First Time Home Buyer Tips

Buying a home for the first time can be an exciting yet daunting experience. It is a significant investment, and it is crucial to do your research and be prepared for the process. In this article, we will discuss some important tips for first-time home buyers.

Downpayment

A downpayment is the amount of money you need to put down towards the purchase of your home. Most lenders require a downpayment of at least 20% of the purchase price to avoid paying private mortgage insurance (PMI). However, there are other options for those who cannot afford a 20% downpayment.

One option is an FHA loan, which allows first-time home buyers to put down as little as 3.5% of the purchase price. There are also USDA loans in rural areas which will allow you to put 0% down. If you have served in the US Military you may also be eligible to use a VA loan. This loan also requires 0% down. Finally, conventional loans will allow anywhere between a lower 5% downpayment requirement up to the standard 20% that most people are familiar with.

It is important to consider your financial situation and determine what option is best for you. We recommend speaking with a knowledgeable lender to find the best loan product for your personal financial situation.

Inspections

Before purchasing a home, it is essential to have a home inspection. A home inspection is a thorough examination of the home's condition by a professional inspector. The inspector will look for any issues or potential problems, such as structural damage, electrical problems, or plumbing issues.

It is important to attend the inspection and ask questions to understand any issues found. If there are any significant issues found, you may be able to negotiate with the seller to have them fixed before closing or adjust the purchase price accordingly.

Earnest Money

Earnest money is a deposit you put down when making an offer on a home. It shows the seller that you are serious about purchasing the home. The amount of earnest money varies but is typically1-3% of the purchase price.

If the sale goes through, the earnest money is applied towards the downpayment or closing costs. If the sale falls through due to a contingency, such as a failed inspection or financing, the earnest money is typically returned to the buyer but this doesn't occur in all cases. You'll want to speak to your Realtor to get all the details for your situation. 

Appraisal

An appraisal is a professional evaluation of the home's value. Lenders require an appraisal to ensure they are not loaning more money than the home is worth. The appraisal is done by a licensed appraiser and takes into consideration the home's condition, location, and recent sales of comparable homes in the area.

If the appraisal comes back lower than the purchase price, the lender may not approve the loan for the full amount. In this case, the buyer can try to negotiate with the seller to lower the purchase price or come up with additional funds to cover the difference.

In Conclusion

Buying a home for the first time is a significant milestone. It is important to do your research and be prepared for the process. We recommend that you speak with one of our highly trained and skilled professionals in detail to make the house buying process as smooth as possible, and avoid possible pitfalls.

By following these tips, you can navigate the home buying process with confidence and find the home of your dreams.