You may not be a First Time Home Buyer, maybe you have bought and sold real estate in the past, that’s ok. There will be plenty of information in this article that can help you in your home search. Whether your looking for your Dream Home, Starter Home or Forever Home these three topics will help you understand the purchase process better.
1. What is the Process to Buying a Home?
It all starts with (or should start with)
This should be your first step in the home buying process unless you are lucky enough to be buying with Cash. You can search for and view homes with out being preapproved but there are some set backs to doing this. The biggest downside to not getting preapproved first is that you might loose out on the home you want. You will need to submit a preapproval letter with your offer and as fast as homes are selling right now you might lose the home while waiting for your preapproval letter, its best to have it before you look.
Another reason to get preapproved first would be that you will know how much you can spend on your new home. I have seen buyers get really excited about a home and then find out they do not qualify for the amount. Its best to know your limit and search for homes within your limit.
Find a Great Realtor
After you get your preapproval letter you should team up with a Great Realtor. Not all Realtors are great. You should make sure the Realtor you are going to work with is a good fit for you. Your Realtor should be a local expect. They should understand your whole situation as wells as your wish list for your home search. You should be completely comfortable and confident with your Realtor.
Find Your Dream Home
Now we start the fun part. Looking for your Dream Home should be fun and exciting, but it will probably be nerve-racking, exhausting and sometimes heartbreaking. You should be prepared to look at 10-12 homes and it might take up to 60 days to find the right home for you. This isn’t always the case, last year I was working with a first-time home buyer and the first home we looked at was the one. Every situation is different, just be patient and trust your Realtor.
Make an Offer and Negotiate
Once you have found the right home you should be ready to have your Realtor prepare an offer for you. I’m not going to go over all the details of how to write an offer, I’ll leave that for another day. I do want to point out that this is the hardest part for the buyers. For a buyer, especially a first-time home buyer, its hard to know if your offer is too high or too low and what other terms you should ask for in your initial offer. This is where it really pays off to have a Great Realtor on your side, he/she will be able to guide you and help you write up a good offer.
Inspections and Appraisal
You should always have a home inspection when purchasing a home. You may also need a few other inspections also. Septic inspections are required in my area. You may want a well inspection if the property has well water. You can also have Radon, termite and mold inspections completed as well.
Anytime you use financing from a lender the home will have to be appraised. The lender has to make sure they are not putting up more money for you to purchase the home then it is actually worth.
Closing and Moving
Finally, it’s time to close! I would like to point out the “Closing” and “Moving” do NOT usually happen at the same time. Now there are some exceptions. When you wrote up your offer you would have written in a “Time of Possession”. This usually has something like “Time of Transfer” written in here. This means you would receive possession (the keys) of the property when the title transfers. This must happen after everyone has signed the closing documents, so this is usually the day after closing. Occasionally you might negotiate “Time of Possession” to be before closing and sometimes after closing. After the title transfers Your Realtor will get you the keys and then, Congratulations! You can move!
2. Which Loan is Best for You?
There are a few popular options that I will go over. Some people may qualify for more then one type of loan but most of the time your decision will be narrowed down by the qualifications.
This is a very common loan product. FHA stands for “Federal Housing Administration”. What this means is the federal government insures the loan. Almost all lenders and banks offer FHA loans.
• Lower Qualifying Credit Score then other options. Some lenders offer 580 but most will require 620
• Lower Down Payment then other options. 3.5%
• You are required to carry Mortgage Insurance.
• FHA has higher standards for property condition. (This could be looked at as a positive, but most buyers see it as a negative because they could lose the property they wanted due to required repairs)
This is also a federal government insured loan product. It has some things in common with FHA.
• 0% Down Payment
• No Mortgage Insurance
• Eligibility requirements
• VA has the Highest standards for property condition. (This could be looked at as a positive, but most buyers see it as a negative because they could lose the property they wanted due to required repairs)
Again, this is a government loan product.
• 0% Down Payment
• No limit on seller Contributions (seller paid Closing Cost)
• Location Restrictions
• Income Limits
This is one of the more popular choices. This is not a government loan product so there are less restrictions involved.
• Less restrictions on property condition
• No Mortgage Insurance (Depending on Down Payment Amount)
• Higher Down Payment Requirements (In most cases)
• Higher Income Requirements
3. How Long Will It Take to Purchase a Home?
Every deal is different, and they are so many variables that all effect how long it will take to get to the moving day. I’m going to estimate the times for the steps to purchasing a home based on my personal experiences and my experiences with my buyers I work with.
Assuming you have good, clean credit history and enough in savings to cover down payment and closing costs, the preapproval should only take a few hours.
If you don’t have good credit or enough in savings it could take six months to a year to get preapproved for a loan.
This really depends on the wish list of the buyer and the current market conditions. I have worked with buyers the bought the first home they looked at and I’ve worked with buyers that have looked for six months before putting in an offer.
I find that most buyers find their home in about two months.
Offer and Negotiations
Writing up an offer is relatively quick. The response time from the seller usually isn’t very quick. I like to write all my offers with a 24 hour response time to limit the seller. I do that to protect my buyers, a seller could take long enough that a second offer comes in and it becomes a bidding war. Now that’s every sellers dream but every buyers nightmare.
The negotiation process could all be completed in one day if everyone has the availability. Its common for this to take a day or two from the offer being submitted to the deal being negotiated and signed.
Inspections and Repairs
The inspections should all be completed with in 10 days and if everything is goes well you would sign off on the inspections and its done.
If something comes up during one of the inspections, then the negotiations begin again. You might need to get estimates and bids on work to be completed. Some of this work might need to be done before the closing and some things might be able to be completed after closing. All of this could only take a week or two but if something big comes up like replacing a septic system it could take months.
Closing and Moving
I want to start this topic by saying that closing and moving are two separate events. Closing is handled by the title company and they will schedule you a time to sign all the paperwork and this takes about one hour. You do not get to move into the property until after the title company files the title at the county office. This sometimes happens the same day as closing but many times it will be the next business day after signing.
One exception to this is if in your offer you negotiated a specific “Time of Possession”.
This is rare though, it is almost always after title transfer.
I hope that after reading this article you understand the purchase process better. If you truly are a “First Time Home Buyer” you might have a few questions about the topics I have written about. Feel free to leave a comment here with your questions or you can send me a message from the contact page.
If you are looking to purchase a home in Ohio please contact me on here or call Nova Star Real Estate.