Buying your first home is exciting.
It can also be confusing.
You may be wondering:
How much money do I need?
Does my credit score need to be perfect?
Should I talk to a real estate agent or a lender first?
How do I know what I can afford?
What happens after I find a house?
And what exactly are closing costs?
If you’ve never purchased a home before, you’re not supposed to know all of this.
That’s why you have professionals helping you.
I’ve been in real estate since 2001, and one thing I want first time buyers to understand is that asking questions is part of the process.
You don’t need to know everything before you call me.
In fact, I’d rather you call me before you think you’re completely ready.
Let’s walk through the process.
First: You May Be Closer to Buying a Home Than You Think
One of the biggest misconceptions I hear is:
“I can’t buy a house because I don’t have 20% to put down.”
You may not need 20%.
Depending on your qualifications, the property and the loan program, there are financing options that may require considerably less.
Some eligible buyers may even qualify for financing or assistance programs that significantly reduce the amount of money needed upfront.
There are also programs that may help with down payment or closing costs for qualified buyers.
The important words there are “may” and “qualified.”
Every buyer’s financial situation is different, and loan programs and requirements can change.
That’s why I don’t want you eliminating yourself from homeownership based on something you heard years ago or something a friend told you.
Talk to a knowledgeable mortgage lender and find out what options may actually be available to you.
If you need a lender referral, I can help with that.
Your Credit Doesn’t Necessarily Have to Be Perfect
Another common misconception is:
“My credit isn’t perfect, so I can’t buy a house.”
Don’t assume that.
Different mortgage programs can have different credit requirements.
Your credit score is important, but lenders may also consider other factors when determining whether you qualify and what loan options may be available.
If your credit isn’t currently where it needs to be, that doesn’t necessarily mean homeownership is off the table forever.
It may simply mean you need a plan.
A knowledgeable lender can review your financial situation and tell you what steps may help you become mortgage ready.
Sometimes the smartest first step toward buying a home isn’t looking at houses.
It’s finding out exactly where you stand.
Talk to a Lender Before You Start Shopping
I know.
Looking at houses is much more fun than talking about mortgages.
But getting preapproved early is one of the smartest things you can do.
A lender can help you understand:
- How much you may qualify to borrow.
- Your estimated monthly payment.
- Potential down payment requirements.
- Estimated closing costs.
- Available loan programs.
- How taxes and insurance may affect your payment.
And here’s something important:
The maximum amount a lender says you qualify for doesn’t have to be the amount you spend.
I want you to think about the payment you’re comfortable making each month.
There is a difference between:
“I qualify for this.”
and
“I’m comfortable spending this.”
That’s the number that matters.
Remember: Your Mortgage Payment Isn’t Just Principal and Interest
When first time buyers estimate what a house will cost each month, they sometimes look only at principal and interest.
Your actual housing expense may include more.
Depending on your financing and property, that can include:
- Principal and interest
- Property taxes
- Homeowners insurance
- Flood insurance, when applicable or chosen
- Mortgage insurance, when applicable
- HOA dues, if applicable
That’s why I want you evaluating the total cost of owning the property, not simply the purchase price.
Two similarly priced homes can potentially have different monthly ownership costs.
Next, Let’s Talk About What You’re Actually Looking For
Once we understand your financing, we can start talking about the house.
How many bedrooms do you need?
How many bathrooms?
Do you want newer construction or an established home?
Would you like a larger yard?
Do you need a home office?
Garage?
Workshop?
Swimming pool?
What areas are you considering?
How far are you comfortable traveling to work or the places you regularly visit?
What price range gives you a monthly payment you’re comfortable with?
Those are objective criteria we can use to build your search.
My job isn’t to tell you where you should live.
My job is to listen to what’s important to you and help you identify properties that meet the criteria you’ve established.
You’ll Need a Written Buyer Agreement
This is something that may be new to you.
Before we begin touring homes together, we’ll discuss and sign the appropriate written buyer agreement.
The agreement establishes our working relationship and addresses things such as the services I’ll provide and how my brokerage may be compensated.
Don’t let the paperwork intimidate you.
I’ll explain it.
I want you to read it.
I want you to ask questions.
And I want you to understand what you’re signing.
I’ve written a separate article explaining buyer agreements in more detail because I think buyers should understand this part of the process before they start looking at houses.
Now We Can Start Looking at Homes
This is the part everyone has been waiting for.
But here’s some advice:
Don’t get distracted by things that are easy to change.
Paint colors can change.
Light fixtures can change.
Flooring can change.
Cabinet hardware can change.
Instead, pay attention to the things that may be more difficult or expensive to change.
The overall condition of the home.
The floor plan.
The lot.
The roof.
Major systems.
The location.
And whether the property fits your budget and the criteria you’ve established.
The prettiest house isn’t automatically the best purchase.
You Found a House. Now What?
This is where first time buyers sometimes think:
“Great! We’re almost done.”
Not quite.
Finding the house is only one part of the process.
Now we need to decide whether you want to make an offer.
We’ll discuss the property, available comparable sales and current market conditions.
Then we’ll talk about the terms you may want to include in your offer.
Price is important.
But an offer contains more than a purchase price.
Depending on the transaction, we’ll also be considering things such as financing, deposit, inspection terms, closing date, seller concessions and other contractual provisions.
