How to Buy a House for the First Time

How to Buy a House for the First Time? Discussing the Basics of Home Ownership

Purchasing a home for the first time can be a daunting experience, but it’s also a significant milestone for many people. 

Regardless of your age or financial situation, there are several key considerations to take into account when making this life-changing decision. 

This guide ‘ How to buy a house for the first time” will provide you with home-buying tips and valuable advice on navigating the challenges of buying a home for the first time, from identifying your priorities to securing the right financing and finding your dream home.

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Who is Qualified to Buy a House for the First Time?

Apart from the specialised loans and mortgage schemes you will get as a first-time home buyer, a specific eligibility criterion qualifies you as a first-time home buyer.

 By considering these qualifications, you can access hundreds of government-based benefits, and your journey to becoming a homeowner will become easy, quick and hassle-free.

 So, here we have discussed the eligibility criteria for first-time home buyers. Let’s have a quick look at them!

  • The person should be financially stable enough to pay the down payment of the house as low as 3% as most of the loans and mortgage schemes come with 3% or 3.5% as a down payment ratio.
  • Technically, a minimum 500 credit score is required for buying a home for the first time. But based on the mortgage and loans scheme, having a 680 credit score will qualify you for the loans.
  • The debt-to-income ratio of the person falls below 43% overall.
  • The person must have a clean credit history.
  • The person has a stable income and at least two years of job history in an authorised organisation.

Potential Candidates for First-Time Home Ownership: 

  • A person who hasn’t owned a property in the last three years.
  • A person who owns a mobile house only wants to buy a land-based house.
  • A single parent who has or hasn’t owned a home with the spouse.
  • A person buying a home with a spouse who is not a homeowner.
  • A single person who has only owned a home with the spouse before in marriage.
  • A person who owned a home as a residence three years ago. That home now serves investment purposes, and the person has lived in a rental home for the last three years.

Steps to Buying a House for the First Time 

How to Buy a House for the First Time

Whether you consider price negotiation and the real estate industry’s trends or complex legal documentation and additional expenses, buying a house for the first time is undoubtedly not a piece of cake. 

From choosing the right neighbourhood to managing the expenses after buying a home, you will face hundreds of intractable problems. 

Still, you can only effectively tackle them if you have the proper process of buying a home and are fully aware of the problems and their solutions.

And this is exactly why we have discussed how to buy your first home. So, make sure you give them a thorough read and follow them to avoid any kind of hassles in the future. Let’s get started! 

1. Find Your Dream Home

Finding a home according to your financial, social and accommodational needs requires consistent time and effort. From having a good neighbourhood to a supply of utilities, you will end up rejecting hundreds of homes before finding your dream one.

So, if you are planning to buy a home for the first time, consider the power and utility supply, transportation, and availability of basic needs.

For this, you can either take the help of online home-selling listings or real estate advisors, ask your friends and family, check in the newspapers or drive through your desired neighbourhood and look for the “HOME FOR SALE” boards. 

2. Choose Your Financing Option 

As a first-time home buyer, you have multiple financing options as loans from the government and lenders, to make your home ownership dream a reality.

However, before finalising one, you must study all of them and choose the one that suits your needs. 

The eligibility criteria, financing limits, down payment ratio, required credit score, and other insights are different for every scheme.

Following are some of the top loans and financing programs for first-time homeowners. Let’s have a look at them.

Fannie Mae and Freddie Mac Conventional Loans:

Accessible through online lenders, mortgage lenders, and banks, Fannie Mae and Freddie Mac have established guidelines for borrowing conventional loans. 

They don’t have any particular eligibility criteria, high required qualifications, low down payment ratios starting from 3%, and other guidelines. 

You can quickly get them for your first-time home-buying process. Fannie Mae and Freddie Mac loans scheme include:

  1. Conventional 97 Mortgage Loan
  2. Home Ready Mortgage
  3. Home Possible Mortgage
  4. Home One Mortgage

Government-Sponsored Loan Schemes:

Government-sponsored mortgage loans have unique eligibility criteria and are only provided to specific categories of people, like those in the military industry. 

They are available on the basis of borrowers, the location of the housing schemes, or the type of property. 

These loan schemes are powered by government departments like the Department of Agriculture, the Department of Veteran Affairs and the Federal Housing Administration and require at least 3% of the down payment. 

Government-sponsored loan schemes include: 

  1. Federal Housing Administrations Loan
  2. Veterans Affairs Loan
  3. US Department Of Agriculture Loan
  4. Energy-efficient Mortgage Loan
  5. Good Neighbor Next Door Loan

3. Get Reliable and Affordable Lender Services

How to Buy a House for the First Time

Finding a reliable lender for your first-time home buying is quite tricky. And to tackle this problem, visit multiple top-ranked lenders in your town and compare their strategies, fees, and other insights.

Even if you have successfully qualified for a loan, keep searching for the best but most affordable lender for your home. 

Sometimes, you have qualified for a loan but don’t receive the funds due to changes in underwriting guidelines, lender risk analysis, and changes in real estate industry trends. 

