First Time Home Buyer Guide

First Time Home Buyer Guide: 15 Steps To Making The Home Buying Experience Successful and Less Stressful

When you buy a home, the process can be very confusing to wade through… even for people who have done it many times but most especially for first time home buyers.

However, this first time home buyer guide is designed to help make this process a bit easier. The first time home buyer guide is split into 15 steps with the information and resources designed to make every single step achievable.

Plus, there are many states that offer assistance in the form of first time home buyer grants and first time home buyer loans for those folks who fall under certain income guidelines.

For the majority of people, these programs can make a big difference in whether or not you can pay for your first home.

First Time Home Buyer Guide: 15 Steps For First Time Home Buyers To Keep In Mind In The Home Buying Process

Step 1 – Have Good Credit, Fix Up Bad Credit

What’s your first step as a first time home buyer? It’s ensuring that you have good/great credit. Banks along with mortgage lenders don’t want to lend money to first time home buyers who don’t have any history of borrowing money and pay that money back in a timely fashion.

If you’re looking for a home and have no credit history, then you’ll need to establish the history. The best way to do so is to open a checking/savings account with an amount of $500 and then apply for a loan of $500, using that money you’ve deposited as security for your loan. This is the ideal way to get a good credit report going.

If the term of the loan is six months, be sure you make three monthly payments then pay it off completely. Repeat the process over and over in larger amounts. This allows you to build up a track record.

Just remember to do this repeatedly until you no longer need to deposit money as security. This keeps your record strong enough to borrow with only your “John Hancock”.

Having good credit is the best way to becoming a first time home owner unless you’re wealthy enough. Just as you build your credit through the bank loans, you need to manage your credit cards just as responsibly. This means you should be paying of the balances each month.

Step 2 – Increase Your Credit Score

One key rudiment of becoming a first time home buyer is your high credit score. After all, a high credit score means you get the lowest interest rates possible. When you’re a first time home buyer, it’s very important to have excellent credit. So how do you get a high credit score?

Here are five things you should do:

1. Pay all bills on time.
2. Keep all credit card balances at zero; if not at zero, as low as possible.
3. Always pay more than minimum amount due.
4. Negotiate with creditors to remove negative reports on credit record.
5. Borrow excellent credit from relatives or close friends.

Step 3 – Save Money For Both Your Down Payment and Closing Costs

When you’re in the market for your first home, you’re going to need the money to put up the down payment and closing costs. This comes about not only first time home buyers but previous homeowners as well.

Remember that lenders have a vested interest in the home you’re looking at. If you put money into the home yourself, lenders know you’re less likely to call it quits when things get tough.

This means you need to save now… not later. Each time you get paid, set aside some cash. Whatever you have leftover is what you should be living on. If you can save for your future, it’ll care for you down the road.

It doesn’t matter how much money you save, as every bit helps. If you make this a habit, it’ll pay off the remainder of your life.  Right now, Washington Mutual will give you the highest rate savings account. Begin your savings with a 5.0 percent APY with just a mere dollar.

If you save just $10 a week, you’ll develop a great habit. Discipline yourself to save a particular amount every week.

Step 4 – Keep Immaculate, Detailed Records Of Where Your Money Is Going

No matter who you are, a first time home buyer, previous home buyer or renter, you should create a record of how your money gets spent. If you want to gain control over your money, it’s important to learn where it’s all going… regardless of how big or small the purchase is.

After all, every little bit counts. Keep track for a month, and after it’s passed, look back and see where you spent your money.  Look to see if you can make room for improvements. The thing to keep in mind is that you want to live within your means. The more money you’re saving, the more you can become a first time home buyer.

Step 5 – Create Yourself A Financial Plan

When a house is being built from the ground up, the architect and builders will have blueprints to give them an idea of how to get the project going and follow through with it all to meet the goal. Similarly, a first time home buyer needs to make a financial plan that will help him/her to meet the goal of buying a home and living in it.

If you’re going to buy your first home, you must save at least 20 percent of your home’s price. This 20 percent will be used for the down payment. You can also use programs that will help you to put less than the 20 percent down on the home such as mortgage insurance, which allows you to purchase a home with just a down payment of five percent or less.

As you see, it’s necessary to have a financial plan to become a first time home buyer.

Step 6 – Build A Rapport With An Agent

It’s important for first time home buyers to find a real estate agent and build a rapport with them. Make sure you find an agent who has lots of experience working with first time home buyers. You should already know that each agent will have varying degrees of expertise.

Be sure you find an agent you’re happy with; don’t settle on just any person. Let each prospective agent know that you’re looking to buy a home for the first time since agents will each have a specialty.