I’ll explain the offer before you sign it.
You should understand what you’re agreeing to.
What Is a Deposit?
When you make an offer, the contract may require a deposit.
The deposit is not simply an extra fee added to the price of the house.
How deposits are handled depends on the contract and circumstances.
I’ll explain the applicable provisions before you make your offer so you understand the amount, deadlines and what the contract says about the funds.
This is another reason you don’t want to wait until you’ve found your dream house to learn how the buying process works.
Then Comes the Inspection
Once you’re under contract, you’ll typically have an opportunity to conduct inspections according to the terms of your purchase agreement.
A home inspector may evaluate many of the home’s visible and accessible components and systems.
An inspection isn’t about finding a perfect house.
There is no perfect house.
Even new construction can have items that need attention.
The purpose is to learn more about the property’s condition so you can make informed decisions under the terms of your contract.
Depending on what is discovered and what your contract provides, there may be additional decisions or negotiations.
I’ll help you understand the real estate process surrounding those decisions.
For technical questions about a condition or repair, we’ll rely on the appropriate qualified professional.
Don’t Forget About Insurance
Please don’t wait until the last minute to investigate insurance.
In South Louisiana, homeowners insurance and flood insurance deserve attention early in the buying process.
When you’re seriously considering a property, you’ll want to investigate things such as:
- The cost of homeowners insurance.
- Whether flood insurance will be required by your lender.
- Whether you want flood coverage even if your lender doesn’t require it.
- The property’s flood zone designation.
- Information about prior claims or flooding when available and relevant.
Insurance costs can affect the total monthly cost of owning a home.
That’s information I want you to have before closing, not after.
What Is an Appraisal?
If you’re obtaining a mortgage, your lender may require an appraisal.
The appraisal is performed for the lender to develop an opinion of the property’s value for the lending decision.
An appraisal is not the same thing as a home inspection.
The inspector is evaluating aspects of the property’s condition.
The appraiser is developing an opinion of value for the lender.
Those are different jobs.
If the appraisal creates an issue with the transaction, we’ll look at the contract and circumstances and discuss the appropriate next steps.
What Are Closing Costs?
Your down payment isn’t necessarily the only money you’ll need when purchasing a home.
There may also be closing costs and prepaid expenses.
Depending on the transaction and financing, these could include lender related charges, appraisal costs, title related expenses, insurance, prepaid taxes or insurance, and other costs.
Your lender will provide the appropriate loan disclosures and estimates for your financing.
And here’s something many first time buyers don’t realize:
In some transactions, it may be possible to negotiate for the seller to contribute toward certain buyer costs, subject to the contract and financing requirements.
It isn’t guaranteed.
But it’s something we can discuss when we’re developing your offer strategy.
Please Don’t Make Major Financial Changes Before Closing
This is important.
Once you’re under contract and your mortgage is being processed, don’t assume your financing is finished.
Before making a major financial move, talk to your lender.
That can include things such as:
- Buying a vehicle.
- Financing furniture.
- Opening new credit accounts.
- Making unusually large purchases on credit.
- Changing employment.
- Moving significant amounts of money between accounts without documentation.
Your lender can tell you what may affect your loan.
That new living room furniture can wait until after you own the living room.
Then Comes Closing Day
Once the contractual requirements have been addressed, your lender has completed the necessary financing steps and the transaction is ready to close, you’ll sign your closing documents.
There will be a lot of paperwork.
That’s normal.
Ask questions when you have them.
Once the transaction has been completed and you’re entitled to possession under the terms of the sale:
Congratulations. You’re a homeowner! 🎊🍾🥂🏡🔑
And yes, that’s a pretty exciting day.
First Time Buyer? You Don’t Have to Figure This Out Alone.
If you’re thinking about buying your first home in Lafayette or the surrounding Acadiana area, you don’t need to wait until you’ve mastered the entire home buying process before contacting me.
That’s backwards.
Call me first.
We’ll talk about where you are right now.
If you’re ready to buy, we’ll develop a plan.
If you need to talk with a lender first, I can connect you with a knowledgeable mortgage professional.
If you’re several months away, that’s okay too.
I’d rather help you understand the process early than have you discover something important after you’ve already fallen in love with a house.
I’ve been helping buyers and sellers since 2001, and I don’t expect a first time buyer to know what I know.
That’s why you hire experienced professionals.
Ask the questions.
Even the ones you think are silly.
I promise you probably aren’t the first person who’s asked them.
Buying your first home is a big deal.
Let’s make sure you understand what you’re doing every step of the way.
Melanie Nash, Broker/Owner
National Realty of Acadiana LLC
Lafayette, Louisiana
nationalrealtyacadiana.com
Local Expertise. Personal Service. Proven Results.
National Realty of Acadiana LLC provides equal professional service without regard to race, color, religion, sex, disability, familial status, national origin or any other characteristic protected by applicable law.
This article is for general informational purposes and is not legal, tax, lending or financial advice. Mortgage programs, interest rates, credit requirements, down-payment requirements, assistance programs, insurance costs and eligibility requirements can change and vary by borrower, lender and property. Buyers should consult qualified lending, insurance, legal and other professionals regarding their individual circumstances.