Breaking Down the First Time Home-buyer Process

    Buying your first home can be overwhelming, we understand that! Today we want to run through some of the terms you’re likely to hear during this process and hopefully give you a general understanding of them to make it a little smoother for you!

    Prequalification – This should be your very first step in this process to ensure it goes smoothly! This means you consulted with a mortgage lender who likely looked at your income, debt, and other factors and gave you a good idea of how much you can afford to pay each month on a mortgage. This is a very important! Many sellers want to see that you are “pre-qualified” when you submit your offer. If they have multiple offers, they will often consider the pre-qualified offer first because it tells them you have a lender and closing should go smoothly. *A prequalification does not guarantee financing. Your lender will tell you exactly what you need to do to ensure your loan will go smoothly and final approval will be granted.*

    Offer – When you find the house you love you will submit an offer to the seller. In this offer you will have the ability to tell the seller what you are willing to pay. If there are any repairs you require you will have the option to place them in there. If you prefer to keep an appliance or furnishing (personal property) in the home, you can request that as well. Your Realtor will fill this out for you and submit it to the seller or their agent. They have the option to accept, deny, or counter your offer.

    Counter Offer – Just as you were able to submit your offer to the sellers, they have the right to ask for something to be changed in your offer. Generally they are not willing to part with the personal property you asked for or they want to be closer to their listing price. In this event, they will send their answer to your Realtor who will go over with you what they are asking for. You then have the right to accept their terms or counter back.

    Contingent – Once an offer has been accepted and a sales contract is in place, the home may be placed on a contingency. This generally tells other agents and buyers that the home is in the process of being sold but that the sale is contingent upon certain criteria. Typical contingencies are appraisal, home inspection, or final mortgage approval. Your Realtor should specify your rights in the sales contract in the case of a contingency as will their agent on their end.

    Earnest Money – Once you have an accepted offer you will need to make an earnest money deposit. The amount required in earnest money varies from sale to sale. It’s included in the offer and counter offer process. This is your way of showing the seller that you are acting in good faith. You will need to secure the funds to make this deposit and it will most likely be held in a trust account until the day you close on your home at which point it is most likely returned to you. If you decide you just no longer want the home you will forfeit this amount of money so it’s important to be sure of your decision prior to signing an offer. Reasons earnest money may be returned may include an appraised value less than the sales contract, a serious issue on the inspection report, or inability to finalize your loan.

    Home Inspection – This is an extremely important step and is required by most mortgage lenders. It’s pretty self explanatory. A qualified home inspector of your choice will go through the home and make sure it is sound and safe for you to occupy. Your Realtor or lender should have a list of qualified home inspectors in your area. Be sure to read this report thoroughly and discuss if with your Realtor. Should something come up in an inspection that is of concern, you have the right to request the sellers address it in some manner. Some loans require an inspection and require any issues to be addressed prior to final loan approval.

    Appraisal – Another important step and required in all home purchases involving a lender. You can obtain the name of a qualified appraisal professional again from your Realtor or lender. They will look at the home and land and often compare it to the sale of other homes in the area and determine the market value of your home. If the home does not appraise for the purchase amount you will need to discuss that with your Realtor and may need to ask the seller to lower the price or let you out of the contract.

    Insurance – All lenders require home owner’s insurance to be in place at closing. You should choose a home insurance policy as quickly as possible. Be sure to get at least 3 quotes from qualified insurance professionals before you settle on a policy. Some loans require mortgage insurance as well. This will be secured for you by the lender. It protects the lender’s interests in the property should you pass away.

    Title – The title to a property is a bundle of rights attached to a piece of property. The Title Company will perform a title search to ensure no one but the sellers own the rights to the property and that they can sign off on those rights at closing. You will be provided with a report to review before closing on the property. It will also show if there are any outstanding debts (or liens) attached to the property which will have to be cleared up prior to closing. Your Realtor will go over this report with you.

    Closing Costs – These are the costs associated with finalizing your purchase. They can be paid by the buyer, seller, or both depending on your sales contract. They will be collected on the day of closing. They include the taxes, insurance, and any other lender related expenses.

    Closing – This can be scheduled as soon as you have final approval from your lender. Typically a closing is tentatively scheduled after the offers are accepted but the date can be fluid based on your final loan approval, appraisal, etc… These typically take place at the title company or bank. Occasionally in the office of one of the Realtors involved. You will sign all documents involved in your purchase including your final loan documents. Generally you will receive your keys and are free to move in to your new home today! Congratulations!

    We hope you found this post informative and helpful!

    Take a sneak peek at some of our listings we think are perfect for first time home-buyers below!

    Have questions about these or other homes in the area? Tell us what you’re looking for!

    To see all of the listing details and photos on these and our other listings Click Here

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