Some agents would rather work with real estate investors. Others will only want to deal with waterfront property. If you tell them upfront that you’re a first time home buyer, both of your times won’t be wasted… if you’re not a good match.

The agent you choose will be your link to all the properties being sold on the market. They’ll have a wealth of knowledge when it comes to this buying/selling process. If you’re a first time home buyer, you should never go it alone. Be sure to utilize the new agent service HungryAgents.com to find a match for you.

Keep in mind that these agents will give you part of their commission after you’ve purchased your home. Best of all, it’s free to use.

Step 7 – Do Your Research On Market Values

When you’re in the market for your first home, you don’t want to spend more money on it than it’s worth. You want to find a good deal. The only way you’ll do this is to study and research the market and learn the values of homes in the area.

As time passes, you develop a comparable database of homes including ones that are underpriced and overpriced. Bear in mind that your first home is not likely to be your last home.

After all, the average American homeowner sells their home every seven years. If you purchase a home that’s less than what it’s worth, you’ll be on the benefiting end. It gives you instant equity, which will boost the profit and give you cash when you’re ready to sell it.

Step 8 – Mortgage Prequalification

You may already know that every single lender is different. Some lenders are quite efficient and helpful in helping first time home buyers become first time home owners.

Some lenders are not like this. If you get pre-approved for a mortgage, you’re taking the first step to being a serious first time home buyer. After all, this step shows the seller you are serious, which allows for negotiations of a lower price and closing the deal much quicker.

For sellers, this is very important.  If you’re ready to buy a home, contact ING DIRECT Orange Mortgage for your no cost or obligation pre-approval.

Step 9 – Know Your Needs and Wants To Stay In Your Budget Range

First time home buyers are overly fervent when it comes to buying their first home. Builders know this, bankers know this and brokers know this. It’s just a common thing they see every time.

When you’re a first time home buyer, you need to resist the temptation and focus on what homes will fit in your budget. Who doesn’t like the idea of having a five bedroom, five bath house? The problem is that not everyone can afford such a place?

When you’re in the market for your first home, you need to remember that this is a major financial commitment. You’ll have a lot of incidental expenditures to deal with as well as the home payment. These incidental costs will put some serious strain on your budget. You don’t want to overspend on the home you pick the first time out.

Thus, take the time with steps four, five and eight before making an offer on any home just because you like it. If you truly understand your budget, you’ll know what kind of home price range to look at it.

Don’t fall into the trap that so many home buyers have gotten themselves into. Don’t put your budget in a place that it takes on more than it can handle, as you’ll get burned in the long run.

Step 10 – Shop Around For The Best Home For You

One of the most exciting times in your life will be searching for the ideal home… especially as a first time home buyer. You should have already been in touch and established a rapport with an agent who works mainly with first time home buyers.

Your budget should be planned out and you should know about what you can afford to pay on your home.  Be sure you summarize the information to the agent when making visits to homes.

Begin with the price range and tell your agent how much you’ve been qualified for. Tell him/her the amenities you’d like to have including the bedroom amount, bathroom amount, space, etc. You should also inform your agent if you want to purchase your first home from a particular area or whatever else you think you’d like.

The more data your agent knows, the more time you and your agent can save in finding the perfect home. Keep in mind that your first home may not have all that you want so be open to negotiations.

The more homes you check out and see, the more knowledge you’ll get about the property values in that area. You’ll also learn what homes you like and don’t like, and which ones are not in your price range.

A first time home buyer should understand, upfront, that their agent is going to get paid on commission...typically from the seller. Thus, your agent is not going to spend all their time on just you and showing you several hundred properties without you making some kind of purchase.

You also don’t want an agent that’ll pressure you to purchase a home just because it’s in your price range and budget.

If this were an ideal world, the agent would have to just show one home and sell it each time he/she showed it. However, the first time home buyer’s ideal world would be to look at several hundred homes before making an offer on one.

Of course, this kind of world does not exist for both the agent and the first time home buyer. Reality is the world and you have to meet somewhere in between. Have a compromise that’ll fit you both.

Step 11 – Learn All About The Sales Contact Including Elements and Terms

When you’re a first time home buyer, you’re kind of inept on the sales agreement and real estate purchase contracts that you’ll be subjected to. Thus, you must do your research about the elements and terms of a sales contract.

