Steps Buying Your First Home

So you are looking to become a homeowner and you have no idea where to start, am I right?

Great, I can help you with that!

Buying your first house is a very big step and the journey isn’t always easy, but when you get the keys to your new home it is the most rewarding feelings ever.

Home Buying in 12 Steps

The Home Buying Journey

Knowing what tools are at your disposal should be the first step to research.

How do I do that?

Very easy, by creating a relationship with experts, this will help you get the job done and the protection you need!

Which Experts Am I looking for?

  • Real Estate Agent
  • Loan Officer
  • Home Inspector
  • Attorney and/or Closing Agent

1-Real Estate Agent

Ok, but I cannot really afford a Real Estate Agent to help me with the process of the house buying. So I prefer to skip that part.

Not so fast! Unless you chose to personally compensate an agent, you don’t have to pay your real estate agent. What I mean by that is if you get a real estate agent to help you with for sale by owner or any other property not listed by a realtor, then yes, you would be responsible for the real estate agent commission.

Otherwise, the buyer’s agents are paid from their broker who receives the commission from the listing broker. The real estate commission is pre-determined by the seller in the listing agreement, so it is not coming out of your pocket!

2-Loan Officer

A loan officer plays a big part in the process.  Nowadays most Realtors will not show you houses unless you have a mortgage pre-approval on hands.

 

What Does Mortgage Pre-Approval Mean?

A mortgage pre-approval is a commitment from your lender that after verification of the documents submitted to them, they will provide you with home financing up to certain loan amount.

How do they determine the amount that they will lend me?

There is a formula the lenders use to qualify you based on the gross income (before taxes)

Most of the lender will use 28-36 rule to determine what you can afford and how much money they’re willing to lend you. It is also known as the front-end ratio and the back-end ratio.

Here’s how it works:

They will take the new housing expenses (PITI=Princial Interest Taxe and Insurance) and divide it by your gross monthly income which will determine your front end ratio.

The back end ratio will be determined the same way, but this time we will be adding all your monthly debts to your new housing expenses and divide it by your gross monthly income.

This rule applies to conventional loan only. There are many other loans available to first time home buyers with a slightly different ratio, FHA and VA also use different ratios.

3-Home Inspector

Who pays for the home inspection?

The buyer pays to have the house inspected.

When do I set up the house inspection? Is it just before closing?

No, when writing up the offer, your agent will normally set it up like “inspection to be done within 3 to 5 business days from the acceptance of the contract”.

The buyers hire their own inspection company. Your Realtor can certainly refer you some companies that they have been working with in the past, but it is totally up to you to decide who will inspect the house as long as they are licensed certified inspector.

Remember: A Home Inspector Is Your Protector!

They help you make sure that the house isn’t hiding anything.

They will also identify any reasonably visible problems with the house like a leaky roof, faulty plumbing, etc. Hiring an inspector, it is you, doing your due diligence.

Before making an offer, your real estate agent will ask the seller agent to provide her/him with the Seller’s Disclosure. This is a document that the seller has to fill out about his property at the time of the listing. The statement lists any flaws the seller is aware that could negatively affect the home’s value.

Before an inspection, the home inspector will review the seller’s disclosure. (Each state has its own requirements for what sellers must disclose on these forms; some have stronger requirements than others.)

What is the duty of a home inspector?

  • Identify problems with the house
  • Suggest fixes
  • Estimate how much repairs might cost
  • He or she produces a written report including photos, that details any issues with the property. This report is critical to you and your agent — it’s what you’ll use to request repairs from the seller.

Negotiation Time

Now that you received your inspection report it is time to negotiate!

By law, there are certain repairs that the seller is obligated to effectuate, but, again the law is not the same everywhere.

Most sales contracts require the seller to fix: 

  • Structural defects
  • Building code violations
  • Safety issues

4-Attorney and/or Closing Agent

The big day has arrived!  Soon you will become a Homeowner!  How exciting!

3 Days Prior To Closing

Your lender must provide you with a Closing Disclosure, which will look very similar to your Loan Estimate.

Very Important

Make sure to double check the interest rate and all other personal information for accuracy. Contact your lender immediately if something appears different than what you were told!

Double check again the mortgage note rate at closing to make sure it is the rate you were told after they lock in the loan!

The Closing Disclosure will detail information about your mortgage loan and the exact amount you’ll need to bring to closing to cover closing costs.

On the day of closing, you’ll receive the following paperwork:

  • Mortgage note stating you agree to repay the loan
  • Deed of trust to secure mortgage note

What do I need to bring at closing?

  • Picture ID
  • Cashier’s Check in the amount that the closer would have told you to bring.  DO NOT bring cash nor personal check!
  • Homeowner Insurance
  • Any other document required by your lender

Congratulations!  You are now a Proud First Time Homeowner!

8 Comments

  1. We lived in our home for 35 years so things have changed a bit since then. Since we recently retired we sold out home in New York and then bought our home in Florida.
    Hiring a realtor is well worth the money and even more so for a home inspector! I believe it’s about $500 but you can’t buy a home without one.
    You have everything laid out perfectly for a first time buyer. It takes a lot of the guess work out of the biggest purchase that you’ll ever make!
    I’m passing this on to my daughter who is looking to but her first home. Thank you!

    1. Hi Rob, thanks for your comment! Yes, those steps are all very important. I never suggest my client to waive their right to inspect as it is a very important step! Of course, if you buy REO. Foreclosure then you have no choice, you have to buy as-is

  2. My wife and I hope to someday own a home, but as you surmised, we really had no idea where to start.

    I found your post helpful because it gave me a better idea what to expect when we decide to go down the road toward home ownership.

    Are you a real estate agent by chance? I went looking for an “About” page or something but was unable to locate anything that shows your credentials and such.

    1. Hi Drew! I am glad my article help you. I know as a first time homebuyer it gets very confusing and scary. We have no idea where to start. I am sorry about my ~About~ page. It is in review right now. As soon as I publish it I will send you an email. I have been a licensed real estate agent for over 22 years!

  3. Wife and I are thinking about buying our first home. Not knowing what to expect has made it seem a bit more nerve racking than it really is. I am glad you laid it all out step by step. I understand the process a lot better now. The only part I was unclear about was what costs might come for a buyer getting the inspection, and do you have to still buy a house if an inspector finds hidden problems?

    1. Hi Waldmann! I have to admit first-time homebuyer is very confusing and scary. I was there once too 🙂 The cost of the inspection varies depending on your location and the size of the house. As for your other question, no you do not have to purchase the house if the inspector finds hidden problems that were not disclosed by the seller on the seller disclosure. You can always go back to the negotiating table as well!

  4. This was insanely insightful for me.
    We have been looking into buying a house with my wife.

    I had the illusion that you pretty much go and see the house. Decide on it and just buy it. Of course, negotiations with the bank and all that, but I thought that there’s nothing more to it.
    The inspection for the house makes so much sense (in a sense it’s similar to cars), you never want to buy a cat in the bag.
    I’m not sure, if people in your country are familiar with the expression, but all that it really means is to by something without really taking a look at it. And then what you get is at times not the thing you hoped or anticipated for.

    Thank you for all the great advice!
    Cheers and have a Great One!
    Matiss

    1. Author

      Hi Matiss! Thanks for stopping by and comment! That is exactly why I wrote this article. You are not the only one thinking like this. It used to be that you go look at houses and do the mortgage qualification after but it was such a waste of time for everyone. I am glad I was able to help you. Don’t be a stranger, ask away I will always get back to you.

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