs. 

On closing day, you may have to spend a few hours signing papers, and you must also be prepared to pay closing costs, which are typically around 3-6% of the sale price. Once you’ve signed everything needed and the sale is recorded, you will get your keys, and you can start the moving process. 

In Conclusion

Buying a home can be simultaneously thrilling and terrifying. There are so many boxes you need to check and Ts you need to cross, and if this is your first time buying a home, we at Alpha Wealth Funds know that the process may feel overwhelming at times. 

Investing in your first property is no small task, and it’s essential that you make the best possible decisions for your financial future. If you feel like you could use some extra advice when making decisions about homes, mortgages, insurance, or anything else, our experts are more than happy to help out.

Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips, but I promise I will get them for you. Michael Torrence

Calendly link https://calendly.com/mt-awf/intro Work: 435.658.1934 Contact: 330.284.3211
Michael Torrence – Investment Advisor Representative: Michael was born and raised in Ohio and attended The Ohio State University. After College, he was commissioned as a 2ndLt in the United States Marine Corps. He attended his initial training in Quantico, Virginia, then graduated at the top of his Primary Aviator Class and was selected for the Strike (Jet) Platform.

Founded in 2010, our services include boutique hedge funds, separately managed accounts, financial planning, estate & trust services, private placements, and in-house concierge services for high-net-worth individuals, families, and businesses.

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