Checklist for First-Time Home Buyers

Your first home is likely to be your largest financial investment to date. That fact, plus the lengthy, sometimes complex, process can make that purchase feel intimidating. However, with almost one-third of Texas homebuyers purchasing for the first time, you are not alone, and with this handy checklist and an experienced realtor/home builder on your side, you can pursue your first home with excitement and confidence.

Set your home buying budget.

Homes in the RGV are available in almost any price range, from multi-million dollar estates to quality homes that sit in the $200-300K range (Like many of our Villa homes). In order to narrow your search down to houses you can actually afford, you will need to evaluate your budget and come up with a monthly mortgage payment you can easily handle.

The best approach is to examine your financial health, including your debt-to-income ratio (DTI), monthly expenses, and credit score. The lower your DTI and the higher your credit score, the more likely you are to get favorable rates for your home loan (mortgage), and the higher your budget is likely to be.

To determine your DTI, simply divide your current debt payments per month by your current gross income. The resulting percentage is your DTI. To evaluate your credit score, request a credit report from one of the three main credit bureaus: Experian, Equifax, and TransUnion.

Once you know about how much you can afford, you can begin to evaluate which homes, whether buying or building, are within your budget.

Set aside a down payment.

Central to the home buying process is the down payment. This is the amount of money you pay toward the purchase price of your home. The remainder of the purchase price you will need to fund through a mortgage from a qualified lender.

The higher your down payment, the lower your mortgage, and the lower your monthly payments, will be. That means that if you can only afford a low monthly payment, but you want a more expensive home, you should save up a higher down payment.

Depending upon the type of mortgage you get, you may pay anywhere from 3-5 percent of the purchase price as a down payment.

However, if your down payment is less than 20 percent, you will need to be prepared to pay a monthly mortgage insurance premium that is required by most lenders. It is in your best financial interest to save up as much of a down payment as possible for your new home.

Get pre-approval from a lender.

You can start looking at homes without pre-approval from a lender, but doing so can make any offer you submit look less desirable to sellers and slow down the purchase process once you find the right home.

Instead, take the time to get pre-approved for a mortgage before you start looking for a home. While this process is relatively straightforward, you should take the time to consider offers from multiple lenders in order to get the lowest interest rate and best loan terms.

You should also be prepared to submit specific pieces of paperwork to the lender. For example, you may need to submit proof of income, past tax returns, or other forms to help establish how much money you can borrow toward the purchase or building of your new home.

Find a real estate agent.

Your real estate agent, while also not necessary for house hunting, will also be an indispensable partner in your first home buying journey. This professional will be able to provide you with a wealth of services to make it easier to purchase your property as a first-time home buyer. These services can include the following:

  • Providing access to the most recent listings in your area.
  • Searching for homes that meet your preferences.
  • Negotiating with sellers to get you the best terms.
  • Guiding you throughout the home buying process.
  • Taking you on tours of potential properties.

With an experienced realtor on your side, you are more likely to find properties that fit your preferences and budget, navigate the closing process, and end up with a home you can be proud of.

Identify your perfect home.

The most enjoyable part of the home buying process for most people is house hunting. Your realtor will identify homes that meet your requirements and take you on tours through these properties to help you see if they are the right property for you.

You may need to see many properties, or you may find the right place after just one or two visits. Typically, however, home buying can take a little while, so settle in and enjoy discovering all of the features and neighborhoods you love until you find the right one for you.

Make an offer and negotiate.

Once you find that ideal property, it is time to make an offer. This is when you provide the seller with the price and terms you are willing to offer to purchase the home.

The seller can then accept or reject your offer or provide a counteroffer of their own, at which point you enter a period of negotiation. Your real estate agent can guide you through this process to help you and the seller reach terms that satisfy you both.

Once the offer is accepted and signed by you and the seller, you will put down what is called earnest money-A small amount of money that shows your interest in purchasing the property. If you choose not to buy the property, the earnest money remains with the seller. If you complete the purchase of the property, the earnest money goes toward your down payment.

Complete your home loan.

Once the seller accepts your offer, you begin the process of purchasing your home, and that means completing your home loan and purchasing homeowner’s insurance to protect your home against natural disasters and accidents.

Completing your home loan can be lengthy and involve a lot of paperwork, but your lender can guide you through it. However, at the end of the process, you will have the funding you need to buy your very first home!

Get a home appraisal and inspection.

While you are completing your home loan, you will also need to make sure that the property you wish to buy is in good shape. This means getting an appraisal, or estimate, of the home’s value and a home inspection to ensure that there are no major repairs that the owners should make before you complete the purchase of the home.

Your real estate agent will guide you through both of these processes. As long as your home appraises for as much as or more than what you are paying for it, and there are no major issues found in your home, you can go ahead and complete the purchase of your home.

Complete a final walkthrough.

Just before you close on your home, you will complete a final walk-through of the home. This process means going through the home with your real estate agent to ensure that any requested repairs and updates have been made and to make sure there are no issues that were missed earlier.

Close on your home.

As a first-time home buyer, closing on your first home can be one of the most exciting times of your life. While this meeting with the sellers, real estate agent, and possibly lawyers involves signing a great deal of paperwork, the end result is that you receive the keys to your very first home. That makes all the paperwork, conversations, loans, and work worth it!

You can always choose to build your first home instead of buying it. Here at Villa Homes, we work with many first-time homeowners to build the home of their dreams within their budgets and their preferences. We can even help you find the perfect property to build on. Contact us today to learn more about how to start the process of creating your very first home!

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