What is the process of buying a home for the first time if you want to save money? The dream of most Americans is to own a home. If you are like one of them, you need to pay rapt attention to this step-by-step guide for purchasing a home.
1. Start saving a mortgage deposit
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If you are looking forward to buying a home for the first time, the best way to start is to save a mortgage deposit. Most mortgages will require you to deposit at least 5% of the price of the property you intend to buy.
If you want to buy a house worth $600,000 in Washington DC, the mortgage deposit you will be required to make is $30,000. The 95% mortgage of $570,000 can be borrowed. If you are able to save more, it means you will be getting a lower interest rate when you apply for a mortgage. The difference will tell you how much you can borrow. Here’s an article that explained exactly how to get a mortgage fast.
2. How much can you borrow? Find out
Your income level, size of deposit and credit score are some of the key factors that will determine how much you can borrow from your mortgage provider. These factors also apply if you are buying a home for the first time as a group.
Beyond the amount you might be getting from your mortgage lender to augment your deposit, it’s important you make a budget for other additional costs of buying a property in North America. Some of the key additional costs of purchasing a property are conveyancing, surveys, stamp duty for a first-time buyer, etc.
3. Take time to explore the area you are buying your first home
One of the biggest challenges you will face when buying a home for the first time is choosing a bad area. There are areas you wouldn’t want to raise your children because of their high risk. There are also areas that are guaranteed to appreciate at price over time because it’s a business district.
Before purchasing a house for the first time, take your time to explore your neighborhoods. How many restaurants, shops, hospitals, schools and recreation centers can you find around? What does the general atmosphere feel like? Does the place have a high crime rate? Is it prone to flooding?
Don’t just take the word of the seller for it, do some quick research by yourself. Verify this information from the flood maps created by FEMA. Flood maps from FEMA are one tool that communities use to know which areas have the highest risk of flooding.
It’s important you check out these things before signing the papers.
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4. It’s time to apply for an agreement in principle for a mortgage
What is a mortgage agreement in principle (AiP)? Some call it a mortgage in principle. Some call it a decision in principle. A mortgage agreement in principle helps you work out how much you could borrow from a mortgage lender.
The details you’ve provided about your income, spending and debts are what will determine if your bank or mortgage lender will give you the amount you requested for. If you are able to apply for AiP and get it, the property seller will be more interested to do business with you because they believe in your capacity to afford the house.
This reassurance from the mortgage lender on their willingness to lend is important to a first-time buyer. With this reassurance letter in your hands, it’s time to approach a reliable estate agent near you.
5. Reach out to as many real estate agents near you as possible and register
You’ve gone through some property listings to ascertain the price range for the property you want to buy. You’ve started saving the mortgage deposit and even got your mortgage agreement in principle. And you’ve explored the area, it’s time to start registering with local real estate agents near you.
It doesn’t cost a dime to register with an estate agent near you. Let’s assume you want to buy a house in Fremont, California. A quick search on Google My Business for “Real estate agents (or agencies) in Fremont, CA” or on LinkedIn will give you an endless list of local agents ready to help you find a good home to buy.
Knowing that you are a first-time buyer can make them follow up more closely so that they can build a long-lasting business relationship with you. Before listing a property online, these agents reach out to already registered buyers.
6. Physically examine the property by yourself
If you truly want to save money when buying your first home, you need to physically examine the property by yourself. Don’t rely on the videos sent to you by your agent. You need to view it by yourself.
No amount of time spent viewing the images of different houses on property portals online can equate to the 5 minutes physical tour you will have on the property.
Many first-time home buyers have said that location is the most important factor they consider when buying a house. In addition to that, everything about the house matters to them. When you physically examine the property, you will have a deeper understanding of the property.
After you’ve examined the properties suggested to you by your estate agents, and chosen the one that suits your budget, it’s time to make an offer.
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7. Make an offer to the seller
The fastest way to make an offer that will be accepted by the seller is to find out the amount similar properties in the neighborhood are sold. Armed with this information, you can start by offering something that’s below the asking price. But there’s an exception to this if it’s a hot market.
How do you make an offer for a property that is in hot demand and win? There are two ways to do it. Firstly, start by offering the asking price or slightly above that. Secondly, present yourself in the best position to match the future plans of the seller, meaning that you as the buyer should try to establish a seller’s motivations for selling.
Once you are able to offer a good price and also fit into the seller’s motivations for selling, the house is yours. Buying a home for the first time can come with a lot of challenges. You need to create a system for navigating them.
Once you’ve made an offer it is accepted, demand that it should be put on paper and that they take it off the market. Use that opportunity to apply for a mortgage. Take a look at other things you need to know before you purchase a house.