Also, before 24 to 48 hours of receiving the funds, you mightn’t receive them as the lender has frozen funds on their loan program, even when you have successfully qualified. 

Therefore, ensure you find an expert and reliable lender to process your home’s funding to avoid every possible trouble. 

Also, having a backup lender for first-time home funding is a good option as you can have an alternate way of applying for the loans.   

4. Making An Effective Offer 

Making an offer is the most critical part of your whole first-time home-buying process. If your pitch is effective, you can continue the bargaining process and get your dream home without exceeding your budget. 

Before making an offer to the seller or seller’s real estate agent, take the average offering price from multiple real estate agents to know the average price of the property as well as buying and selling conditions. 

Your real estate agent will manage your offer and present it to the seller or property agent. 

The seller’s agent will accept the offer or send your agent a counteroffer, including their desired price and conditions. 

And from here, the negotiating cycle begins if you disagree with the price and conditions; you can again issue them your concerns and conditions. 

And this process will continue until any of you agree on the offer or decide to quit and move to another property. 

Here is a list of what a typical property offer should include: 

  • The seller’s name
  • Address of the home
  • Name of the title holders, including your name
  • The total price you are offering for the house
  • Down payment for the home you are offering
  • The earnest deposit price
  • Any discounts and concessions you are requesting from the seller
  • Your expected date for closing the offer
  • Complete data about the closing costs and other fees
  • The date you will move into the home
  • A deadline to respond to your offer

5. Schedule Your Home Inspection

A home inspection is a thorough and detailed inspection of the use before buying it from the buying party by a professional inspection expert.

For home inspection, multiple companies offer these services. You can get these services and discover any problems that may require maintenance in future. 

You can negotiate the price with the seller by discovering these additional problems. Following are some of the services that are included in home inspections services: 

  • Presence of mould in roof, window, doors and pipes.
  • Broken or damaged HVAC system of home
  • Leakage in the pipes of water or gas
  • Pests, termites and insects infestation
  • Carbon monoxide and smoke detection
  • Falling ceilings and broken windows
  • Chimney cracking, blockage or damaged
  • Structural cracks in the foundation
  • Installation problem in the electrical system
  • Randon detection at high levels
  • Inspection of the lead paint of home
  • Asbestos and other toxic materials availability

Understanding the present condition of the house is essential not only to understand the actual worth of the home as well as knowing the price and how much maintenance will cost you after moving in. 

6. Perform the Legal Documentation 

There are many legal documents you have to perform before buying a home. And as a first-time homeowner with mortgage schemes and loans, whether you take Fannie Mae and Freddie Mac loans or government-sponsored schemes. 

To receive the funds successfully, close the deal and start living your dream life in your dream home, you have to do the following essential paperwork: 

The Sale Deed: 

It is written proof of the property transfer from the builder to the property owner and is crucial while selling the house to other buyers.

The Mother Deed: 

It is required by the banks to process the loan amount and is a document for tracing the home’s ownership history.

The Sale And Purchase Agreement: 

The sales and purchase agreement includes all the terms and conditions settled between the buyer and seller for the property.

The Building Approval Plan: 

This document includes the legal information about the building plan and layout approval of the property. The builder provides it to the buyer.

The Possession Letter: 

Provided by the builder in the name of the property’s buyer and states the buyer’s date of possession of the property.

The Completion Certificate: 

Also known as Occupancy Certification, it is proof that the building is inspected after complete construction and follows all the rules and regulations of the Municipal Corporation and FHA. This document is essential to avail basic utility supplies like water, electricity and gas.

The Allotment Letter: 

This document is vital for buying a home that is under construction. It includes information about the payment of the property and all the additional fees you have to pay. It is required by the bank for a loan and indicates the amount the buyer has to pay.

7. Closing of the Deal

How to Buy a House for the First Time

At the closing of your deal, you have to sign and finalize all the necessary documents required to buy a home. 

After completing all the legal paperwork, you’ll receive the funds from the lenders within a few days, and once your check is delivered to the seller, your struggles end, and you are ready to move into your dream home.

Congratulations! You Have the Keys to Your Dream Home! Now, What to Do Next?   

Just moving into your new home is not enough. Hundreds of additional expenses are on their way to making you entirely financially broke if you haven’t effectively planned your finances during the home-buying process. 

For example, home maintenance will cost you a large sum of money after moving in. And if you are planning for renovations and interiors, your expenses are going to be skyrocketing high. 

Moreover, professional house cleaning, lawn maintenance, building maintenance fees, home essentials and furniture transportation and other expenses will break you off within a month. 

So, along with a down payment and other expenses, start saving money to deal with these additional expenses before moving in! And this is the end. You have successfully become a homeowner now. 

However, homeownership is a journey that requires buyers’ consistency and diligence. Thus, from finding a good neighbourhood to legal paperwork, make sure to have the right decisions and the help of expert lenders and real estate agents. 

Enjoy your dream life in your dream home with your family and loved ones!