Homebuying Process for First-Time Homebuyers
Buying a home is a long and, sometimes, overwhelming process. That’s especially true for a first-time homebuyer. However, with some self-education, good planning and preparation, the process can be smooth and less stressful. Let’s look at the 11 steps of the homebuying process for first-time homebuyers and what to expect along the way.
Step 1: Prepare your finances
Knowing your budget is the first step in buying your first home. Many first-time homeowners make the mistake of spending more than they can afford on a home. These buyers then become “house poor,” buying a home that costs more than their budget allows.
Here are some tips for preparing your finances ahead of the homebuying process:
- Set a realistic budget for your monthly mortgage payment.
- Boost your credit score before applying for a mortgage by making full and on-time payments, not opening too many new credit cards and keeping your credit utilization low.
- Save for a down payment.
Once you have your finances worked out, you can start shopping for a mortgage.
Step 2: Choose a lender
You can choose to take out a home loan through a financial institution or a private lender. When researching potential lenders, read online reviews and look for lenders that offer excellent service experiences, reasonable closing costs and fees, transparency, and favorable rates.
Scott Credit Union offers competitive rates and personalized loan options, such as a 100% financing no money down home loan. Our Mortgage Loan Originators help simplify the home loan process and help answer your questions every step of the way.
Scott Credit Union also offers free Homebuyer Seminars, led by professionals who can answer your home buying questions. You can learn more about the process of buying your first home and receive a lender credit* when you apply for a home loan through SCU.**
**Discount will appear as a Lender Credit on the closing disclosure.
**Excludes construction loans and lot loans. Scott Credit Union NMLS #415767.
Step 3: Get preapproved for a mortgage
Once you’ve chosen your mortgage lender, you can apply for a preapproval on your loan. Depending on your lender, the preapproval process can take several months, or just a few days. The lender will ask for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan.
When they have determined how large a loan you are eligible for, they will grant you a preapproval letter.
Step 4: Find a real estate agent
A real estate agent can help you find the perfect home that fits your budget and preferences. They have access to a broad range of homes on the market and can negotiate on your behalf.
Step 5: Find your dream home
Once you have a pre-approval and a real estate agent, it’s time to start shopping for homes.
Here are some tips to keep in mind as you look for your dream house:
- Know what you want. Make a list of your must-haves before you start house-hunting. Is a large backyard a deal-breaker for you? Do you need a specific number of bedrooms? Knowing what you want will help you narrow down your options.
- Be prepared to negotiate. The seller may counter your offer, so be prepared to negotiate on the price. Your real estate agent can advise you on the best course of action.
- Beware of red flags. Inspect a home thoroughly before considering it for a purchase. Look for structural issues, like doors that don’t close, cracks in the foundation and sagging ceilings as well as the presence of mold and unexplained smells
Step 6: Make an offer
If your offer is accepted, the deal will officially be “under contract.” At this point, you’ll likely need to pay a portion of the down payment.
Home sales are typically under contract for 4-8 weeks, though this can vary.
Step 7: Get your mortgage
As soon as your offer has been accepted, your mortgage lender will get to work on the details of your loan. If you’ve gotten a preapproval, you should have most of this ironed out already, though the final number-crunching will depend on the loan amount, the property value, the type of mortgage you choose and the size of your down payment.
Throughout this time, you’ll need to provide your lender with various financial documents and sign a host of documents as well.
Step 8: Schedule a home inspection
Hire a professional home inspector to thoroughly check out the home. This will reveal any issues with the home that you may not have noticed. If the inspection uncovers any major issues, you can choose to walk away from the deal, or to negotiate with the seller for a lower price.
Step 9: Obtain homeowner’s insurance
Homeowner’s insurance is necessary to protect your investment. Shop around for the best rates and coverage and make sure you have a policy in place before the closing date.
Step 10: Schedule an appraisalThe home appraisal, which determines the actual value of the home, assures the lender the loan details fit within their policies and regulations. Your lender will likely choose the appraiser, though the homebuyer usually pays for and schedules it.
Step 11: Close and move in
Congrats – you’ve made it! You’re ready for the closing, which is when the property will change hands. Be sure to set aside several hours for the closing and to come prepared with all the funds you need to cover the remainder of the down payment and all closing costs and fees.
Once you’ve closed, the home is yours. All that’s left to do now is to pack up and move into your first home. Best of luck in your new home sweet home!
If you’re in the market to buy your first home, the professionals at Scott Credit Union can help! With competitive rates and personalized home loan options, our mortgage lending team can guide you through the application and closing process. You’re also invited to join us at any of our upcoming free Homebuyer Seminars to learn more about purchasing your first home.