Here are some terms you should know about a real estate contract:

1. Acceptance – This is the time frame in which the seller can accept your offer or have a counter-offer.
2. Closing – This is the future date in which the closing takes place.
3. Description – A legal explanation of property including street address.
4. Deposit – How much money will be included in contract and who will hold the money.
5. Financing Contingency – This is a clause which states the whole contract will be subject to the buyer to get a mortgage in such and such amount by a specific date. Most first time home buyers will ensure their agent have this passage in the contract.
6. Home Inspection – One condition that can be stipulated in the contract is that the house has to have an acceptable home inspection completed within so many days by a professional.
7. Inclusions/Exclusions – There are some things inside a home that are included as part of the real estate deal but are not considered real estate such as the refrigerator, washing machines, dishwasher, etc. The inclusion/exclusion clause will identify what is and is not in the sale.
8. Insurance – This will stipulate who is the primary insurer until the closing date.
9. Price – This is the amount of money the buyer pays to the home seller.
10. Possession Date – This will be the date in which the buyer takes possession of the property.

Your agent will know every detail of the contract, and if you have questions, he/she can answer them.

Step 12 – Pick The Right Neighborhood For Your Family

You may think it’s a bit odd to think about selling your home before you’ve even purchased it but every first time home buyer should have this in their mind. After all, there’s going to come a time that you’ll want to sell it.

It could be from the desire to upgrade or a job relocation to another part of the country. You want to pick a neighborhood that will give you a high resell value when that time comes about.  So what should you look for as a first time home buyer in your home?

There are four things to keep an eye out for:

1. Good, Respectable School District – Check out the school districts and note which one is the favorite. If you’re buying a home, be sure to locate to this district. If it’s appealing to you as a first time home buyer, it’s likely to appeal to the next home buyer who looks at your home and wants to buy it.
2. Area Improvement or On The Decline – Something else you’ll need to consider is whether or not the area you are buying into is improving itself or steadily declining. You may think it’s fine now but if it’s in the decline when you go to sell, you could have a hard time getting rid of it.
3. Home Relation To Popular Areas/Attractions – Both first time home buyers and previous home buyers will look at the area in terms of attractions including but not limited to parks, lakes, mountains and beaches. Be sure to choose a home that’s convenient to these places.
4. Carefully Pick Your Neighbors - You certainly don’t want to live next door to the obnoxious, loud neighbors because it’ll hurt resale down the road. Be sure you do some homework and learn about the area. You can knock on doors to find out what your prospective neighbors are like and talk with them about the area and any problems they might have experienced. By getting this information beforehand, you’ll be happy rather than disappointed in this first time home buying experience.

Step 13 – Put In Your Offer

Once you’ve done all the above 12 steps in this first time home buyer guide, be sure you place in your offer for the home. If you’ve done your research, you know you can confidently make an offer based on the information you have gathered together.

Remember that making offers on homes is an art, not science.  There are dozens of books on this issue that explain in detail the methods and techniques on how to negotiate successfully.

Here are three points to remember:

1. Get To Learn Who The Home Seller Is – One way you can pay less for the house is to learn about the home seller and what they are like. The idea is to come somewhere in the middle to find a settlement that works best for you. You want to learn what else the seller wants besides getting a high price. Do they want a quick closing? Do they want to delay the closing? Does the home need work done such as new carpet, windows, siding, etc? Will they do any work on it themselves before closing or will they let you contend with it all? The more data you can find out, the better position you’ll be in to negotiate. In the end, it’s a win/win situation.
2. Know The Good and Bad Scenarios – Once you’ve learned who the seller is, determine how much risk you’re facing. Ask yourself if you truly want this house? Do you want to lose the deal just to get your best case scenario? Of course, you’ll be the only one providing that answer.
3. Be Professional All The Time – Negotiate only when you’re emotionally neutral. When you do this, you can keep a professional head about things. If, at any time, you become upset during the process, you’re more likely to make decisions based on that emotion rather than using your logical side of the brain. Keep in mind that emotional decisions are not really the best decisions. Thus, you must do whatever you can to stay unemotional. This can be a very emotional time for the first time home buyer but if you stay professional, it’ll all work out in your favor in the end.

Step 14 – Set Up A Home Inspection On Your Prospective Home

Any experienced real estate investor will use a qualified home inspector so the same should be said for first time home buyers. Qualified home inspectors will check out the roof, structural integrity, windows, siding, electrical systems, plumbing systems, heating and air systems, etc.

They’ll note deficiencies in this area and bring it to your attention in an in-depth written report. All first time home buyers should talk with a qualified home inspector and then make a decision based on his/her report.

Step 15 – Set Up Your Homeowners Insurance

The wisest decision you can make is having homeowners insurance. As a first time home buyer, make sure you include this in your list of expenses and find the best rates.

You’re about done! Now all you have to do is make plans to get that moving truck ready. Of course, it’ll be expensive to go with a professional moving company so talk with your agent about who’s the best deal in town.

If you’re looking to save yourself some money, be sure to gather up some friends and make a party out of it. With several friends helping you, you can make this large amount of work become nothing at all.

With the help of this first time home buyer guide, you can become a first time home buyer with the home that’ll give you years of enjoyment and memories.